Aytu Biopharma

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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, 2021

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)

Delaware
(State or other jurisdiction of incorporation
or organization)

373 Inverness Parkway
Suite 206
Englewood, Colorado
(Address of principal executive offices)

47-0883144
(I.R.S. Employer Identification Number)

80112
(Zip Code)

(720) 437-6580
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock, par value $0.0001 per share

Trading Symbol
AYTU

Name of each exchange on which
registered
The NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ⌧

Indicate by a check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes
⌧ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of

“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer
Non-accelerated filer

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⌧

Accelerated filer
Smaller reporting company
Emerging growth company

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☒
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised

financial accounting standards provided pursuant to Section 13a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of common stock held by non-affiliates of the Registrant as of December 31, 2020 was $88.4 million based on the closing price of $5.98 as

of that date.

As of September 10, 2021, there were 27,555,120 shares of common stock issued and outstanding.

    
    
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PART I

TABLE OF CONTENTS

BUSINESS

Item 1
Item 1A RISK FACTORS
Item 1B UNRESOLVED STAFF COMMENTS
Item 2
Item 3
Item 4

PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES

PART II

Item 5

Item 6
Item 7

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
RESERVED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8
Item 9

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Item 9A CONTROLS AND PROCEDURES
Item 9B OTHER INFORMATION

PART III

Item 10 DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Item 11
Item 12

EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 13

Item 14

PART IV

Item 15
Item 16

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY

SIGNATURES

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Forward-Looking Statements

This Annual Report on Form 10-K, or Annual Report, includes forward-looking statements within the meaning of

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the
Exchange Act. All statements other than statements of historical facts contained in this Annual Report, including statements
regarding our anticipated future clinical and regulatory events, future financial position, business strategy and plans and
objectives of management for future operations, are forward-looking statements. Forward-looking statements are generally
written in the future tense and/or are preceded by words such as “may,” “will,” “should,” “forecast,” “could,” “expect,”
“suggest,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” or similar words, or the negatives of such terms
or other variations on such terms or comparable terminology. Such forward-looking statements include, without limitation,
statements regarding the markets for our approved products and our plans for our approved products, the anticipated start
dates, durations and completion dates, as well as the potential future results, of our ongoing and future clinical trials, the
anticipated designs of our future clinical trials, anticipated future regulatory submissions and events, the potential future
commercialization of our product candidates, our anticipated future cash position and future events under our current and
potential future collaborations. These forward-looking statements are subject to a number of risks, uncertainties and
assumptions, including without limitation the risks described in “Risk Factors” in Part I, Item 1A of this Annual Report.
These risks are not exhaustive. Other sections of this Annual Report include additional factors that could adversely impact
our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment.
New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we
assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-
looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the
forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the
forward-looking statements. We assume no obligation to update or supplement forward-looking statements.

Unless otherwise indicated or unless the context otherwise requires, references in this Form 10-K to the

“Company,” “Aytu,” “we,” “us,” or “our” are to Aytu BioPharma, Inc.

This Annual Report on Form 10-K refers to trademarks, such as Adzenys, Aytu, Aytu BioPharma, Apeaz,

Cotempla, Diabasens, FlutiCare, Innovus Pharma, Neos, OmepraCare, Poly-Vi-Flor, Regoxidine, Tri-Vi-Flor, Tuzistra,
Urivarx, Zestra, and ZolpiMist which are protected under applicable intellectual property laws and are our property or the
property of our subsidiaries. This Form 10-K also contains trademarks, service marks, copyrights and trade names of other
companies which are the property of their respective owners. Solely for convenience, our trademarks and tradenames
referred to in this Form 10-K may appear without the ® or ™ symbols, but such references are not intended to indicate in
any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

We obtained statistical data, market and product data, and forecasts used throughout this Form 10-K from market
research, publicly available information and industry publications. While we believe that the statistical data, industry data
and forecasts and market research are reliable, we have not independently verified the data, and we do not make any
representation as to the accuracy of the information.

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Summary of Risk Factors

The following list summarizes what we believe to be the principal risks relevant to our company. The below

summary is further elaborated on by the full text of the risk factors provided in the “Risk Factors” section of this Annual
Report on Form 10-K for the year ended June 30, 2021. All capitalized terms in this section not defined herein shall have
the meanings given to them elsewhere in this Annual Report. Material risks that may affect our business, operating results
and financial condition include, but are not necessarily limited to, the following:

Risks Related to Our Financial Position and Capital Resources

● We have incurred significant losses since our inception and anticipate that we will incur continued losses in
the future. We may never achieve or maintain profitability, and will likely require additional capital to fund
our operations.

● Our failure to comply with the covenants or other terms of the of senior secured credit facilities with Deerfield
and our secured revolving loans with Encina could result in a default under those agreements that could
materially and adversely affect the ongoing viability of our business.

● Our credit facility agreements contain restrictions that limit our flexibility in operating our business.

Risks Related to COVID-19

● The coronavirus (“COVID-19”) pandemic has and may continue to adversely affect our business, results of

operations and financial condition.

Risks Related to Commercialization of Our Products

● If we are unable to successfully commercialize our commercial prescription products, our business, financial
condition and results of operations may be materially adversely affected and the price of our common stock
may decline.

● The commercial success of our commercial prescription products will depend upon their acceptance by

multiple stakeholders, including physicians, patients and healthcare payors.

● If third-party payors do not reimburse patients for our commercial prescription products or if reimbursement

levels are set too low for us to sell our commercial prescription products at a profit, our ability to successfully
commercialize our commercial prescription products and our results of operations will be harmed.

● If we are unable to differentiate our commercial prescription products from current and future products or
existing methods of treatments or if the market opportunities for our commercial prescription products are
smaller than we believe, our ability to successfully commercialize our commercial prescription products
would be adversely affected and our revenue may be adversely affected.

● If we cannot implement and maintain effective patient affordability programs or improve formulary access for
our commercial prescription products in the face of increasing pressure to reduce the price of medications, the
adoption of our commercial prescription products by physicians and patients may decline.

● If our sole manufacturing facility for our attention deficit/hyperactivity disorder (“ADHD”) products becomes

damaged or inoperable or we decide to or are required to vacate our facility, our ability to continue
manufacturing adequate supplies of our ADHD products could adversely affect our ability to generate
revenue.

● If the U.S. Food and Drug Administration (“FDA”) or other applicable regulatory authorities approve generic
or similar products that compete with our commercial prescription products, or if the FDA or other applicable
regulatory authorities change or create new pathways that may expedite approval of such products, it could
decrease our expected sales of our commercial prescription products.

● Even though we have obtained regulatory approval for our commercial prescription products, we still face

extensive FDA regulatory requirements and may face future regulatory difficulties.

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● Our relationships with physicians, patients, payors and pharmacies in the U.S. are subject to applicable anti-
kickback, fraud and abuse laws and regulations. Our failure to comply with these laws could expose us to
criminal, civil and administrative sanctions, reputational harm, and could harm our results of operations and
financial conditions.

Risks Related to Clinical Development and Regulatory Approval of AR101 for the Treatment of vascular Ehlers-
Danlos Syndrome (“vEDS”), Healight for the Treatment for SARS-CoV-2 and Other Viral and Bacterial Respiratory
Infections and Our Other Product Candidates

● The design and execution of clinical trials to support FDA-approval of AR101 for the treatment of vEDS,

Healight for the Treatment for SARS-CoV-2 and other viral and bacterial respiratory infections is subject to
substantial risk and uncertainty.

● The clinical development and regulatory approval processes of the FDA are lengthy, time consuming and
inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product
candidates or maintain regulatory approval for our approved products, our business may be substantially
harmed.

Risks Related to Our Reliance on Third Parties

● If we encounter difficulties in maintaining commercial manufacturing and supply agreements with our third-
party manufacturers and suppliers of our commercial prescription products or if we encounter issues with our
contract manufacturers or suppliers, our ability to commercialize and manufacture commercial prescription
products would be impaired.

● If we encounter difficulties in transferring our production of our ADHD products to our third-party contract

manufacturing organization (“CMO”), or unable to negotiate a long term supply contract on acceptable terms,
our ability to commercialize and manufacture commercial prescription products would be impaired, and our
financial conditions could be harmed.

Risks Related to Our Business Operations and Industry

● Our sales force and other employees, third party logistics partners, CMOs, CROs, principal investigators,
collaborators, independent contractors, consultants and other vendors may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements.

Risks Related to Our Intellectual Property

● If we are unable to protect our intellectual property rights or if our intellectual property rights are inadequate

to protect our technology, our commercial prescription products or our other product candidates, our
competitors could develop and commercialize technology similar to ours, and our competitive position could
be harmed.

● We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, which

could be expensive, time consuming and unsuccessful.

● Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights,

the outcome of which could be uncertain and could harm our business.

Risks Related to Ownership of Our Common Stock

● The price of our common stock may be volatile, and you may lose all or part of your investment.

● Future issuances of our common stock or rights to purchase common stock, including pursuant to our equity
incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could
cause our stock price to fall.

● Some provisions of our charter documents and Delaware law may have anti-takeover effects that could

discourage an acquisition of us by others.

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Item 1. Business

Company Overview

AYTU BIOPHARMA, INC.

PART I

We are a commercial-stage specialty pharmaceutical company focused on commercializing novel products that
address needs in both prescription and consumer health categories. Through our prescription business, and following our
recent merger with Neos Therapeutics, Inc. (“Neos”), which closed on March 19, 2021, we market a portfolio of
prescription products addressing large markets with a focus on general pediatric conditions, attention deficit/hyperactivity
disorder (“ADHD”) and insomnia. We also market a portfolio of consumer health products also addressing large categories
through our consumer health subsidiary, acquired in February 2020. Our goal is to become a leading specialty
pharmaceutical company focused on large prescription and consumer health categories while building a late-stage
development pipeline addressing significant medical needs.

Commercial Prescription Products

Our prescription ADHD portfolio (the “ADHD Portfolio”), which was acquired through the merger with Neos,

includes branded products marketed in the United States using our internal commercial organization.

These commercial ADHD products are extended-release (“XR”) medications formulated in patient-friendly, orally

disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize Neos’ microparticle modified-release drug
delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for three
ADHD products and were subsequently launched as displayed below.

Branded Product
Adzenys XR‑ODT
(amphetamine)
Cotempla XR‑ODT
(methylphenidate)
Adzenys ER (amphetamine)
oral suspension

Approved Indication
Treatment of ADHD in patients 6 years
and older
Treatment of ADHD in patients 6 to 17
years old
Treatment of ADHD in patients 6 years
and older

FDA Approval Date

Commercial Launch Date

January 2016

May 2016

June 2017

September 2017

September 2017

February 2018

Products containing amphetamine or methylphenidate are the most commonly prescribed medications in the United

States for the treatment of ADHD. We believe Adzenys XR-ODT and Cotempla XR-ODT are the first amphetamine and
methylphenidate extended-release, orally disintegrating tablets, respectively, marketed for the treatment of ADHD. In 2020,
to facilitate improved patient access to our ADHD products, Neos deployed a Neos-sponsored patient support program,
called Neos RxConnect. This program now operates through a network of approximately 1,200 pharmacies as of June 30,
2021. Following the Neos merger we rebranded the program as Aytu RxConnect, and we expect to integrate our legacy
prescription products into this program with a focus on adding Poly-Vi-Flor, Tri-Vi-Flor, ZolpiMist and Karbinal ER to the
program. We expect to have the legacy products incorporated into the program during the second half of calendar 2021, and
for our patients and their health care providers to benefit from this state-of-the-art patient support program starting in the
first half of calendar 2022.

Our legacy prescription pediatric portfolio includes Cefaclor, a second-generation cephalosporin antibiotic

suspension, Karbinal® ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous
allergic conditions and Poly-Vi-Flor® and Tri-Vi-Flor®, two complementary prescription fluoride-based multi-vitamin
product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride
deficiency (Cefaclor, Karbinal ER and Poly-Vi-Flor and Tri-Vi-Flor, collectively the “Pediatric Portfolio”). These products
serve large pediatric markets and offer distinct clinical features and patient benefits.

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Our primary care portfolio includes ZolpiMist, the only FDA-approved oral spray prescription sleep aid and

Tuzistra® XR, the only FDA-approved 12-hour codeine-based antitussive syrup (ZolpiMist and Tuzistra XR together are
known as our “Primary Care Portfolio”). In addition to our legacy Primary Care Portfolio products, through the Neos merger
we now sell our generic equivalent to the branded product Tussionex®, an extended-release oral suspension of hydrocodone
and chlorpheniramine indicated for the relief of cough and upper respiratory symptoms of a cold (“generic Tussionex”).

Our Aytu RxConnect program (rebranded following the combining of Neos’ RxConnect program with our
Pharmacy Partner Program) offers affordable and predictable copays to all commercially insured patients, regardless of their
individual insurance plan and seeks to significantly reduce the challenges and frustrations that health care professionals and
their office staff can face when prescribing branded medications, including our medications, for their patients.

Consumer Health Division

We acquired our consumer health division, Aytu Consumer Health, previously known as Innovus Pharmaceuticals,

Inc. (“Innovus”), in February 2020. This division is an emerging over-the-counter (“OTC”) specialty pharmaceutical
company engaged in the commercialization, licensing and development of safe and effective non-prescription medicine,
consumer care products, supplements and medical devices to improve men’s and women’s health and vitality. The products
focus in five core categories including diabetes management (with a concentration on neuropathy), pain management,
digestive health, sexual and urological health and general wellness for men and women. All products are intended to be used
by consumers on a regular basis and as such we offer a monthly subscription program to allow for continuous use.

The consumer health division is dedicated to being a leader in developing and marketing new OTC and branded
Abbreviated New Drug Application (“ANDA”) products, supplements and medical devices. The division actively pursues
opportunities where existing prescription drugs have recently, or are expected to, change from a prescription (or Rx) to
OTC. These “Rx-to-OTC switches” required FDA approval through a process initiated by the New Drug Application
(“NDA”) holder.

The division currently sells directly to consumers in both the United States and Canada through its proprietary

Beyond Human Sales & Marketing platform which focuses direct mail marketing, which includes pamphlets, postcards, tear
sheets and newspaper advertisements, allowing consumers to purchase directly through call centers with shipments to their
residence. We currently issue over 17 million pieces of mail annually across the United States and Canada. Additionally,
products are marketed on e-commerce platforms including the division’s website and the Amazon.com platform. Our
consumer health marketing strategies focus on search engine optimization and search engine marketing and affiliate
marketing. The division also sells to domestic and international distributors on both an exclusive and non-exclusive basis.

The overall strategy of the consumer health division focuses on two primary objectives:

● developing a diversified product portfolio of exclusive and unique non-prescription OTC and branded ANDA

drugs, devices, consumer health products and clinical supplements through: (a) the introduction of line
extensions and reformulations of either our or third-parties’ currently marketed products; (b) the development
of new proprietary OTC products, supplements and devices; and (c) the acquisition of products or obtaining
exclusive licensing rights to market such products; and

● building an innovative, U.S. and global sales and marketing model through direct-to-consumer approaches

such as our proprietary Beyond Human® sales and marketing platform, the addition of e-commerce platforms,
through our own websites both nationally and internationally and commercial partnerships with established
domestic and international entities that both generate revenue and require a lower cost structure compared to
traditional pharmaceutical companies.

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Development Portfolio

On April 12, 2021, we, acquired substantially all the assets of Rumpus Therapeutics, LLC through an asset
purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus
VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”). Upon closing the transaction, we hired Rumpus’ principal
executive officers, Christopher Brooke and Nathaniel Massari, as employees. Pursuant to the Rumpus transaction, we
acquired certain rights and other assets, including key commercial licenses, including a global license to enzastaurin (which
we now refer to as AR101) for rare, inherited connective tissue disorders specifically inclusive of vascular Ehlers-Danlos
Syndrome (“vEDS”).

AR101 is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the

PKC beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and
hematological tumor types in trials previously conducted by Eli Lilly & Company. Dr. Hal Dietz developed the first
preclinical model that mimics the human condition and recapitulates vEDS, and this model serves as the basis for the
plausible clinical benefit and rationale for conducting a clinical trial with AR101 in vEDS. This knock-in model has the
same genetic mutation most prevalent in vEDS patients and is representative of the human condition in both the timing and
location of vascular events. The model has generated identical structural histology and mechanical characteristics, and
unbiased findings demonstrated that vascular structure alone does not lead to vascular events. Objective comparative
transcriptional profiling by high-throughput RNA sequencing of the aorta displayed a molecular signature for excessive
PKC/ERK cell signaling that is the purported driver of disease. PKC inhibition proved efficacious in multiple pre-clinical
and murine (mice) models and indeed prevented death due to vascular rupture.

Pivotal Phase 3 studies for both newly-diagnosed diffuse large B-cell lymphoma (“DLBCL”) and glioblastoma

multiforme (“GBM”) are currently being conducted by Denovo Biopharma LLC (“Denovo”), enzastaurin's owner,
following Denovo’s acquisition of enzastaurin from Eli Lilly & Company. Enzastaurin received orphan drug designation in
DLBCL and GBM from the FDA and the European Medicines Agency (“EMA”). In July 2020, the FDA granted Fast Track
qualification for enzastaurin as the first-line treatment of GBM. Through our transaction with Rumpus, we have secured
exclusive global rights to enzastaurin/AR101 from Denovo in the fields of rare genetic pediatric onset or congenital
disorders outside of oncology. We expect to receive Orphan Drug Designation by the first calendar quarter of 2022, allowing
for seven years' marketing exclusivity in the United States and ten years in Europe and Japan. AR101 is protected by a suite
of pending patents being pursued in major markets globally which have been licensed from The Johns Hopkins University
(“Johns Hopkins”) and have an earliest priority date of March 2017. We expect to advance AR101 to a pivotal study in the
first calendar quarter of 2022 following submission and FDA acceptance of an Investigational New Drug (“IND”)
application.

Our other clinical-stage pharmaceutical asset, N-desethyloxybutynin (which we acquired through our merger with

Neos and Neos historically referred to as NT0502), is an active metabolite of the active ingredient in Ditropan®
(oxybutynin chloride), an FDA-approved medication for a urological condition. NT0502 is a new chemical entity (“NCE”)
and selective anticholinergic agent that we are developing as an oral, once- or twice-daily treatment to reduce chronic
sialorrhea in patients with neurological conditions associated with excessive salivation and drooling. Based on preclinical
data, we believe that NT0502 is preferential for blocking muscarinic receptors in the salivary glands and may offer the
potential for an improved tolerability profile and an easier-to-dose oral formulation compared to existing treatment options.
We intend to utilize the regulatory pathway provided by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act for
NT0502. In January 2020, we announced that we had completed dosing in a Phase 1 pilot pharmacokinetic study for
NT0502. The Phase 1 trial was a single-dose open-label, randomized, parallel study to assess the systemic exposure and
safety of four ion-resin, modified-release ODT formulations of NT0502 and oxybutynin in 30 healthy adults. The top-line
results from this study confirmed a formulation for further clinical development. NT0502 entered our pipeline on October
23, 2018, when Neos entered into an Exclusive License Agreement with NeuRx Pharmaceuticals, LLC (“NeuRx”) pursuant
to which NeuRx granted an exclusive, worldwide, royalty bearing license to us to develop, manufacture and commercialize
certain pharmaceutical products containing NeuRx’s proprietary compound designated as NRX-101, now NT0502.

Our clinical-stage medical device asset, an ultraviolet (UV)-A light endotracheal catheter we refer to as Healight™,

is being studied as a potential treatment for mechanically ventilated patients suffering from severe

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respiratory infections, including the infection caused by SARS-CoV-2 (the virus implicated in COVID-19). In April 2020
we licensed global rights to the Healight technology platform from Cedars-Sinai Medical Center (“Cedars-Sinai”). The
research team at the Medically Associated Science and Technology (MAST) Program at Cedars-Sinai has been developing
the patent-pending Healight platform since 2016 and has produced a growing body of scientific evidence demonstrating pre-
clinical safety and effectiveness of the technology as a potential antiviral and antibacterial treatment. The Healight
technology employs proprietary methods of administering intermittent ultraviolet (UV) A light via a novel endotracheal
medical device that, when implemented clinically, is inserted through the patient’s endotracheal tube and illuminated
intermittently over a period of multiple days. Pre-clinical findings indicate the technology's effects in eradicating a wide
range of viruses and bacteria, inclusive of human coronavirus. Those data, along with recently published clinical data from a
five patient study studying SARS-CoV-2, have been the basis of discussions with regulatory bodies as we consider an
efficient path to enable human use for the potential treatment of coronavirus in intubated patients in the intensive care unit
(ICU). Beyond the initial pursuit of a coronavirus indication, additional data suggest broader clinical applications for the
technology across a range of viral and bacterial pathogens. This includes bacteria implicated in ventilator associated
pneumonia (“VAP”). A randomized, controlled, sham-controlled study is currently being planned to further evaluate
Healight in SARS-CoV-2, and additional clinical applications (including VAP) are being considered.

Our Strategy

Our goal is to become a leading specialty pharmaceutical company that improves the lives of patients and
healthcare consumers. We will do this by employing a focused approach of in-licensing, acquiring, developing and
commercializing novel prescription therapeutics and consumer health products. Our primary focus is on commercializing
innovative prescription products that address prevalent conditions frequently developed in childhood, including ADHD. We
also commercialize consumer healthcare products through efficient direct-to-consumer and e-commerce platforms.
Importantly, we are also focused on developing a late-stage pipeline of novel, promising therapeutics that address unmet
medical needs, with a focus on pediatric-onset rare diseases. Our current development pipeline includes a pivotal study-
ready therapeutic that, if proven safe and effective and ultimately approved, would be the world’s first and only approved
treatment for vEDS.

Our strategic priorities are to continue to increase revenues from our prescription and consumer health portfolios,

advance our late-stage product pipeline, expand our patient access programs for our prescription products and grow our
commercial portfolio through additional in-licensing or acquisition. Specifically, we intend to:

● continue to grow our commercial branded, revenue-generating products, by increasing product sales and

improving patient access. Our primary commercial objective is to drive revenue growth of our ADHD and
pediatric brands, with a focus on Adzenys XR-ODT, Cotempla XR-ODT, Poly-Vi-Flor, and Tri-Vi-Flor. We
expect to increase market share using our internal commercial organization and leveraging our advanced
analytics platform to optimize sales force performance and increase both the breadth, or number of healthcare
professionals (“HCPs”) prescribing our medicines, and the depth, or the number of appropriate patients per
HCP for our products;

● grow our consumer health business by driving growth of our current consumer health brands and introducing

new products into our consumer marketing channels. Through a dual approach that employs both direct-to-
consumer and e-commerce commercial strategies to sell existing and forthcoming products, we expect to
reach an increasing number of healthcare consumers and drive incremental revenue growth;

● drive expansion and adoption of our Aytu RxConnect network which is designed to reduce barriers to access

to medicines facing patients and HCPs by providing coverage for all commercially insured patients, regardless
of their individual insurance plan, establishing an affordable and predictable monthly co-pay for patients, and
eliminating many of the hassles facing HCPs and their staffs by improving availability of Aytu products at
participating pharmacies; and

● rapidly advance the development of AR101 (enzastaurin) to address a significant unmet need in vEDS, an
ultra-rare, devastating, pediatric-onset disease with no currently approved therapies. The vEDS patient

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support community, with which we are highly engaged, recognizes the importance of advancing novel
treatments to address this deadly, life-shortening, inherited disorder, and we take seriously our goal of
advancing this treatment to regulatory approval.

We believe our history of acquiring companies and in-licensing and acquiring products and pipeline assets, along

with our success in building out commercial teams and successfully executing product launch and growth strategies, is a
distinct competitive advantage. Our transactional adeptness and execution orientation enable us to continue to seek growth
opportunities through both organic growth and opportunistic in-licensing or strategic acquisitions. Further, our commercial
infrastructure is scalable and lends itself to additional on-market assets and future product candidates that fit within our core
pediatric focus. As such, in the near term, we may seek to leverage our commercial model and infrastructure by expanding
our commercial portfolio with external product opportunities as we have done since our inception. Near to longer term, we
believe our prescription and consumer health businesses will provide resources to invest in and develop our pediatric and
rare disease asset pipeline.

Corporate History

We were initially incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado.

Vyrix Pharmaceuticals, Inc., or Vyrix, was incorporated under the laws of the State of Delaware on November 18,
2013 and was wholly-owned by Ampio Pharmaceuticals, Inc. (NYSE American: AMPE), or Ampio, immediately prior to
the completion of the Merger (defined below). Vyrix was previously a carve-out of the sexual dysfunction therapeutics
business, including the late-stage men’s health product candidates, Zertane and Zertane-ED, from Ampio, which was
announced in December 2013. Luoxis Diagnostics, Inc., or Luoxis, was incorporated under the laws of the State of
Delaware on January 24, 2013 and was majority-owned by Ampio immediately prior to the completion of the Merger.
Luoxis was initially focused on developing and advancing the RedoxSYS System. The MiOXSYS System was developed
following the completed development of the RedoxSYS System.

On March 20, 2015, Rosewind formed Rosewind Merger Sub V, Inc. and Rosewind Merger Sub L, Inc., each a

wholly-owned subsidiary formed for the purpose of the Merger. On April 16, 2015, Rosewind Merger Sub V, Inc. merged
with and into Vyrix and Rosewind Merger Sub L, Inc. merged with and into Luoxis, and Vyrix and Luoxis became
subsidiaries of Rosewind. Immediately thereafter, Vyrix and Luoxis merged with and into Rosewind with Rosewind as the
surviving corporation (herein referred to as the Merger). Concurrent with the closing of the Merger, Rosewind abandoned its
pre-merger business plans, solely to pursue products in the specialty pharmaceuticals, devices and diagnostics markets,
focusing on large areas of medical need, including the business of Vyrix and Luoxis.

On June 8, 2015, we reincorporated as a domestic Delaware corporation under Delaware General Corporate Law

and changed our name from Rosewind Corporation to Aytu BioScience, Inc.

On November 1, 2020, we acquired the established prescription pediatric portfolio of Cerecor, Inc. The acquired

products include Cefaclor, a second-generation cephalosporin antibiotic suspension, Karbinal ER, an extended-release
carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions and Poly-Vi-Flor and Tri-Vi-Flor,
two complementary prescription fluoride-based multi-vitamin product lines containing combinations of fluoride and
vitamins in various formulations for infants and children with fluoride deficiency.

In February 2020, we acquired Innovus, a specialty pharmaceutical company commercializing, licensing and
developing safe and effective consumer healthcare products designed to improve people’s health and vitality. Innovus
commercializes over 30 consumer health products competing in large healthcare categories including diabetes, pain
management, digestive health, sexual and urological health and general wellness for men and women. The Innovus product
portfolio is commercialized through both direct-to-consumer and e-commerce marketing channels utilizing our proprietary
Beyond Human® marketing and sales platform.

On March 10, 2020, we announced the licensing of a COVID-19 IgG/IgM Rapid Test from L.B. Resources, Ltd.
This agreement grants us the right to distribute the product in the United States for a period of three years, with additional
three-year autorenewals thereafter. The COVID-19 IgG/IgM Rapid Test is a solid phase

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immunochromatographic assay used in the rapid, qualitative and differential detection of IgG and IgM antibodies to the
2019 Novel Coronavirus in human whole blood, serum or plasma. We also distributed a COVID-19 rapid antigen test as part
of our effort to aid in the fight against COVID-19. In April 2020, we signed an exclusive worldwide licensing agreement
with Cedars-Sinai for a medical device platform technology called Healight™. This technology, which has been studied in
the laboratory and clinical setting, is being investigated as a potential treatment for COVID-19 in hospitalized, intubated
patients. In collaboration with researchers from the Medically Associated Science and Technology Program (MAST) at
Cedars-Sinai Medical Center, we expect to advance the development of Healight in the near term.

Our Board of Directors approved a 1-for-10 reverse stock split of our common stock on December 7, 2020, which

became effective on December 8, 2020. Our shares began trading on a split-adjusted basis on the Nasdaq Capital Market
commencing upon market open on December 9, 2020. The reverse stock split was previously approved by shareholders at
an Annual Meeting of Stockholders on April 23, 2020.

On December 10, 2020 we announced a definitive merger agreement with Neos Therapeutics whereby we agreed

to acquire all outstanding shares of Neos stock in an all-stock transaction valued at $44.9 million. Through this merger
transaction, which was completed on March 19, 2021, we increased our footprint in the prescription pediatric market
through the acquisition of Neos’ established, growing multi-brand ADHD portfolio. We closed the Neos merger on March
19, 2021. Following the Neos merger, we changed our name to Aytu BioPharma, Inc.

On April 12, 2021, we entered into an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics,

LLC, Rumpus Vascular, Christopher Brooke and Nathaniel Massari pursuant to which we acquired certain rights and other
assets, including key commercial global licenses, relating primarily to the pediatric-onset rare disease development asset
enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied for the treatment of
vascular Ehlers-Danlos Syndrome or vEDS. We acquired this asset for $1.5 million in cash and, upon the achievement of
certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares
of common stock, generally at our option.

Our Products and Markets

Our prescription products are sold solely in the United States and are distributed through multiple channels,

including sales to pharmaceutical wholesalers, on a sell-through basis using third-party logistics enterprises. Our consumer
health products are sold primarily in the United States and Canada directly to consumers via traditional consumer channels,
such as print advertising and direct mail, and e-commerce channels including various websites and consumer web
commerce platforms such as Amazon,com in the United States and Amazon.ca in Canada.

Prescription Products

ADHD Portfolio (the Neos legacy product portfolio)

Through the merger with Neos, we acquired ADHD brands Adzenys XR-ODT, Adzenys ER, and Cotempla XR-

ODT.

ADHD Market and Treatment Options

ADHD is a neurobehavioral disorder characterized by a persistent pattern of inattention and/or

hyperactivity/impulsivity that interferes with functioning and/or development. ADHD can have a profound impact on an
individual’s life, causing disruption at school, work and home and in relationships. It is one of the most common
developmental disorders in children and often persists into adulthood. In 2011, an estimated 11% of children in the United
States ages 4 to 17 had previously received an ADHD diagnosis. A 2006 study estimated 4.4% of adults in the United States
experience ADHD symptoms. Current ADHD treatment guidelines recommend a multi-faceted approach that uses
medications in conjunction with behavioral interventions.

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In 2020, approximately 75.1 million prescriptions for medications with ADHD labeling were written in the United

States and generated approximately $8.5 billion in sales. Approximately 91% of these prescriptions were for stimulant
medications, such as methylphenidate and amphetamine, which are and have been the standard of care for several decades.
Methylphenidate and amphetamine prescriptions generated $2.6 billion and $5.6 billion in sales, respectively, in 2020 in the
United States. A few non-stimulant medications are also available, but evidence of their efficacy for treating ADHD
symptoms is less compelling. The market for ADHD medications outside of the United States is less developed, but we
believe it will continue to grow as recognition and awareness of the disorder increase.

Extended-release, or long acting, dosage forms of stimulant medications are the standard of care for treating

ADHD, making up approximately 54% of ADHD prescriptions. The most prescribed extended-release medications for
ADHD, Concerta® and Adderall XR® (and each of their generic equivalents), are long-acting versions of previously short-
acting methylphenidate and amphetamine medications, respectively. Most of these extended-release dosage forms allow for
once-daily dosing in the morning, which eliminates the need to re-dose during the day. Our products, Adzenys XR-ODT and
Cotempla XR-ODT, are extended-release orally disintegrating tablets that allow for once-daily dosing in the morning based
upon the proprietary microparticle delivery technology developed by Neos.

There is significant competition in the ADHD market, including from well-established companies, many of whom

have substantially greater financial, technical and commercial resources than we do, and entrenched existing ADHD
products. For example:

● amphetamine XR is currently marketed in the United States by (i) Takeda Pharmaceutical Company Limited

under the brand names Adderall XR®, Vyvanse® and Mydayis® and (ii) Tris Pharma, Inc. (“Tris”), under the
brand name Dyanavel XR®; and

● methylphenidate XR is marketed in the United States by (i) Janssen Pharmaceuticals, Inc. under the brand
name Concerta®, (ii) Tris under the brand names Quillivant XR® and QuilliChew ER®, (iii) Rhodes
Pharmaceuticals LP under the brand name Aptensio XR®, (iv) Ironshore Pharmaceuticals Inc. under the brand
name Jornay PM®, (v) Osomotica Pharmaceuticals plc under the name Methylphenidate HCl ER 72 mg
Tablets, (vi) Novartis under the brand names Focalin XR® and Ritalin LA® and (vii) Adlon Therapeutics
L.P., a subsidiary of Purdue Pharma L.P., under the name Adhansia XR®. AzstarysTM, a product developed by
KemPharm, recently received FDA approval and it is anticipated will be commercially launched by Corium,
Inc. in the second half of 2021.

Further, makers of branded drugs could also enhance their own formulations in a manner that competes with our

enhancements of these drugs. We are also aware of efforts by several pharmaceutical companies with ADHD medications in
clinical development, including Sunovion, NLS Pharma and Neurovance, a subsidiary of Otsuka Pharmaceutical Co., Ltd. A
non-stimulant treatment Qelbree™, a non-stimulant treatment for ADHD was recently approved by the FDA and
commercially launched by Supernus in the U.S.

Our ADHD and Central Nervous System (CNS) Product Portfolio

Neos’ modified-release drug delivery technology platform has enabled Neos to create XR-ODT formulations of

amphetamine and methylphenidate. This was achieved by developing an extended-release profile that allows for once daily
dosing and an ODT formulation that allows for easier administration and ingestion and twelve-hour duration of action.

Adzenys XR-ODT and Cotempla XR-ODT are the first XR-ODT products for the treatment of ADHD. These XR-

ODT products offer unique attributes to ADHD patients and caregivers, including:

● ease of administration and ingestion because they disintegrate rapidly in the mouth and may be taken without

water;

● taste-masking of bitter ADHD medications, with flavoring options;

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● prevention of “cheeking”, the practice of hiding medication in the mouth and later spitting it out rather than

swallowing it; and

● convenient single-unit blister-packaging, which is both portable and discrete.

Adzenys XR-ODT: Amphetamine XR-ODT for the treatment of ADHD

Neos received approval on January 27, 2016 from the FDA for Adzenys XR-ODT for the treatment of ADHD in

patients six years and older. We believe Adzenys XR-ODT is the first amphetamine XR-ODT approved for the treatment of
ADHD. The NDA for Adzenys XR-ODT relies on the efficacy and safety data that formed the basis of FDA approval for
the listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability and aggregate safety data from the
Adzenys XR-ODT clinical program. Adzenys XR-ODT contains amphetamine loaded onto a mixture of immediate-release
and polymer-coated delayed-release resin particles, which are formulated and compressed into an ODT along with other
typical tableting excipients using Neos’ patented rapidly disintegrating ionic masking (“RDIM”) technology. The result is
amphetamine with an in vivo extended-release profile delivered through a tablet that quickly disintegrates in the mouth
without the need for water. Adzenys XR-ODT is available in 30-day supply, child-resistant blister packs.

The suite of composition-of-matter patents for Adzenys XR-ODT are scheduled to expire in 2026 and 2032. These
patents are listed in the FDA’s publication of approved drug products with therapeutic equivalence evaluations (the “Orange
Book”). In addition, Neos entered into a settlement agreement with Actavis Laboratories FL, Inc. (“Actavis”), which
resolved all ongoing litigation involving Neos’ Adzenys XR-ODT patents and Actavis’ ANDA with the FDA for a generic
version of Adzenys XR-ODT. Under the agreement with Actavis, Neos granted Actavis the right to manufacture and market
its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain
circumstances.

Neos included a Paragraph IV certification in the NDA submission for Adzenys XR-ODT, which required a

Paragraph IV certification notification to the producer of Adderall XR®, Shire Pharmaceuticals (“Shire”), in accordance
with the Hatch-Waxman Amendments. In July 2014, Neos entered into a license agreement with Shire, pursuant to which
Shire granted Neos a non-exclusive license to certain patents owned by Shire for certain activities with respect to Adzenys
XR-ODT. Under the terms of the agreement, Neos paid a lump sum, non-refundable license fee of an amount less than $1.0
million in February 2016 and agreed to pay Shire a single digit royalty on net sales of Adzenys XR-ODT during the life of
the patents. Additionally, the license agreement contains a covenant from Shire not to file a patent infringement suit against
Neos alleging that Adzenys XR-ODT infringes the relevant Shire patents.

In conjunction with the approval of the Adzenys XR-ODT NDA, Neos committed to the FDA to conduct certain

clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. Neos completed
a pharmacokinetic study in this population in 2018, and, following the merger, we have engaged in discussions with the
FDA to further clarify the design protocols required to conduct the remaining studies.

Cotempla XR-ODT: Methylphenidate XR-ODT for the treatment of ADHD

Neos received approval of Cotempla XR-ODT from the FDA for the treatment of ADHD in patients 6 to 17 years

old, on June 19, 2017. The Cotempla XR-ODT NDA relies on the efficacy and safety data that formed the basis of FDA
approval for the listed drug, Metadate CD®, together with bioavailability/bioequivalence data and efficacy/safety data from
the Cotempla XR-ODT clinical program. The results of the Cotempla XR-ODT Phase 3 clinical efficacy and safety trial
showed a statistically significant improvement in ADHD symptom control compared to placebo across the classroom day.
Onset of effect was observed within one hour post-dose and persisted through 12 hours. No serious adverse events were
reported during the study, and the adverse event profile was consistent with the drug’s mechanism of action.

Cotempla XR-ODT contains methylphenidate loaded onto a mixture of immediate-release and polymer-coated

delayed-release resin particles, which are formulated and compressed into an ODT along with other typical tableting
excipients using Neos’ RDIM technology. The result is methylphenidate with an in vivo extended-release profile

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delivered through a tablet that quickly disintegrates in the mouth. Cotempla XR-ODT is available in 30-day supply, child-
resistant blister packs. We believe Cotempla XR-ODT is the first methylphenidate XR-ODT for the treatment of ADHD,
providing onset-of-effect within one hour and a 12-hour duration.

We hold composition-of-matter patents in the U.S. which we expect will provide Cotempla XR-ODT intellectual
property protection until 2032. These patents are listed in the Orange Book. In addition, Neos entered into the settlement
agreement with Teva Pharmaceuticals USA, Inc. (“Teva”), which resolved all ongoing litigation involving the Cotempla
XR-ODT patents and Teva’s ANDA with the FDA for a generic version of Cotempla XR-ODT. Under the agreement with
Teva, Neos granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA
beginning on July 1, 2026, or earlier under certain circumstances.

In conjunction with the approval of the Cotempla XR-ODT NDA, Neos committed to the FDA to perform
additional clinical studies in preschool (age four to five years) children with ADHD as a post-marketing requirement. Neos
completed a pharmacokinetic study in this population in 2019. In light of a new draft guidance for industry that was
published in May 2019, “Attention Deficit Hyperactivity Disorder: Developing Stimulant Drugs for Treatment Guidance for
Industry,” and following the merger, we have engaged in discussions with the FDA to gain concurrence on the design of the
protocols required to meet the remaining post-marketing requirements.

Adzenys ER: Amphetamine XR liquid suspension for the treatment of ADHD

Neos received approval of Adzenys ER from the FDA for the treatment of ADHD in patients six years and older,

on September 15, 2017. The NDA for Adzenys ER relies on the efficacy and safety data that formed the basis of FDA
approval for the listed drug, Adderall XR, 30 mg, together with bioequivalence, bioavailability and aggregate safety data
from the Adzenys ER clinical program. There are no post-marketing requirements for this product. Adzenys ER contains
amphetamine loaded onto a mixture of immediate-release and polymer coated delayed-release resin particles, and using
Neos’ patented dynamic time release suspension (“DTRS”) technology, Neos created an amphetamine XR oral suspension.
Adzenys ER is designed to be shelf stable for 36 months, without requiring refrigeration or reconstitution. The composition-
of-matter patents for Adzenys ER are scheduled to expire in 2032. These patents are listed in the Orange Book.

Neos included a Paragraph IV certification in the NDA submission for Adzenys ER, which required a Paragraph IV

certification notification to the producer of Adderall XR®, Shire Pharmaceuticals, in accordance with the Hatch Waxman-
Amendments. On March 6, 2017, Neos entered into a license agreement with Shire, pursuant to which Shire granted Neos a
non-exclusive license to certain patents owned by Shire for certain activities with respect to Adzenys ER. Under the terms
of the agreement, Neos paid a lump sum, non-refundable license fee of an amount less than $1.0 million in October 2017
and has been paying a single digit royalty on net sales of the Adzenys ER during the life of the patents. Additionally, the
license agreement contains a covenant from Shire not to file a patent infringement suit against us alleging that Adzenys ER
infringes the relevant Shire patents.

Following the merger and in conjunction with the integration of the Aytu and Neos sales forces and product

portfolios, we evaluated the market potential of Adzenys ER and made the decision to discontinue the product. We believe
this discontinuation will enable a higher level of promotional focus on the core ADHD and pediatric brands while reducing
the regulatory and commercial expenses associated with Adzenys ER. Revenue for Adzenys ER has been minimal since
launching the product February 2018.

ZolpiMist: Oral spray zolpidem tartrate for the short-term treatment of insomnia

ZolpiMist is an FDA-approved prescription oral spray indicated for the short-term treatment of insomnia. We

believe ZolpiMist is the only oral spray formulation of zolpidem tartrate, the most widely prescribed prescription sleep aid
in the U.S. ZolpiMist competes in the non-barbituate prescription sleep aid category, a $5.2 billion prescription drug
category with over 35 million prescriptions written in 2020. Over 70 percent of the prescriptions in this category were
written for a branded or generic formulation of zolpidem tartrate. The zolpidem tartrate brands marketed in the U.S. include
Ambien®, Ambien® CR, Intermezzo®, Edluar® and ZolpiMist®, but the vast majority of prescriptions written are filled
with generic versions of zolpidem tartrate. Zolpidem tartrate is approved in multiple formulations including

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immediate-release, controlled release and orally dissolving tablet formulations, but immediate release tablets are most
widely prescribed and dispensed.

Insomnia is among the most common conditions affecting Americans and patients around the world in general.

Approximately 30 percent of adults experience insomnia, and it is estimated that ten percent or more suffer daytime
consequences as a result of their poor sleep. Prescription sleep aids are prescribed to enable more rapid onset of sleep for
patients experiencing short-term insomnia, and ZolpiMist’s oral spray formulation rapidly absorbs into the patient’s
bloodstream to potentially enable faster sleep onset. In a randomized, controlled clinical trial, patients taking 5 mg and 10
mg of ZolpiMist achieved higher levels of blood plasma significantly faster than patients taking zolpidem tartrate oral
tablets. Additionally, these patients experienced faster onset of sedation as measured by the validated Digital Symbol
Substitution Test (DSST). By virtue of bypassing first-pass liver metabolism, the oral spray delivery afforded through
ZolpiMist enables rapid absorption, fast sleep onset and may offer distinct patient benefits not afforded by oral tablets.
Additionally, since ZolpiMist does not require swallowing, it may be appropriate for patients with dysphagia or who
otherwise find tablets difficult to tolerate.

In June 2018, we acquired an exclusive license to ZolpiMist in the U.S. and Canada from Magna Pharmaceuticals.
This agreement allows for our exclusive distribution throughout the U.S. and the ability to sublicense the product in Canada.
The agreement can only be terminated for a material breach as defined in the agreement or by convenience by us upon sixty
days’ written notice and payment of a $50,000 termination fee. Per the agreement, we pay a low double-digit royalty for the
first seven years of the agreement, following which the license becomes a royalty-free perpetual license as long as the terms
of the agreement remain satisfied. We do not have a signed supply agreement with the ZolpiMist contract manufacturer, but
we have an ongoing relationship with the manufacturer and have received multiple product deliveries to date. ZolpiMist is
not currently covered by any patents, but we maintain an active trademark in the United States.

Pediatric Portfolio

Prior to the closing of the Neos merger on March 19, 2021, we were focused on the commercialization of the

Pediatric and Aytu legacy Portfolio inclusive of core products Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER, ZolpiMist and
Natesto. Prior to November of 2019 we primarily commercialized Natesto, Tuzistra XR and ZolpiMist through our U.S.
sales force, but upon the closing of the asset purchase of a portfolio of prescription pediatric products with Cerecor on
November 1, 2019 (“Cerecor Asset Purchase”), we expanded our portfolio to include AcipHex® Sprinkle, Poly-Vi-Flor, Tri-
Vi-Flor, Karbinal ER, Cefaclor and Flexichamber. We have since de-prioritized Cefaclor and Flexichamber, given that these
products have contributed immaterial revenue. Further, we have discontinued AcipHex Sprinkle and returned rights to
Natesto to the product’s licensor Acerus Pharmaceuticals. With respect to the Aytu legacy products, going forward we
expect to focus our promotional efforts on Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER and ZolpiMist. ZolpiMist is now being
promoted by the CNS-focused sales force in conjunction with the ADHD brands to take advantage of overlapping call
points. Poly-Vi-Flor, Tri-Vi-Flor and Karbinal ER are being promoted by our pediatric-focused sales representatives.

Poly-Vi-Flor and Tri-Vi-Flor: Our fluoride-based multivitamin prescription supplement product line for infants and
children

Poly-Vi-Flor and Tri-Vi-Flor are two complementary prescription fluoride-based supplement product lines
containing combinations of vitamins and fluoride in various oral formulations. These prescription supplements are
prescribed for infants and children to treat or prevent fluoride deficiency due to poor diet or low levels of fluoride in
drinking water and other sources while also providing multi-vitamin support and folic acid supplementation. Because these
products contain at least .25 mg of sodium fluoride, Poly-Vi-Flor and Tri-Vi-Flor are regulated as prescription products.

Fluoride supplementation has been proven to protect teeth from decay. Community water fluoridation prevents

tooth decay by providing frequent and consistent contact with low levels of fluoride. By keeping the tooth strong and solid,
fluoride stops cavities from forming and can rebuild the tooth’s surface. Community water fluoridation began in the United
States in 1945 and is the process of adjusting the amount of fluoride in drinking water to a level

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recommended for preventing tooth decay. As of 2016, more than 200 million people, or nearly 3 in 4 Americans who use
public water supplies, drank water with enough fluoride to prevent tooth decay. However, American children living in
municipalities that do not fluoridate the water supply or in rural areas that rely on well water supplies do not receive
recommended levels of fluoride through fluoridation. Therefore, these children often require daily fluoride supplementation
as part of their mineral and vitamin intake. In many instances, physicians prescribe fluoride-based multi-vitamins (Vitamins
A, B, C, D and folic acid) regularly to supplement their fluoride intake and enable convenient supplementation. Infants are
prescribed multi-vitamin drops while older children are prescribed tablet formulations.

In 2020, 13.1 million multi-vitamin prescriptions were written in the U.S. Of those, prescription multi-vitamins

containing sodium fluoride accounted for 1.6 million total prescriptions. Common multi-vitamin combinations contain
vitamins A, B, C, D and E, but no other prescription pediatric multi-vitamin products contain Metafolin, which makes the
Poly-Vi-Flor and Tri-Vi-Flor product lines distinct, single-source brands. While the multi-vitamin market is dominated by
generic products, brands account for 3.4% of the multivitamin plus fluoride market. Poly-Vi-Flor and Tri-Vi-Flor
collectively account for 2.4% of total prescriptions in the multi-vitamin plus fluoride market. Other brands include Tri-Vite
(marketed by Method Pharmaceuticals), Floriva (marketed by BonGeo Pharmaceuticals) and Quflora (marketed by Carwin
Pharmaceutical Associates).

Poly-Vi-Flor is available in both chewable tablet and oral liquid suspension multivitamin formulations in six

different product presentations: Poly-Vi-Flor Chewable Tablets .25 MG, .50 MG, and 1 MG tablets, Poly-Vi-Flor Chewable
Tablets with Iron, Poly-Vi-Flor Oral Suspension and Poly-Vi-Flor Oral Suspension with Iron. Poly-Vi-Flor contains Vitamin
A, Vitamin B1, B2, B3, and B6, Vitamin C, Sodium Fluoride in various doses and Metafolin, a proprietary, trademarked L-
methylfolate form of folic acid developed by Merck & Cie (“Merck”).

Tri-Flor is available as an oral liquid suspension in two different strengths (.25 MG and .50 MG fluoride)
containing Vitamin A, Vitamin C, Vitamin D3, Sodium Fluoride, Sodium Benzoate and Metafolin. By virtue of its
Metafolin content, Tri-Vi-Flor offers a similar clinical profile: a fluoride-based multivitamin containing body-ready
Metafolin.

Metafolin® is Merck’s manufactured calcium salt of L-5-methyltetrahydrofolic or L-methylfolate. It is a ‘body

ready’ alternative to folic acid and offers good stability, solubility and bioavailability. Folic acid supplementation is
recommended in various patient groups, but a significant number of patients have difficulty metabolizing folate due to an
enzymatic deficiency characterized by a genetic mutation affecting the enzyme methylenetetrahydrofolate reductase, or
MTHFR. MTHFR converts ingested folate (such as supplemented folic acid) into L-methylfolate, the body’s usable form.
Clinical studies have demonstrated that 75% of pediatric patients may have one MTHFR genetic mutation while 40% may
have two mutations. These mutations lead to impaired function of the enzyme and cause folate deficiencies. Metafolin is
unaffected by the MTHFR mutation, thereby directly delivering bioavailable L-methylfolate, and offering a distinct clinical
advantage over other folic acid supplements.

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Poly-Vi-Flor and Tri-Flor Product Line Description

Product Name

Ingredients

Sodium Fluoride – Metafolin - Iron Dosage

Poly-Vi-Flor Chewable Tablet (.25 MG)  

Poly-Vi-Flor Chewable Tablet (.5 MG)

Poly-Vi-Flor Chewable Tablet (1 MG)

Poly-Vi-Flor Chewable Tablet w/ Iron
(.5 MG - 10 MG)

Poly-Vi-Flor Oral Suspension (.25
MG/ML)

Poly-Vi-Flor Oral Suspension w/ Iron
(.25 MG/ML – 7 MG)

Tri-Vi-Flor Oral Suspension .25 MG/ML

Tri-Vi-Flor Oral Suspension .50 MG/ML

Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin C, Vitamin D, Vitamin E,
Sodium Fluoride, Metafolin
Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin C, Vitamin D, Vitamin E,
Sodium Fluoride, Metafolin
Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin C, Vitamin D, Vitamin E,
Sodium Fluoride, Metafolin
Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin, C, Vitamin D, Vitamin E,
Sodium Fluoride, Metafolin, Iron
Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin, C, Vitamin D, Vitamin E,
Sodium Fluoride, Sodium Benzoate,
Metafolin
Vitamin A, Vitamin B1, B2, B3, B6,
Vitamin C, Vitamin D, Vitamin E,
Sodium Fluoride, Sodium Benzoate,
Metafolin, Iron (as Ferrous Bisglycinate
Hydrochloride)
Vitamin A, Vitamin C, Vitamin D3,
Sodium Fluoride, Sodium Benzoate,
Metafolin
Vitamin A, Vitamin C, Vitamin D3,
Sodium Fluoride, Sodium Benzoate,
Metafolin

.25 MG - 200 MCG

.50 MG - 200 MCG

1 MG - 200 MCG

.50 MG - 200 MCG – 10 MG

.25 MG – 200 MCG

.25 MG – 200 MCG – 7 MG

.25 MG – 200 MCG

.50 MG – 200 MCG

We acquired Poly-Vi-Flor and Tri-Vi-Flor through the Cerecor Asset Purchase. Through the acquisition we

acquired multiple licenses surrounding both brands. We own or exclusively license from Mead Johnson & Company, LLC
to the trademarks Poly-Vi-Flor and Tri-Vi-Flor, and we pay a sales-based royalty for the use of these trademarks. We also
pay a single-digit royalty to Merck & Cie through a commercial supply and license agreement for exclusive use of the
proprietary ingredient Metafolin (and the follow-on L-methylfolate ingredient Arcofolin®). The commercial supply and
license agreement was originally between Merck and Zylera Pharmaceuticals, which was subsequently acquired by Cerecor,
and it was assigned to us upon closing of the Cerecor Asset Purchase. Subsequent to that assignment, we signed a new
commercial supply and license agreement to include Arcofolin that was effective February 1, 2020. Arcofolin is an
improved formulation of L-methylfolate, and, if granted, the core patent covering Arcofolin would expire in 2033. Through
the supply and license agreement with Merck we have exclusive rights to Merck’s L-methylfolate in the pediatric field (birth
to twelve years of age) in the United States. The term of the agreement extends through January 2025, with an automatic
renewal for two years following the initial term unless either party terminates the agreement within one year of the then
current term. The agreement requires, among other items, that we provide a rolling twelve-month forecast containing our
requirements for either Metafolin or Arcofolin each quarter. The first six months forecast of each rolling forecast is binding.

The core family of patent covering Arcofolin has a priority date of March 31, 2017 and describes a crystalline

sodium salt of 5-methyl-(6S)- tetrahydrofolic acid wherein the molar ratio of 5-methyl-(6S)-tetrahydrofolic acid to sodium
is from 1:0.5 to 1:1.5 (in mol/mol) and/or hydrates and/or solvates thereof, as well as a process of obtaining the same. If
issued, the standard 20-year exclusivity for this patent would expire in 2037.

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Karbinal ER: Extended release carbinoxamine oral suspension for the treatment of seasonal and perennial allergies

Karbinal® ER (carbinoxamine maleate extended-release oral suspension) is an H1 receptor antagonist
(antihistamine) indicated to treat seasonal and perennial allergic rhinitis, vasomotor rhinitis, allergic conjunctivitis due to
inhalant allergens and food, mild, uncomplicated allergic skin manifestations of urticaria and angioedema,
dermatographism, as therapy for anaphylactic reactions adjunctive to epinephrine and other standard measures after the
acute manifestations have been controlled, and amelioration of the severity of allergic reactions to blood or plasma.

Over 50 million Americans suffer from allergies in any given year, and allergies are the sixth leading cause of

chronic illness in the U.S. Numerous allergy treatments exist to address allergies and allergic symptoms depending upon the
symptom(s). Oral antihistamines are considered a mainstay of allergy treatment, and the prescription antihistamine market is
a large category with over 50 million prescriptions written in 2020. The prescription antihistamine category is dominated by
generic products and consists of first generation and second-generation molecules. Generally, first-generation antihistamines
block both histaminic and muscarinic receptors and pass the blood-brain barrier. Second-generation antihistamines mainly
block histaminic receptors, but they do not pass the blood-brain barrier. First generation antihistamines, which are generally
characterized as more sedating, accounted for 16% of 2020 total prescriptions, while non-sedating, second generation
antihistamines accounted for 84% of total prescriptions. The most widely prescribed oral, second-generation antihistamines
are cetirizine (brand name Zyrtec®) and loratadine (brand name Claritin®). Diphenhydramine (brand name Benadryl®) is
the most widely prescribed first-generation molecule.

Karbinal ER is the only FDA-approved, 12-hour carbinoxamine oral suspension and is an effective antihistamine
with a broad range of indications. Karbinal ER is positioned as a second-line allergy treatment for patients who continue to
suffer from allergic symptoms following initial treatment with a second-generation, non-sedating antihistamine. Further, as
Karbinal ER is an oral suspension formulation, children are the primary target patient given their preference for liquid
treatments and, in many cases, their inability to swallow tablets or capsules. Karbinal ER is indicated for children as young
as two years of age. Karbinal has a pleasant strawberry-banana taste and is available in 480 mL bottles.

We acquired rights to Karbinal ER through the Cerecor Asset Purchase. Through the acquisition we assigned an

exclusive supply and distribution agreement with Tris, the developer and manufacturer of the product. This agreement
allows us to exclusively distribute Karbinal ER in the U.S. through the term of the agreement, which is through August
2032, unless the agreement is terminated earlier pursuant to the termination provisions in the agreement. Tris originally
licensed Karbinal to FSC Laboratories. Prior to Cerecor’s acquisition of Karbinal through its acquisition of the pediatric
assets of Avadel Pharmaceuticals (“Avadel”), through a transaction with FSC Laboratories, Flamel Technologies and Eclat
Pharmaceuticals that formed Avadel, Avadel owned rights to the Karbinal ER supply and distribution agreement. As part of
the agreement, we pay Tris sales-based royalties based on net revenue. Additionally, we are committed to make annual
minimum payments to Tris through 2023. We provide Tris with a rolling 12-month forecast containing estimates of our
product requirements for the upcoming year. The first three months of each forecast is binding.

Two core patents protect Karbinal ER in the U.S., and both parents are listed in the FDA’s Orange Book. The first

patent describes a coated drug-ion exchange resin complex comprising a core composed of a drug complexed with a
pharmaceutically acceptable ion-exchange resin. The priority date for this family is March 29, 2009, so the standard 20-year
exclusivity for this patent will expire in 2029. The second patent describes an aqueous liquid suspension containing a coated
drug-ion exchange resin complex comprising a core molecule complexed with a pharmaceutically acceptable ion-exchange
resin and an uncoated ion exchange resin complex. The priority date for this family is June 15, 2007, so the standard 20-year
exclusivity for this patent will expire in 2027.

Our Prescription Antitussive Products: Tuzistra® XR and Generic Tussionex®

Tuzistra® XR

In November 2018 we acquired U.S. rights to be supplied by and to market Tuzistra XR from Tris, the developer

and manufacturer of the product. Tuzistra XR is the only FDA-approved 12-hour codeine-based antitussive.

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Tuzistra XR is a prescription antitussive consisting of codeine polistirex and chlorpheniramine polistirex in an extended-
release oral suspension. Tuzistra XR is a patented combination of codeine, an opiate agonist antitussive, and
chlorpheniramine, a histamine-1 receptor antagonist, indicated for relief of cough and symptoms associated with upper
respiratory allergies or a common cold in adults aged 18 years and older. Tuzistra XR is protected by two Orange Book-
listed patents extending to 2027 and 2029 both of which are owned by Tris.

According to MediMedia, the U.S. cough cold prescription market is worth in excess of $3 billion, with 30-35

million annual prescriptions. The antitussive market is dominated by short-acting treatments, which require dosing 4-6 times
a day. Tuzistra XR was developed using Tris’ liquid sustained release technology, LiquiXR®, which allows for extended
drug delivery throughout a 12-hour dosing period. On September 1, 2019, we entered into a co-promotion agreement for
Tuzistra XR with Poly Pharmaceuticals (“Poly”) whereby Poly will promote Tuzistra XR in select geographies throughout
the U.S. through their sales force. Poly receives a commission payment for each prescription generated according to the
terms of the agreement. Poly is a privately-held specialty pharmaceutical company focused primarily on cough, allergy, and
other respiratory conditions and has actively promoted prescription antitussives since its founding in 1980. The co-
promotion agreement expires in September 2022 and can be extended beyond the initial term upon the companies’ mutual
agreement. Poly will receive commission payments based on Tuzistra XR prescriptions generated from physician targets
within Poly’s geographic footprint. Poly’s geographic footprint covers approximately 750,000 antitussive prescriptions
annually. We revised the Poly co-promotion agreement in December 21, 2020 to expand their promotional rights.

Generic Tussionex

Through the merger with Neos in March 2021 we acquired their generic Tussionex product. Generic Tussionex is a

hydrocodone polistirex and chlorpheniramine polistirex XR oral suspension that is a Schedule II narcotic, antitussive and
antihistamine combination. This product is indicated for the relief of cough and upper respiratory symptoms associated with
allergies or colds in adults and children six years of age and older.

Since its launch in September 2013, Neos has manufactured and utilized Neos’ DTRS technology in the production

of the generic Tussionex product at the Neos facility in Grand Prairie, Texas. In August 2014, Neos acquired all
commercialization and profit rights to this formulation of the generic Tussionex product from Cornerstone BioPharma, Inc.
and Coating Place, Inc. In October 2014, the product was re-launched under Neos’ own label. We sell our product to drug
wholesalers in the United States. We have also established indirect contracts with drug, food and mass retailers that order
and receive our product through wholesalers. We have obtained required state licenses, set up distribution channels and
established trade relations in order to commercialize our generic Tussionex.

Divested and Out-Licensed Products

Natesto®

In 2016, we acquired exclusive U.S. rights to Natesto® (testosterone) nasal gel, a novel formulation of testosterone

delivered via a discreet, easy-to-use nasal gel, including a license to four Orange Book-listed patents. We exclusively
commercialized Natesto in the U.S. beginning September 2016 through March 31, 2021, and Natesto was a key promotional
priority through this timeframe.

On July 29, 2019, we agreed to amend and restate the License and Supply Agreement with Acerus. The

effectiveness of the amended Agreement was conditioned upon Acerus obtaining new financing within six months of
signing of the amended Agreement, which was achieved on December 1, 2019. Upon the execution of the Amendment,
Aytu continued to serve as the exclusive U.S. supplier to purchasers of Natesto, and Acerus received performance-based
commissions on prescriptions generated by urology and endocrinology specialties. Acerus assumed regulatory and clinical
responsibilities and associated expenses and began serving a primary role in the development of key opinion leaders in
urology and endocrinology. Aytu focused on commercial channel management, sales to wholesalers and other purchasing
customers, and directs sales efforts in all other physician specialties. On December 1, 2019, we officially launched the co-
promotion program and transferred five of our dedicated sales employees to Acerus until such time that

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they could establish their own dedicated sales force. In July 2020, Acerus launched its dedicated sales team to promote
Natesto to urologists and endocrinologists across the United States.

In anticipation of the planned merger with Neos, and to enable an increased focus on ADHD, pediatrics and
adjacent specialty areas, in late 2020 we negotiated an agreement with Acerus whereby we would return all rights to Natesto
in exchange for cash consideration. Following the closing of the Neos merger, on March 31, 2021 we entered into a
termination and transition agreement (the “Termination Agreement”) with Acerus, pursuant to which Aytu and Acerus
agreed to terminate the Amended and Restated License and Supply Agreement. On April 1, 2021 we ceased all sale,
marketing and promotion of Natesto. In exchange Acerus has agreed to pay us an aggregate amount equal to $7.5 million,
payable in equal monthly installment payments for a period of 30 consecutive months. In addition, Acerus agreed to
repurchase all Natesto inventory at cost. Finally, we agreed to perform all of our distribution related obligations under the
License and Supply Agreement and to assist Acerus and book Acerus’ sales of Natesto to third parties from the Effective
Date until such date that Acerus was able to book Natesto sales without Aytu’s assistance (but in no event later than July 31,
2021 and pay to Acerus an amount equal to gross sales less applicable deductions and direct costs attributable to sales made
during the transition period.

MiOXSYS®

Upon the formation of Aytu in April 2015, the technology underpinning MiOXSYS (originally the RedoxSYS

System) was a core commercial asset that aligned to our strategic priorities at that time. As we evolved and shifted focus to
therapeutics, MiOXSYS became non-strategic. As we shifted focus to pediatrics and specialty pharmaceuticals, we pursued
monetizing the asset. As such, and in anticipation of the closing of the Neos merger, on January 20, 2021 we signed an
exclusive license agreement to license the intellectual property surrounding the use and commercialization of the MiOXSYS
commercial system (“MiOXSYS Product”). The Agreement was entered into with Avrio Genetics, LLC (“Avrio”). Under
this agreement, Avrio was obligated to purchase existing inventory, commercialize and market the MiOXSYS Product under
a royalty on Product net sales with a minimum annual payment fee structure for a term of ten years, with the term
continuing in perpetuity with a fixed royalty rate based on MiOXSYS sales, payable annually to us. Avrio did not perform
under the terms of the agreement, and on July 1, 2021, we and Avrio mutually agreed to terminate the Avrio agreement,
effective as of June 29, 2021. In connection with the termination of the agreement, we entered into a termination agreement
with Avrio. Pursuant to the terms of this termination agreement, the original Avrio agreement and its amendments were
terminated in their entirety, except for certain provisions that survived the termination as specified in such agreement.

Subsequent to the Avrio termination, on July 1, 2021 we signed an Asset Purchase Agreement with UAB “Caerus

Biotechnologies” (“UAB”). Pursuant to the terms and conditions of the agreement, UAB has acquired all existing
intellectual property rights, technical information and know-how related to MiOXSYS as well as all existing inventory and
all rights attached and related to the product and manufacturing thereof. As consideration, UAB agreed to pay us
approximately $0.5 million and make royalty payments to us of five percent of net global revenue of the MiOXSYS Product
for five years from the closing date of the transactions contemplated in the Asset Purchase Agreement.

Accordingly, both Natesto and MiOXSYS have been divested and are no longer material aspects of our business.

Aytu Consumer Health Portfolio

We acquired our consumer health business through the acquisition of Innovus Pharmaceuticals, Inc. in February

2020. The consumer health business is focused on OTC and consumer health care products designed for in-home treatment
of medical conditions and ailments to help customers take care of themselves and their families in order to lead healthy
lives. Now marketed under the name Aytu Consumer Health, we commercialize over 30 products in the U.S. and Canada
and more than seven products in other countries through two distinct marketing channels: direct-to-consumer

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marketing channels utilizing our proprietary Beyond Human marketing and sales platform and our e-commerce platforms.

We classify our products into three categories:

● ANDA/Device OTC products, which compete in large consumer health categories and are marketed via e-

commerce strategies;

● OTC monograph products, which have a strong presence in the neuropathy/pain relief category; and

● personal care products, which are proprietary products with strong scientific and clinical support for everyday

life in categories such as urology and sexual health.

The following represents the core Aytu Consumer Health products:

● Urivarx® - dietary supplement to support healthy bladder function consisting of a proprietary blend of well

published botanical ingredients.

● Vesele® - nitric oxide supplement to relax blood vessels and allow for healthy blood flow throughout the

body.

● Regoxidine® - for Men & Women – proprietary over-the-counter aerosol foam that works to treat hair loss in

both men and women.

● OmepraCareDR® - acid reducer to treat frequent heartburn.

● Beyond Human® Testosterone Booster – daily dietary supplement that naturally increases testosterone levels,

supporting natural stamina, endurance and strength.

● ProstaGorx® - clinical strength, multi-response prostate supplement, scientifically formulated to effectively

maintain good prostate health.

● Sensum+® - combination of natural oils to condition the specialized skin of the glans and shaft of the penis to

provide just the right amount of biofeedback for a majority of men to increase sensitivity.

● Trexar®* - supplement formulated to support healthy nerves targeting the TRPA1 pathway in both men and

women which controls how we interpret both hot and cold sensations on the skin.

● FlutiCare® - allergy relieving nasal spray proven to offer 24-hour relief of both nose and sinus-related allergy

symptoms.

● Diabasens® / NeuriteRx® - scientifically formulated combination of three effective and extensively clinically

tested and published ingredients to improve soft tissue pain or leg and foot discomfort.

● Apeaz® - arthritis cream to temporarily relieve aches and pains or muscles and joints associated with simple

backache, lumbago, strains and sprains, and arthritis.

● Steroxin® - dietary supplement to support health bladder function with a naturally sourced blend including

pumpkin seed extract allowing for a reduction in urination urgency.

We continue to grow this business through organic growth, acquisition of new products and exclusive distribution

rights and introduction of new products developed internally. In our fiscal 2021, we launched 12 new

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products in our product line. In addition, in June 2021, we signed an exclusive agency supply and distribution agreement
with Amman Pharmaceutical Industries to exclusively market and sell over 20 products in the U.S.

We own 267 trademarks for products in our consumer health portfolio and own or license patents covering 15 of

these products.

Other Products

The COVID-19 IgG/IgM Rapid Test

In March 2020, we signed an agreement to distribute a COVID-19 IgG/IgM rapid test with L.B. Resources
Limited. This test is a serology-based rapid test detecting IgG and IgM antibodies specific to the COVID-19 virus. This test
is intended for professional use and delivers clinical results between 2 and 10 minutes. The COVID-19 IgG/IgM rapid test is
a solid phase immunochromatographic assay used in the rapid, qualitative and differential detection of IgG and IgM
antibodies to the COVID-19 virus in human whole blood, serum or plasma. The test has been clinically validated and can be
distributed in the U.S. We actively commercialized the COVID-19 IgG/IgM rapid test in the U.S. through the first three
quarters of our fiscal 2021. Aytu does not own or license any patents covering the COVID-19 IgG/IgM rapid test.

The CovID RAD Rapid Antigen Detection Test and Additional Rapid Antigen Test

In September 2020, we signed an agreement to distribute the Pinnacle CovID RAD Rapid Antigen Detection Test

worldwide. The rapid antigen test, which delivers results in 15 minutes, tests for the presence of the SARS-CoV-2 virus
antigen via a nasopharyngeal sample and can be conducted without the use of laboratory equipment. The CovID RAD Rapid
Antigen Detection Test was developed by U.S.-based Pinnacle IVD Corporation. The Pinnacle CovID RAD Rapid Antigen
Detection Test is a lateral flow immunoassay intended for the qualitative detection of nucleocapsid protein antigens from
SARS-CoV-2 in nasopharyngeal swab specimens from individuals who are suspected of COVID-19 by their healthcare
provider. Subsequent to the signing of this agreement, and due to the fact that Pinnacle did not receive Emergency Use
Authorization for the CovID RAD Rapid Antigen Detection Test, we acquired a separate Emergency Use Authorized rapid
antigen to meet the demand of customers requiring rapid antigen testing. We continued the sale of this antigen test through
2021.

With the Emergency Use Authorization and subsequent rollout of COVID-19 vaccines beginning in late calendar

2020, the demand for rapid COVID-19 testing diminished, negatively impacting demand across the rapid testing market. As
such we are no longer actively commercializing the COVID-19 IgG/IgM Rapid Test or the rapid antigen test.

Our prescription portfolio commercialization efforts

We are commercializing our prescription products in the United States using our internal commercial infrastructure.

We sell our products to drug wholesalers in the United States, the largest three of which accounted for approximately 55%
of our total gross revenues in fiscal 2021.

We are using our own sales force of approximately 50 sales representatives who target approximately 10,000

physician targets. We focus the efforts of this sales force on the most profitable, high-volume prescribers of the medication
classes treating our respective products' indications. The sales force is divided into six regions, each managed by a regional
sales manager. There are five regions totaling 40 sales representatives dedicated to promoting the ADHD brands and
ZolpiMist (the CNS sales team), given the fact that this sales team calls on psychiatrists for our ADHD brands. Psychiatrists
commonly prescribe sleep aids, so this physician specialty affords an overlapping promotional opportunity in these adjacent
neuro-psychiatric conditions. An additional region consisting of ten sales representatives and one regional sales manager is
dedicated to promoting Poly-Vi-Flor, Tri-Vi-Flor, and Karbinal ER in focused geographies with high volumes of fluoride
and/or antihistamine prescriptions.

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We align our sales territories geographically and resource areas with high prescription potential and favorable
commercial dynamics, and we continuously evaluate reimbursement trends and other market factors to optimize sales
efforts. We use multi-channel tactics to reach physicians, payers, patients and patient caregivers with the right frequency to
drive clinician prescribing and patient adherence.

Our commercialization efforts are focused on delivering the right message for each of our products to the
appropriate targeted clinician. With respect to our ADHD brands, our messaging focuses on the anticipated benefits of our
XR-ODT dosage form with balancing important product safety information. With respect to the Aytu pediatric and legacy
brands, our messaging focuses on the patient-friendly features of a pleasant tasting, effective antihistamine liquid (Karbinal
ER) and the benefits of Metalofin® as a key, differentiating ingredient contained in Poly-Vi-Flor and Tri-Vi-Flor that
provides a ‘body-ready’ L-methylfolate in a convenient, multi-strength multi-vitamin.

To expand distribution, in 2019, Neos launched and deployed Neos RxConnect, a best-in-class Neos-sponsored

patient support program that operates through a network of pharmacies throughout the U.S. Neos created this program based
upon research and feedback from HCPs centered on their frustration with the hassle associated with insurance restrictions,
access and cost. Aytu developed a similar program to meet these challenges, so upon the closing of the merger we began
integrating the programs to form the newly branded Aytu RxConnect program. The goal of RxConnect is to reduce barriers
to access to medications facing patients and HCPs by providing coverage for all commercially insured patients, regardless
of their individual insurance plan, establishing an affordable and predictable monthly co-pay for patients, and eliminating
many of the hassles facing HCPs and their staffs by improving availability of our products at participating pharmacies.
Since the inception of this program in early 2019, the number of pharmacies participating in the network has increased to
approximately 1,200 as of June 30, 2021.

Competition

Prescription pharmaceuticals

The healthcare industry is highly competitive and subject to significant and rapid technological change as
researchers learn more about diseases and develop new technologies and treatments. Our products compete, and our product
candidates may in the future compete, with currently existing therapies, product candidates currently under development by
others and/or future product candidates, including new chemical entities that may be safer, more effective or more
convenient than our products. Any products that we develop may be commercialized in competitive markets, and our
competitors, which include large global pharmaceutical companies and small research-based companies and institutions,
may succeed in developing products that render our products obsolete or noncompetitive.

In particular, our products and most advanced product candidates face or may face competition as described below:

● Our branded ADHD products face competition from commercially available generic and branded medications

currently produced by companies that are promoting products in the ADHD market, including Takada
Pharmaceutical Company (Vyvanse, Adderall XR, Mydayis), Janssen (Concerta), Novartis (Focalin XR and
Ritalin LA), Tris Pharmaceuticals (Dyanavel XR, Quillivant XR and QuilliChew ER), Rhodes
Pharmaceuticals (Aptensio XR), Osomotica Pharmaceuticals (Methylphenidate HCl ER 72 mg Tablet),
Ironshore Pharmaceuticals, a subsidiary of Highland Therapeutics (Jornay PM), Adlon Therapeutics L.P., a
subsidiary of Purdue Pharma L.P. (Adhansia XR) and related generics. Qelbree™, a non-stimulant treatment
for ADHD was recently approved by the FDA and commercially launched in the U.S. by Supernus.
Azstarys™, a product developed by KemPharm, recently received FDA approval and it has been
commercially launched by Corium, Inc. We are also aware of efforts by several pharmaceutical companies
with ADHD medications in clinical development, including Cingulate Therapeutics, Sunovion, NLS Pharma
and Neurovance, a subsidiary of Otsuka Pharmaceutical Co., Ltd. Tris Pharmaceuticals is also working in this
therapeutic category to reformulate existing methylphenidate and amphetamine medications.

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● ZolpiMist competes in a large prescription category with over 43 million prescriptions written annually and

generating $1.8 billion in wholesale sales. The non-benzodiazepine prescription sleep aid market is dominated
by generic zolpidem tartrate (brand name Ambien), which accounts for approximately 30 million prescriptions
annually. Various forms of zolpidem tartrate are commercially available, including both immediate release and
controlled release tablets as well as orally dissolving tablets. ZolpiMist is the only oral spray formulation of
zolpidem tartrate in the U.S. No zolpidem tartrate products are actively marketed in the U.S.

● Karbinal ER faces competition from over-the-counter (“OTC”) products such as non-sedating antihistamines,

sedating antihistamines as well as nasal steroids.

● The prescription multi-vitamin market is dominated by generic products, with brands accounting for 3.4% of

the multivitamin plus fluoride market. Poly-Vi-Flor and Tri-Vi-Flor primarily compete in the generic
prescription multi-vitamin fluoride market and with the brands of FLORIVA and QFLORA.

● Cefaclor (cefaclor oral suspension) faces significant competition from the generic antibiotic amoxicillin as

well as Omnicef, Ceftin, Suprax and others.

Consumer health

The OTC pharmaceutical market is highly competitive with many established manufacturers, suppliers and

distributors that are actively engaged in all phases of the business. We believe that competition in the sale of our products
will be based primarily on efficacy, regulatory compliance, brand awareness, availability, product safety and price. Our
brand name OTC monograph pharmaceutical products may be subject to competition from alternate therapies during the
period of patent protection and thereafter from generic or other competitive products. All of our existing products compete
with generic and other competitive branded products in the marketplace.

Competing in the branded products business requires us to identify and quickly bring to market new products

embodying technological innovations and/or improved pricing. Successful marketing of branded products depends primarily
on the ability to communicate the efficacy, safety and value to consumers. We anticipate that our branded product offerings
will support our existing lines of therapeutic focus. Based upon business conditions and other factors, we regularly
reexamine our business strategies and may from time to time reallocate our resources from one therapeutic area to another,
withdraw from a therapeutic area or add an additional therapeutic area in order to maximize our overall growth
opportunities.

Some of our existing products compete with one or more products marketed by very large pharmaceutical or
consumer healthcare companies that have much greater financial resources for marketing, selling and developing their
products. These competitors, as well as others, have been in business for a longer period of time, have a greater number of
products on the market and have greater financial and other resources than we do. If we directly compete with them for the
same markets and/or products, their financial and market strength could prevent us from capturing a meaningful share of
those markets.

Manufacturing

We contract with third parties for the manufacture and testing of Karbinal, Tuzistra XR, Cefaclor, Poly-Vi-Flor and

Tri-Vi-Flor and ZolpiMist. Cefaclor, Poly-Vi-Flor and Tri-Vi-Flor and ZolpiMist are not supplied under any contract. We
have entered into the following key supply agreements for the commercial manufacture and supply of certain of these
products:

● A supply agreement with Tris for the supply of Karbinal. This agreement terminates in August 2033, subject

to earlier termination or extension in accordance with the terms of the agreement.

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● A supply agreement with Tris for the supply of Tuzistra XR. This agreement terminates in December 2038,

subject to earlier termination or extension in accordance with the terms of the agreement.

● Cefaclor is purchased under a supply agreement with Yung Shin Pharm. Ind., Ltd. This agreement terminates

on December 31, 2024 subject to earlier termination or extension in accordance with the terms of the
agreement.

● Poly-Vi-Flor and Tri-Vi-Flor are not purchased under any supply agreement and only on a purchase order

basis with a CMO based in the U.S. Merck & Cie is responsible for providing either Metafolin or Arcofolin to
our designated CMO.

● We do not have a signed supply agreement with the ZolpiMist contract manufacturer, but we have an ongoing
relationship with a CMO based in Sweden (or Europe), from whom we purchase product on a purchase order
basis.

We believe our third-party manufacturers have adequate capacity to manufacture sufficient quantities of these

products to meet anticipated commercial demands. Because we rely on CMOs, we employ personnel with extensive
technical, manufacturing, analytical and quality experience to oversee contract manufacturing and testing activities, and to
compile manufacturing and quality information for our regulatory submissions. Manufacturing is subject to extensive
regulations that impose various procedural and documentation requirements, and which govern record-keeping,
manufacturing processes and controls, personnel, quality control and quality assurance, among other activities. Our systems
and our contractors are required to comply with these regulations, and we assess this compliance regularly through
monitoring of performance and a formal audit program.

For the production of our ADHD products and our generic Tussionex, we lease one manufacturing site in Grand
Prairie, Texas. This facility has 77,112 square feet of manufacturing and laboratory space, and contains dedicated current
Good Manufacturing Practices (“cGMP”) manufacturing suites for both XR-ODT and ER oral suspension. We hold DEA
manufacturing and analytical licenses, and maintain storage and use of Schedule II through IV controlled substances. The
manufacture of our products is subject to extensive cGMP regulations, which impose various procedural and documentation
requirements and govern all areas of record keeping, production processes and controls, personnel and quality control.

We have operated this facility dating back to when Neos and its predecessor corporation, PharmaFab, Inc., or

PharmaFab operated as a contract manufacturer. In April 2007, the FDA announced entry of a Consent Decree of Permanent
Injunction, or the Consent Decree, against PharmaFab, one of its subsidiaries and two of its officials. The Consent Decree
arose out of several perceived cGMP deficiencies related to the manufacture of unapproved drugs or Drug Efficacy Study
Implementation, or DESI, drugs that we no longer manufacture. In July 2019, Neos filed a motion with the U.S. District
Court of North Texas to vacate the Consent Decree, which was unopposed by the Department of Justice and the FDA and
was granted by the court on July 11, 2019. While the Consent Decree has been vacated, there can be no assurance that we
will not become subject to similar orders in the future, which may result in us continuing to expend resources and attention
to observe its terms, and there can be no assurance that we will be in compliance with its requirements.

We believe that our current facility has the manufacturing capacity for commercial production of our approved

products in quantities sufficient to meet what we believe will be our commercial needs for our ADHD products.

We currently purchase the active pharmaceutical ingredients, or APIs, used in Adzenys XR-ODT and Adzenys ER
(amphetamine), and Cotempla XR-ODT (methylphenidate), anionic resins, excipients and other materials from third-party
providers on a purchase order basis from manufacturers based outside and within the U.S. We have entered into commercial
supply agreements with several of these manufacturers and may enter into commercial supply agreements with additional
manufacturers in the future.

Both amphetamine and methylphenidate are classified as controlled substances under U.S. federal law. All of our

ADHD products are classified by the DEA as Schedule II controlled substances, meaning that these drug products

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have a high potential for abuse and dependence among drugs that are recognized as having an accepted medical use.
Consequently, the procurement, manufacturing, shipping, dispensing and storing of our products, and potentially product
candidates, will be subject to a high degree of regulations, as described in more detail under the captions “Governmental
Regulation” and “DEA Regulation” included elsewhere in this Annual Report on Form 10-K.

In our experience, contract manufacturers are generally cost-efficient and reliable and therefore we have begun the
process of outsourcing the manufacture of Adzenys XR-ODT and Cotempla XR-ODT to a CMO. We have selected a CMO,
conducted pilot studies and continue to transfer analytical methods and evaluate engineering and validation of intermediates
and tablets. We plan to conduct bioequivalence studies versus our internally manufactured products. The process to transfer
the technology to make our ADHD ODT products is complex and requires compliance with both FDA and DEA
regulations. This is time consuming, and there is no guarantee we will be successful in our efforts. Although we have
entered into technology transfer contracts for each of the products, we still have to enter into a formal supply contracts as
the process proceeds. There is no guarantee that we will reach terms that are affordable or cost effective.

The Aytu Consumer Health division maintains relationships with a number of manufacturers from which it obtains
its products. With the exception of a settlement agreement with our manufacturer of FlutiCare which establishes a minimum
number of batches which may be purchased, there are no manufacturing agreements in place and no annual minimum
requirements. Aside from those products under the ANDA classification, most products may be manufactured by a variety
of manufacturers and therefore we engage those who can produce product most cost efficiently and on a timely basis.

Research and Development

A key aspect of our growth strategy is our continued investment in our evolving and expanding research and
development actives. We actively explore new option for patients including novel compounds and innovative medical
device technologies.

Our Development Pipeline: AR101 (enzastaurin for the treatment of Vascular Ehlers-Danlos Syndrome (vEDS))

AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine kinase

inhibitor of the protein kinase C (PKC) beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients
across a range of solid and hematological tumor types. AR101 was originally developed by Eli Lilly and Company
(“Lilly”), and worldwide rights were acquired by Denovo Biopharma (“Denovo”) in September 2014. Orphan drug
designation in DLBCL and GBM has been granted by the FDA and the EMA. Fast Track qualification for the first-line
treatment of GBM was also granted by the FDA in July 2020. Pivotal Phase 3 studies for both newly diagnosed DLBCL and
GBM patients are currently being conducted by Denovo.

In April 2021, we announced the acquisition of substantially all the assets of Rumpus Therapeutics (“Rumpus”),
which had executed an exclusive option agreement with Denovo to enzastaurin for use in specific clinical fields. Through
the transaction we converted the Rumpus-Denovo option agreement into an exclusive license agreement and secured
exclusive global rights to AR101 from Denovo in the fields of rare genetic pediatric onset or congenital disorders, and
specifically including vEDS, outside the field of oncology. AR101 is a pivotal study-ready therapeutic candidate initially
targeting the treatment of vEDS, and we are now planning the pivotal study and preparing the IND application.

vEDS is a rare genetic disorder typically diagnosed in childhood and characterized by arterial aneurysm, dissection

and rupture, bowel rupture and rupture of the gravid uterus. vEDS is the severe subtype of Ehlers-Danlos Syndrome,
affecting 1 in 50,000 people worldwide. vEDS results from pathogenic variants in the COL3A1 gene, which encodes the
chains of type III procollagen, a major protein in vessel walls and hollow organs. Twenty-five percent of vEDS patients
have a first complication by the age of 20 years, and more than 80 percent have at least one complication by the age of 40.
vEDS is a devastating condition; patients have a median lifespan of 51 years. There are currently no FDA approved
treatments for vEDS.

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The research underpinning the application of enzastaurin for the treatment of vEDS has been conducted by Dr. Hal
Dietz. Dr. Dietz is the Victor A. McKusick Professor of Genetics in the departments of medicine, pediatrics, and molecular
biology and genetics at The Johns Hopkins University School of Medicine and director of the William S. Smilow Center for
Marfan Syndrome Research. He has also been an investigator at Howard Hughes Medical Institute since 1997. Dr. Dietz is a
leading scientist in the field of genetic connective tissue disorders and developed the first preclinical model that mimics the
human condition and recapitulates vEDS. Research findings were published in the Journal of Clinical Investigation in
February 2020. The vEDS knock-in murine (mice) preclinical model from Dr. Dietz has the same genetic mutation most
prevalent in vEDS patients and is representative of the human condition in both the timing and location of vascular events.
The model has generated identical structural histology and mechanical characteristics, and unbiased findings demonstrated
that structure alone does not lead to vascular events. Objective comparative transcriptional profiling by high-throughput
RNA sequencing of the aorta displayed a molecular signature for excessive PKC/ERK cell signaling that is the driver of
disease. Based on the scientific rationale for intervention along the PKC/ERK pathway, PKC inhibition and treatment with
PKCβ inhibitors proved efficacious in multiple pre-clinical and murine studies and indeed prevented death due to vascular
rupture.

Taken together, the pre-clinical efficacy model along with extensive previous pharmacokinetic, safety, and
tolerability findings from Lilly’s IND and NDA provide significant support for once daily dosing of 500mg of enzastaurin in
the potential treatment of patients with vEDS. Given the nature of this rare disease, the high unmet medical need, the well-
characterized nature of AR101, and guidance from the FDA, we expect to advance AR101 to a pivotal safety and efficacy
study in vEDS patients. The development plan includes a well-controlled global clinical trial designed to demonstrate that
AR101 reduces arterial rupture, dissection or pseudoaneurysm patients in vEDS patients whose vEDS diagnoses have been
confirmed with COL3A1 gene mutations. Additional data will also be collected to evaluate the effectiveness of AR101 in
preventing intestinal rupture, uterine rupture, pneumothorax and any of the severe clinical events related to vEDS confirmed
with COL3A1 gene mutations, as adjudicated by an independent event committee. During development, we expect to
receive Orphan Drug Designation for AR101 in vEDS, allowing for seven years’ marketing exclusivity in the United States
and ten years in other regions such as Europe and Japan.

As progress is achieved with AR101, certain milestones will be met that require accompanying payments. Under

the terms of the transaction with Rumpus, Aytu will pay up to $22.5 million in milestone payments if certain regulatory
milestones are met, including $15.0 million in milestone payments if AR101 receives approval by the FDA and another
major market regulatory authority. Commercial milestones of up to an additional $45.0 million may be paid if a series of
global commercial milestones are met over the life of the product. In addition, we received assignments of third-party
licenses from Denovo and Johns Hopkins and took over royalty obligations and performance-based milestones under these
licenses. As part of the license with Denovo, Aytu will pay up to $28.0 million in milestone payments if certain regulatory
milestones are met, including $14.0 million in milestone payments if AR101 receives approval by the FDA and another
major market regulatory authority. Commercial milestones of up to an additional $72.0 million may be paid if a series of
global commercial milestones are met over the life of the product. As part of the license with Johns Hopkins, we will pay up
to $1.6 million in milestone payments if certain regulatory milestones are met. Commercial milestones of up to an additional
$1.65 million may be paid to Johns Hopkins if a series of global commercial milestones are met over the life of the product.

AR101 is protected by a suite of pending patents being pursued in major markets globally which have been

licensed from Johns Hopkins and have an earliest priority date of March 2017. The cornerstone of the intellectual property
family surrounds the therapeutic candidate (AR101) initially targeting the treatment of vEDS focused on the U.S. and
certain foreign jurisdictions which include Europe, Japan, China, Brazil, Mexico, Canada, Israel, Australia, New Zealand
and South Korea. This pending patent provides compositions and methods for treating vEDS and associated connective
tissue disorders and has a priority date of October 16, 2018. Additional molecule intellectual property is afforded through
the license with Denovo whose pending patent provides methods and compositions for the prediction of the activity of
enzastaurin and has a priority date of September 1, 2016. The third pending patent provides methods and compositions for
the diagnosis, treatment, and prevention of Marfan syndrome and related diseases, disorders and conditions and has a
priority date of March 2, 2017, in select geographies. The fourth pending patent provides targeted epigenetic therapy for
inherited aortic aneurysm conditions and has a priority date of September 1, 2017, also in select geographies.

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Healight Medical Device Platform Technology

In April 2020, we signed an exclusive worldwide license with Cedars-Sinai in Los Angeles, California, to develop

and commercialize the Healight Platform Technology ("Healight" or the “Healight Platform”). This medical device
technology platform currently envisioned as an endotracheal, UV-A light catheter, developed by scientists at Cedars-Sinai, is
being studied as a potential first-in-class treatment for SARS-CoV-2 and other viral and bacterial respiratory infections. The
Healight Platform has been in development since 2016 by the Medically Associated Science and Technology (MAST) team
at Cedars-Sinai. We and our research collaborators are engaging in clinical and scientific research to establish the clinical
utility of Healight as an intervention for critically ill, mechanically ventilated patients with an initial focus on SARS-CoV-2
infections. In conjunction with this research, we are evaluating regulatory pathways to potentially enable marketing
clearance in the U.S. and other markets.

The agreement with Cedars-Sinai grants us a license to all patent and development related technology rights for the
intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications. The term of
the agreement is on a country-by-country basis and will expire on the latest of the date upon which the last to expire valid
claim shall expire, ten years after the first bona fide commercial sale of such licensed product in a country, or the expiration
of any market exclusivity period granted by a regulatory agency. Pursuant to the terms of the agreement, we paid an initial
$250,000 license fee and approximately $140,000 in earlier patent prosecution fees. We are responsible for paying a low
double-digit royalty in the U.S., which decreases as net sales increase, and a lower royalty for net sales outside of the U.S.,
as well as various product development and sales milestones throughout the life of the agreement.

As part of the Healight development plan we also entered into an agreement with Sterling Medical Devices

("Sterling") to support our product development efforts. This agreement with Sterling is a fee-for-service development
agreement for which we pay Sterling on a project-by-project basis.

Severe acute respiratory syndrome coronavirus 2 (“SARS‑CoV‑2”) is the virus that causes COVID-19, the
respiratory illness responsible for the COVID-19 pandemic. The World Health Organization (“WHO”) declared the outbreak
a Public Health Emergency of International Concern on January 30, 2020, and a pandemic on March 11, 2020.
SARS‑CoV‑2 is a positive-sense single-stranded RNA virus that is contagious in humans. As described by the U.S. National
Institutes of Health, it is the successor to SARS-CoV-1, the virus that caused the 2002 to 2004 SARS outbreak. Over
600,000 Americans have died to date as a result of the COVID-19 pandemic, and very few treatment options have proven
broadly effective against severe cases of SARS-CoV-2.

The Healight technology is being developed initially as an endotracheal catheter-based treatment for patients

infected with SARS-CoV-2 who are mechanically ventilated in the intensive care unit. Numerous pre-clinical studies have
been performed, and the first Healight clinical study was completed in January 2021. That study was an open-label single-
center trial and was conducted at Cedars-Sinai in Los Angeles, California. The study’s objective was to establish safety and
early signs of potential efficacy of the Healight device and was overseen by an independent data and safety monitoring
board. A total of five critically ill, mechanically ventilated COVID-19 patients underwent UVA light therapy with the
Healight device for five consecutive days. The UVA light catheter was inserted into an endotracheal tube and illuminated for
20 minutes during each treatment. The endotracheal (“ET”) treatment resulted in significant logarithmic reduction of the
SARS-CoV-2 viral load of the ET aspirate, which was the study's primary endpoint. Average log changes from baseline to
day five and day six were -2.41 (>99%, p=0.0018) and -3.2 (>99.9%, p=0.0005), respectively. WHO clinical severity scores
improved by an average of 1.6 and 3.6 points on day 15 and day 30, respectively. Excluding one subject, who had
undetectable viral load, WHO clinical severity scores improved by 4.75 points on day 30. Importantly, no serious adverse
device effects were observed, and no early treatment discontinuation occurred.

A separate pre-clinical study titled, “Ultraviolet-A light increases mitochondrial anti-viral signaling protein via

cell-cell communication”, established that UVA light increases the expression of mitochondrial antiviral-signaling
(“MAVS”) protein within cells, and the results suggest that this transmission of an increase in intracellular MAVS involves
cell-to-cell communication. An additional pre-clinical study, “Ultraviolet-A light reduces cellular cytokine release from
human endotracheal cells infected with Coronavirus”, demonstrated that infected tracheal epithelial cells showed reduced
cytokine release, including IL-6, TNF, IL-8, and MCP-1, following UVA exposure.

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A larger clinical study is planned to begin at leading medical center in Europe during fiscal 2022. The randomized,

controlled (single blind) trial is planned to enroll a total of 40 critically ill, mechanically ventilated COVID-19 patients.
Enrolled patients will be randomized (1:1) to receive treatment with the UVA device or a sham control device. Patients will
be administered 20 minutes of therapy each day for five consecutive days. The study will primarily evaluate change in viral
load in endotracheal tube aspirates from the beginning to end of therapy. Secondary endpoints will include overall reduction
or change of bacterial load in patients’ upper airways, reduction in SARS-CoV-2 serum viral load, days to extubation,
percentage of development of ventilator-associated pneumonia (VAP), days to discharge, mean ordinal scale days 15 and 30,
change in inflammatory markers and COVID-19 prognostic markers.

Upon the readout of this larger clinical study, we will evaluate the data and determine an appropriate pathway

toward gathering additional clinical data in COVID-19 and for other potential respiratory applications. In conjunction with
that, we expect to explore various commercialization and regulatory options in key markets around the world.

Intellectual Property

We hold ownership, trademark rights and/or exclusivity to develop and commercialize our products and product

candidates covered by patents and patent applications. Our portfolio of patents includes patents or patent applications with
claims directed to compositions of matter, including compounds, pharmaceutical formulations, methods of use, methods of
manufacturing the compounds, or a combination of these claims. Depending upon the timing, duration and specifics of FDA
approval of the use of a compound for a specific indication, some of our U.S. patents may be eligible for a limited patent
term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-
Waxman Act. Patent life determination depends on the date of filing of the application and other factors as promulgated
under the patent laws. In most countries, including the United States, the patent term is generally 20 years from the earliest
claimed filing date of a non-provisional patent application in the applicable country. Additional market exclusivity is
available through various programs with the FDA, including its orphan drug designation program, which we expect to
access for AR101, as further described below.

Patents Rights

Our ADHD and Neos technology intellectual property portfolio consists of 13 patents and 2 patent applications,
which includes one on which a notice of allowance was received subsequent to fiscal year-end, in the United States, and 4
patents and 4 patent applications in foreign countries and regions. Our intellectual property strategy emphasizes specific
drug products, product groups, and technology platforms. Our patents and patent applications covering specific drug
products include claims to the drug products and to methods of using those products. Our patents and patent applications
covering technology platforms include claims to methods of making products as well as claims to the products made by
those methods. Certain of these patents and patent applications cover more than one product. We own all of the above
patents and pending applications.

The Adzenys XR-ODT patent portfolio includes five granted U.S. patents and one pending U.S. non provisional

applications. The issued patents contain pharmaceutical composition of matter claims covering controlled release direct
compression ODT with drug resin particles and, among other things, composition of matter for Adzenys XR-ODT. The
composition of matter patents are scheduled to expire in 2026 and 2032, respectively. These patents are listed in the Orange
Book. Adzenys XR-ODT is protected in Europe by one granted patent scheduled to expire in 2032; however, Adzenys XR-
ODT is not currently protected by patents outside of the United States and Europe. As such, competitors may be free to sell
products that incorporate the same or similar technologies that are used in Adzenys XR-ODT in countries outside of the
United States or Europe.

The Cotempla XR-ODT patent portfolio includes three granted U.S. patents, including pharmaceutical composition

of matter claims covering controlled release direct compression ODT with drug resin particles and, among other things,
composition of matter for Cotempla XR-ODT. These patents are scheduled to expire in 2026 and 2032, respectively. These
patents are listed in the Orange Book. Cotempla XR-ODT also has an FDA marketing exclusivity period of three years
which bars approval of an ANDA. The Cotempla XR-ODT portfolio also includes two other pending U.S. non provisional
applications; a notice of allowance was received for one of these subsequent to year-end and pending patent applications in
Australia, Europe, Japan and South Korea. As such, competitors may be free to sell

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products that incorporate the same or similar technologies that are used in Cotempla XR-ODT in countries outside of the
United States, Australia, Europe, Japan or South Korea.

The Adzenys ER patent portfolio contains nine granted U.S. patents and one other pending U.S. non-provisional

application. These patents contain claims directed to, among other things, compositions of matter, as well as methods of
preparing liquid controlled-release formulations and for predicting bioequivalence for liquid suspension. The longest-term
composition-of-matter patent is scheduled to expire in 2032, and the method patents are scheduled to expire in 2025, 2029
and 2031, respectively. The composition of matter patents are listed in the Orange Book. Adzenys ER is currently protected
by patents only in the United States, Canada and Mexico. As such, competitors may be free to sell products that incorporate
the same or similar technologies that are used in Adzenys ER in countries outside of the United States, Canada and Mexico.

Our generic Tussionex is covered by six of our granted U.S. patents which include claims directed to, among other
things, a composition-of-matter, as well as methods-of-making, and for predicting bioequivalence for liquid suspension. Our
generic Tussionex is also covered by one other pending non-provisional application. The composition-of-matter patent is
scheduled to expire in 2031. We expect protection under certain other granted patents and/or a patent granted on the pending
application to also extend until 2031. Our generic Tussionex is currently protected by patents only in the United States,
Canada and Mexico. As such, competitors may be free to sell products that incorporate the same or similar technologies that
are used in our product in countries outside of the United States, Canada and Mexico.

On July 25, 2016, we received a Paragraph IV certification from Actavis advising us that Actavis has filed an

ANDA with the FDA for a generic version of Adzenys XR-ODT. The certification notice alleges that the four U.S. patents
listed in the FDA’s Orange Book for Adzenys XR-ODT, one with an expiration date in April 2026 and three with expiration
dates in June 2032, will not be infringed by Actavis’s proposed product, are invalid and/or are unenforceable. On September
1, 2016, we filed a patent infringement lawsuit in federal district court in the District of Delaware against Actavis that
automatically stayed, or barred, the FDA from approving Actavis’s ANDA for 30 months or until a district court decision
that is adverse to the asserted patents is rendered, whichever is earlier. On October 17, 2017, we entered into a settlement
and licensing agreement with Actavis (“Actavis Agreement”), which resolved all ongoing litigation involving our Adzenys
XR-ODT patents and Actavis’s ANDA. Under the Actavis Agreement, we have granted Actavis the right to manufacture
and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under
certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of
Delaware. The Actavis Agreement has been submitted to the applicable governmental agencies.

On October 31, 2017, we received a Paragraph IV certification from Teva advising us that Teva has filed an ANDA

with the FDA for a generic version of Cotempla XR-ODT, in connection with seeking to market its product prior to the
expiration of patents covering Cotempla XR-ODT. On December 13, 2017, we filed a patent infringement lawsuit in federal
district court in the District of Delaware against Teva. This case alleged that Teva infringed our Cotempla XR-ODT patents
by submitting to the FDA an ANDA seeking to market a generic version of Cotempla XR-ODT prior to the expiration of
our patents. This lawsuit automatically stayed, or barred, the FDA from approving Teva’s ANDA for 30 months or until a
district court decision that is adverse to the asserted patents is rendered, whichever is earlier. On December 21, 2018, we
entered into a settlement and licensing agreement with Teva (“Teva Agreement”), which resolved all ongoing litigation
involving our Cotempla XR-ODT patents and Teva’s ANDA. Under the Teva Agreement, we have granted Teva the right to
manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on July 1, 2026, or earlier
under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of
Delaware. The Teva Agreement has been submitted to the applicable governmental agencies.

On October 23, 2018, we signed a licensing agreement with NeuRx Pharmaceuticals, LLC (“NeuRx”) for NRX

101, now known as NT0502, a selective muscarinic receptor antagonist drug candidate for the treatment of sialorrhea.
Under the terms of this licensing agreement, we have assumed responsibility for the NeuRx intellectual property portfolio
protecting NT0502, currently consisting of one granted U.S. patent and one U.S. non provisional patent application. The
granted patent includes claims directed to, among other things, methods of treatment with NT0502. The granted patent
would be expected to expire in 2032.

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Adzenys XR-ODT is not currently protected by patents or patent applications outside of the United States and
Europe, and Cotempla XR-ODT is not currently protected by patents or patent applications outside of the United States,
Australia, Europe, Japan and South Korea. Our generic Tussionex and Adzenys ER are currently protected by patents only
in the United States, Canada and Mexico. As such, competitors may be free to sell products that incorporate the same or
similar technologies that used in our products in countries in which the relevant product does not have patent protection.

License Rights

There are two FDA Orange Book-listed patents protecting Tuzistra XR. Through our exclusive commercialization

agreement with Tris, we are the FDA-recognized New Drug Application holder and thus the designated holder of these
patents. The first patent describes a coated ion-exchange resin complex delivering an extended-release formulation and
methods therein. The standard 20-year exclusivity for this patent expires in 2029. The second patent covers an aqueous
liquid suspension containing a drug-ion exchange resin complex and methods therein. The standard 20-year exclusivity for
this patent expires in 2027.

We have exclusive license rights with third parties to develop, commercialize and promote our Primary Care

Portfolio and Pediatric Portfolio products within the United States of America, including but not limited to, Poly-Vi-Flor
and Tri-Vi-Flor, Karbinal ER, ZolpiMist and Tuzistra XR. Each of these agreements come with royalties ranging from 0% to
23.5% based on net product revenue or gross profit (as defined by each agreement). In addition, certain licensing
agreements include forms of contingent consideration, make-whole payments or both.

Consumer Health

We currently hold 8 patents in the U.S. and 12 patents registered outside the U.S. We currently have 12 patent

applications pending in the U.S. and 17 patent applications pending in countries other than the U.S.

We own or license 93 trademark registrations in the U.S. and have 42 trademark applications pending in the U.S.
We also own or license 124 trademarks registered outside of the U.S. (including 21 Madrid Protocol registrations), with 58
applications currently pending.

AR101

Among the assets of Rumpus which we acquired are license agreements which provide access to four patent
applications. The cornerstone of the intellectual property family is a pivotal study-ready therapeutic candidate initially
targeting the treatment of vEDS focused on the U.S. and certain foreign jurisdictions which include Europe, Japan, China,
Brazil, Mexico, Canada, Israel, Australia, New Zealand and Korea. This pending patent provides compositions and methods
for treating vEDS and associated connective tissue disorders and has a priority date of October 16, 2018. Additional
molecule intellectual property is afforded through a license with Denovo whose pending patent provides methods and
compositions for the prediction of the activity of enzastaurin and has a priority date of September 1, 2016.

The third pending patent provides methods and compositions for the diagnosis, treatment, and prevention of

Marfan syndrome and related diseases, disorders and conditions and has a priority date of March 2, 2017 in select
geographies. The fourth pending patent provides targeted epigenetic therapy for inherited aortic aneurysm conditions and
has a priority date of September 1, 2017, also in select geographies.

Healight

The licensed patent portfolio surrounding Healight currently includes four patent families at various stages of

prosecution. The first family discloses the use of ultraviolet-A light for internal therapeutic treatment, including through an
endotracheal tube. This application is filed in the U.S. and in 14 other countries. The 20-year patent term for this family
expires in 2037. The second family discloses a preferred ultraviolet wavelength range within the UV-A range for internal
therapeutic treatment, including endotracheal and nasopharyngeal applications. This application is filed in the United States
and internationally as a PCT application with a first national phase filing deadline in April 2022. The 20-

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year patent term for this family expires in 2040. The third family discloses pre-clinical data developed in support of the
Healight technology and details of the structure of the Healight device. This application is filed as a PCT application with a
first national phase filing deadline of September 2022. The 20-year patent term for this family expires in 2041. The fourth
patent family is directed to methods of increasing expression of mitochondrial antiviral-signaling protein in epithelial cells
to mediate innate antiviral responses for use in treatment of viral conditions. The methods include exposure of tissue to
ultraviolet-A light.

Trade secret and other protection

In addition to patented intellectual property, we also rely on trade secrets and proprietary know how to protect our

technology and maintain our competitive position, especially when we do not believe that patent protection is appropriate or
can be obtained. Our policy is to require each of our employees, consultants and advisors to execute a confidentiality and
inventions assignment agreement before beginning their employment, consulting or advisory relationship with us. The
agreements generally provide that the individual must keep confidential and not disclose to other parties any confidential
information developed or learned by the individual during the course of the individual’s relationship with us except in
limited circumstances. These agreements generally also provide that we shall own all inventions conceived by the individual
in the course of rendering services to us.

Other intellectual property rights

We seek trademark protection in the United States when appropriate. We currently have registered trademarks for
Aytu, Neos Therapeutics, Innovus Pharma, Beyond Human, Supplement Hunt, Delta Prime Club, Healight, Poly-Vi-Flor,
Adzenys, Adzenys XR-ODT, Adzenys ER and Cotempla XR-ODT in the United States, as well as for a number of our
consumer health products and two for our DTRS technology.

From time to time, we may find it necessary or prudent to obtain licenses from third party intellectual property

holders.

U.S. Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and other specific aspects of the FDA approval of our drug candidates, some

of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments
permit a patent restoration term of up to five years as compensation for patent term lost during product development and the
FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a
total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between
the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and
the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the
application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office,
in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the
future, if any of our NDAs are approved, we intend to apply for restoration of patent term for one of our currently owned or
licensed patents to add patent life beyond the current expiration date, depending on the expected length of the clinical trials
and other factors involved in the filing of the relevant NDA.

Other Regulatory Exclusivities

The Hatch-Waxman Act provides periods of regulatory exclusivity for products that would serve as reference listed
drugs (“RLDs”) for an ANDA or 505(b)(2) application. If a product is a "new chemical entity," or NCE, generally meaning
that the active moiety has never before been approved in any drug, there is a period of five years from the product's approval
during which the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety.
An ANDA or 505(b)(2) application may be submitted after four years, however, if the sponsor of the application makes a
Paragraph IV certification.

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A product that is not an NCE may qualify for a three-year period of exclusivity if the NDA contains new clinical

data, (other than bioavailability studies) derived from studies conducted by or for the sponsor, that were necessary for
approval. In that instance, the exclusivity period does not preclude filing or review of an ANDA or 505(b)(2) application;
rather, the FDA is precluded from granting final approval to the ANDA or 505(b)(2) application until three years after
approval of the RLD. Additionally, the exclusivity applies only to the conditions of approval that required submission of the
clinical data.

Once the FDA accepts for filing an ANDA or 505(b)(2) application containing a Paragraph IV certification, the
applicant must within 20 days provide notice to the RLD or listed drug NDA holder and patent owner that the application
has been submitted, and provide the factual and legal basis for the applicant's assertion that the patent is invalid or not
infringed. If the NDA holder or patent owner files suit against the ANDA or 505(b)(2) applicant for patent infringement
within 45 days of receiving the Paragraph IV notice, the FDA is prohibited from approving the ANDA or 505(b)(2)
application for a period of 30 months or the resolution of the underlying suit, whichever is earlier. If the RLD has NCE
exclusivity and the notice is given and suit filed during the fifth year of exclusivity, the regulatory stay does extends until
7.5 years after the RLD approval. The FDA may approve the proposed product before the expiration of the regulatory stay if
a court finds the patent invalid or not infringed or if the court shortens the period because the parties have failed to
cooperate in expediting the litigation.

If the RLD has NCE exclusivity and the notice is given and suit filed during the fifth year of exclusivity, the

regulatory stay extends until 7.5 years after the RLD approval. The FDA may approve the proposed product before the
expiration of the regulatory stay if a court finds the patent invalid or not infringed or if the court shortens the period because
the parties have failed to cooperate in expediting the litigation.

Pediatric Exclusivity. Section 505A of the Federal Food, Drug and Cosmetic Act (“FDCA”) provides for six
months of additional exclusivity or patent protection if an NDA sponsor submits pediatric data that fairly respond to a
written request from the FDA for such data. The data does not need to show that the product is effective in the pediatric
population studied; rather, if the clinical trial is deemed to fairly respond to the FDA's request, the additional protection is
granted. If reports of requested pediatric studies are submitted to and accepted by FDA within the statutory time limits,
whatever statutory or regulatory periods of exclusivity or Orange Book listed patent protection that cover the drug are
extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the
FDA cannot approve an ANDA or 505(b)(2) application owing to regulatory exclusivity or listed patents. When any product
is approved, we will evaluate seeking pediatric exclusivity as appropriate.

Orphan Drug Exclusivity. The Orphan Drug Act provides incentives for the development of drugs intended to treat
rare diseases or conditions, which generally are diseases or conditions affecting less than 200,000 individuals in the U.S. If a
sponsor demonstrates that a drug product qualifies for orphan drug designation, the FDA grants orphan drug designation to
the product for that use. The benefits of orphan drug designation include research and development tax credits and
exemption from user fees. A drug that is approved for the orphan drug designated indication generally is granted seven
years of orphan drug exclusivity. During that period, the FDA generally may not approve any other application for the same
product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically
superior to the product with exclusivity. The FDA can revoke a product’s orphan drug exclusivity under certain
circumstances, including when the product sponsor is unable to assure the availability of sufficient quantities of the product
to meet patient needs. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same
disease or condition, or the same drug for a different disease or condition.

Government Regulation

We are subject to extensive regulation by the FDA and other federal, state and local regulatory agencies. The

FDCA and the FDA's implementing regulations set forth, among other things, requirements for the testing, development,
manufacture, quality control, safety, effectiveness, approval, labeling, storage, record-keeping, reporting, distribution,
import, export, sale, advertising and promotion of our products and product candidates. Although the discussion below
focuses on regulation in the U.S., we may seek approval for, and market, our products in other countries in the future.
Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in
the U.S., although there can be important differences.

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Development and Approval

Under the FDCA, FDA approval of an NDA is required before any new drug can be marketed in the U.S. NDAs in
the case of new drugs, or PMAs or 510(k)s in the case of medical devices, may require extensive studies and submission of
a large amount of data by the applicant.

Pharmaceutical Regulations

Preclinical Testing. Before testing any compound in human patients in the U.S., a company must generate extensive
preclinical data. Preclinical testing generally includes laboratory evaluation of product chemistry and formulation, as well as
toxicological and pharmacological studies in several animal species to assess the toxicity and dosing of the product. Certain
animal studies must be performed in compliance with the FDA's Good Laboratory Practice (“GLP”) regulations and the
U.S. Department of Agriculture's Animal Welfare Act.

IND Application. Human clinical trials in the U.S. cannot commence until an investigational new drug or IND application is
submitted and becomes effective. A company must submit preclinical testing results to the FDA as part of the IND, and the
FDA must evaluate whether there is an adequate basis for testing the drug in initial clinical studies in human volunteers.
Unless the FDA raises concerns, the IND becomes effective 30 days following its receipt by the FDA, and the clinical trial
proposed in the IND may begin. Once human clinical trials have commenced, the FDA may stop a clinical trial by placing it
on "clinical hold" because of concerns about the safety of the product being tested, or for other reasons.

Clinical Trials. Clinical trials involve the administration of a drug to healthy human volunteers or to patients, under the
supervision of a qualified investigator. The conduct of clinical trials is subject to extensive regulation, including compliance
with the FDA's bioresearch monitoring regulations and Good Clinical Practice (“GCP”) requirements, which establish
standards for conducting, recording data from, and reporting the results of, clinical trials, and are intended to assure that the
data and reported results are credible and accurate, and that the rights, safety, and well-being of study participants are
protected. Clinical trials must be conducted under protocols that detail the study objectives, parameters for monitoring
safety, and the efficacy criteria, if any, to be evaluated. Each protocol is reviewed by the FDA as part of the IND. In
addition, each clinical trial must be reviewed and approved by, and conducted under the auspices of, an Institutional Review
Board (“IRB”) for each clinical site. Companies sponsoring the clinical trials, investigators, and IRBs also must comply
with, as applicable, regulations and guidelines for obtaining informed consent from the study patients, following the
protocol and investigational plan, adequately monitoring the clinical trial, and timely reporting of adverse events (“AEs”).
Foreign studies conducted under an IND must meet the same requirements that apply to studies being conducted in the U.S.
Data from a foreign study not conducted under an IND may be submitted in support of an NDA if the study was conducted
in accordance with GCP and the FDA is able to validate the data.

A study sponsor is required to publicly post specified details about certain clinical trials and clinical trial results on

government or independent websites (e.g., http://clinicaltrials.gov). Human clinical trials typically are conducted in three
sequential phases, although the phases may overlap, be combined, or be subdivided in some cases:

● Phase 1 clinical trials involve the initial administration of the investigational drug to humans, typically to a
small group of healthy human subjects, but occasionally to a group of patients with the targeted disease or
disorder. Phase 1 clinical trials generally are intended to evaluate the safety, metabolism and pharmacologic
actions of the drug, the side effects associated with increasing doses, and, if possible, to gain early evidence of
effectiveness.

● Phase 2 clinical trials generally are controlled studies that involve a relatively small sample of the intended

patient population, and are designed to develop initial data regarding the product's effectiveness, to determine
dose response and the optimal dose range, and to gather additional information relating to safety and potential
AEs.

● Phase 3 clinical trials are conducted after preliminary evidence of effectiveness has been obtained, and are

intended to gather the additional information about safety and effectiveness necessary to evaluate the drug's

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overall risk-benefit profile, and to provide a basis for physician labeling. Generally, Phase 3 clinical
development programs consist of expanded, multi-site, large-scale studies of patients with the target disease or
disorder to obtain statistical evidence of the efficacy and safety of the drug at the proposed dosing regimen.
Phase 3 data often form the core basis on which the FDA evaluates a drug’s safety and effectiveness when
considering the product application.

The sponsoring company, the FDA, or the IRB may suspend or terminate a clinical trial at any time on various
grounds, including a finding that the patients are being exposed to an unacceptable health risk. Further, success in early-
stage clinical trials does not assure success in later-stage clinical trials. Data obtained from clinical activities are not always
conclusive and may be subject to alternative interpretations that could delay, limit or prevent regulatory approval.

NDA Submission and Review. The FDCA provides two pathways for the approval of new drugs through an NDA. An NDA
under Section 505(b)(1) of the FDCA is a comprehensive application to support approval of a product candidate that
includes, among other things, data and information to demonstrate that the proposed drug is safe and effective for its
proposed uses, that production methods are adequate to ensure its identity, strength, quality, and purity of the drug, and that
proposed labeling is appropriate and contains all necessary information. A 505(b)(1) NDA contains results of the full set of
preclinical studies and clinical trials conducted by or on behalf of the applicant to characterize and evaluate the product
candidate. We intend to seek FDA approval of AR101 through the Section 505(b)(1) regulatory approval pathway.

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to obtain FDA approval that permits the
filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for
the applicant and for which the applicant has not obtained a right of reference. The applicant may rely to some extent upon
the FDA's findings of safety and effectiveness for an approved product that acts as the reference drug and submit its own
product-specific data — which may include data from preclinical studies or clinical trials conducted by or on behalf of the
applicant — to address differences between the product candidate and the reference drug. We obtained FDA approval of our
ADHD products through the Section 505(b)(2) regulatory approval pathway, with in the case of Adzenys XR-ODT and
Adzenys ER, Adderall XR® and in the case of Cotempla XR-ODT, Metadate CD® as the reference drugs. Adderall XR
contains amphetamine, and Metadate CD contains methylphenidate, which are also the active ingredients in our Adzenys
products and Cotempla XR-ODT, respectively.

The submission of an NDA under either Section 505(b)(1) or Section 505(b)(2) generally requires payment of a

substantial user fee to the FDA. The FDA reviews applications to determine, among other things, whether a product is safe
and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product's
identity, strength, quality, and purity. For some NDAs, the FDA may convene an advisory committee to seek insights and
recommendations on issues relevant to approval of the application. Although the FDA is not bound by the recommendation
of an advisory committee, the agency considers such recommendations carefully when making decisions.

The FDA may determine that a Risk Evaluation and Mitigation Strategy (“REMS”) is necessary to ensure that the

benefits of a new product outweigh its risks, and the product can therefore be approved. A REMS may include various
elements, ranging from a medication guide or patient package insert to limitations on who may prescribe or dispense the
drug, depending on what the FDA considers necessary for the safe use of the drug. Under the Pediatric Research Equity Act
(“PREA”), certain applications for approval must also include an assessment, generally based on clinical study data, of the
safety and effectiveness of the subject drug in relevant pediatric populations. We are currently conducting programs for both
Adzenys XR-ODT and Cotempla XR-ODT under PREA guidelines. Before approving an NDA, the FDA will inspect the
facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that
the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent
production of the product within required specifications.

Once the FDA accepts an NDA submission — which occurs, if at all, within 60 days after submission of the NDA

— the FDA's goal for a non-priority review of an NDA is ten months. In the case of product candidates for orphan
indications which receive priority review, as further discussed below, the FDA’s goal for review of an NDA is six months.
The review process can be and often is significantly extended, however, by FDA requests for additional

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information, studies, or clarification. After review of an NDA and the facilities where the product is manufactured, the FDA
either issues an approval letter or a complete response letter (“CRL”) outlining the deficiencies in the submission. The CRL
may require additional testing or information, including additional preclinical or clinical data or additional work relating to
Chemistry, Manufacturing, and Controls (CMC) requirements. Even if such additional information and data are submitted,
the FDA may decide that the NDA still does not meet the standards for approval. Data from clinical trials are not always
conclusive, and the FDA may interpret data differently than the sponsor.

Obtaining regulatory approval often takes a number of years, involves the expenditure of substantial resources, and

depends on a number of factors, including the severity of the disease in question, the availability of alternative treatments,
and the risks and benefits demonstrated in clinical trials. Additionally, as a condition of approval, the FDA may impose
restrictions that could affect the commercial success of a drug or require post-approval commitments, including the
completion within a specified time period of additional clinical studies, which often are referred to as "Phase 4" or "post-
marketing" studies.

Post-approval modifications to the drug, such as changes in indications, labeling, or manufacturing processes or
facilities, may require a sponsor to develop additional data or conduct additional preclinical studies or clinical trials, to be
submitted in a new or supplemental NDA, which would require FDA approval.

Medical Device Regulations

Our Healight product candidate is classified as an investigational medical device and is subject to restrictions under

domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders, including, but not limited to,
FDCA. The FDCA requires these products, when sold in the United States, to be safe and effective for their intended uses
and to comply with the regulations administered by the FDA. The FDA regulates the design, development, research,
preclinical and clinical testing, introduction, manufacture, advertising, labeling, packaging, marketing, distribution, import
and export and record keeping for such products. Many medical device products are also regulated by comparable agencies
in non-U.S. countries in which they are produced or sold.

Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new

indication for use of an existing medical device obtain either a Section 510(k) premarket notification clearance or a
premarket approval (“PMA”) before introducing it into the U.S. market. The type of marketing authorization is generally
linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III)
based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed
necessary to ensure the device’s safety and effectiveness.

The process of obtaining a Section 510(k) clearance generally requires the submission of performance data and

clinical data, which in some cases can be extensive, to demonstrate that the device is “substantially equivalent” to another
legally U.S. marketed device. A predecessor device is referred to as “predicate device.” As a result, FDA clearance
requirements may extend the development process for a considerable length of time.. Substantial equivalence means that the
new device is as safe and effective as the predicate. A device is substantially equivalent if, in comparison to a predicate it:

● has the same intended use as the predicate; and

● has the same technological characteristics as the predicate; or

● has the same intended use as the predicate; and

● has different technological characteristics and does not raise different questions of safety and effectiveness;

and

● the information submitted to FDA demonstrates that the device is as safe and effective as the legally marketed

device.

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A claim of substantial equivalence does not mean the new and predicate devices needs to be identical. FDA first

establishes that the new and predicate devices have the same intended use and any differences in technological
characteristics do not raise different questions of safety and effectiveness. FDA then determines whether the device is as
safe and effective as the predicate device by reviewing the scientific methods used to evaluate differences in technological
characteristics and performance data. This performance data can include clinical data and non-clinical bench performance
data, including engineering performance testing, sterility, electromagnetic compatibility, software validation,
biocompatibility evaluation, among other data.

Unless specifically exempt from requiring pre-market clearance, a device may not be marketed in the U.S. until the

submitter receives a letter finding the device substantially equivalent. If FDA determines that a device is not substantially
equivalent, the applicant may:

● resubmit another 510(k) with new data;

● request a Class I or II designation through the De Novo Classification process;

● file a reclassification petition, or

● submit a premarket approval application (PMA).

Medical devices can be marketed only for the indications for which they are cleared or approved. After a device

has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or
effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a
new 510(k) clearance or PMA approval and payment of an FDA user fee. The determination as to whether or not a
modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available
FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at
any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA
approval is obtained.

Any medical devices we may manufacture and distribute are subject to pervasive and continuing regulation by the

FDA and certain state and non-U.S. agencies. These include product listing and establishment registration requirements,
which help facilitate inspections and other regulatory actions. The manufacturing facilities for any medical devices we
market are subject to inspection on a routine basis by the FDA and are required to adhere to GMP requirements, as set forth
in the Quality Systems Regulation (“QSR”), which require manufacturers, including third-party manufacturers, to follow
stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and
manufacturing process.

We must also comply with post-market surveillance regulations, including medical device reporting (“MDR”)

requirements which require that we review and report to the FDA any incident in which our products may have caused or
contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that
malfunction would likely cause or contribute to a death or serious injury if it were to recur.

Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the

Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or
uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses.

In the European Union (“EU”), our product candidate would be subject to the medical device and in vitro medical

device laws of the various member states, which for many years were based on Directives of the European Commission
(“Directives”). However, in May 2017, the EU adopted new, formal regulations to replace such Directives; specifically, the
EU Medical Device Regulation (the “EU MDR”) and In Vitro Diagnostic Regulation (the “EU IVDR”), each of which
imposes stricter requirements for the marketing and sale of medical devices and in vitro devices, including in the area of
clinical evaluation requirements, quality systems and post-market surveillance. The EU regulations were

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adopted with staggered transitional periods that have since been updated. The full application of the EU MDR was
implemented May 2021, while the EU IVDR will be fully applicable in May 2022.

Post-Approval Regulation

Once approved, drug products are subject to continuing regulation by the FDA. If ongoing regulatory requirements

are not met or if safety or manufacturing problems occur after the product reaches the market, the FDA may at any time
withdraw product approval or take actions that would limit or suspend marketing. Additionally, the FDA may require post-
marketing studies or clinical trials, changes to a product’s approved labeling, including the addition of new warnings and
contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if
there are new safety information developments.

Good Manufacturing Practices. Companies engaged in manufacturing drug products or their components must comply with
applicable cGMP requirements and product-specific regulations enforced by the FDA and other regulatory agencies.
Compliance with cGMP includes adhering to requirements relating to organization and training of personnel, buildings and
facilities, equipment, control of components and drug product containers and closures, production and process controls,
quality control and quality assurance, packaging and labeling controls, holding and distribution, laboratory controls, and
records and reports. The FDA regulates and inspects equipment, facilities, and processes used in manufacturing
pharmaceutical products prior to approval. If, after receiving approval, a company makes a material change in
manufacturing equipment, location, or process (all of which are, to some degree, incorporated in the NDA), additional
regulatory review and approval may be required. The FDA also conducts regular, periodic visits to re-inspect equipment,
facilities, and processes following the initial approval of a product. Failure to comply with applicable cGMP requirements
and conditions of product approval may lead the FDA to take enforcement action or seek sanctions, including fines,
issuance of warning letters, civil penalties, injunctions, suspension of manufacturing operations, operating restrictions,
withdrawal of FDA approval, seizure or recall of products, and criminal prosecution.

Advertising and Promotion. The FDA and other federal regulatory agencies closely regulate the marketing and promotion of
drugs through, among other things, standards and regulations for direct-to-consumer advertising, advertising and promotion
to healthcare professionals, communications regarding unapproved uses, industry-sponsored scientific and educational
activities, and promotional activities involving the Internet. A product cannot be commercially promoted before it is
approved. After approval, product promotion can include only those claims relating to safety and effectiveness that are
consistent with the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs for "off-label" uses
— that is, uses not approved by the FDA and not described in the product's labeling — because the FDA does not regulate
the practice of medicine. However, FDA regulations impose restrictions on manufacturers' communications regarding off-
label uses. Broadly speaking, a manufacturer may not promote a drug for off-label use, but under certain conditions may
engage in non-promotional, balanced, scientific communication regarding off-label use. In addition to FDA restrictions on
marketing of pharmaceutical products, state and federal fraud and abuse laws have been applied to restrict certain marketing
practices in the pharmaceutical industry.

Failure to comply with applicable FDA requirements and restrictions in this area may subject a company to adverse

publicity and enforcement action by the FDA, the Department of Justice, or the Office of the Inspector General of the
Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties
that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict
the manner in which a company promotes or distributes a drug.

Other Requirements. NDA holders must comply with other regulatory requirements, including submitting annual reports,
reporting information about adverse drug experiences and maintaining certain records.

Hatch-Waxman Act

The Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) establishes two
abbreviated approval pathways for pharmaceutical products that are in some way follow-on versions of already approved
products.

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Generic Drugs. A generic version of an approved drug is approved by means of an ANDA, by which the sponsor
demonstrates that the proposed product is the same as the approved, brand-name drug, which is referred to as the RLD.
Generally, an ANDA must contain data and information showing that the proposed generic product and RLD (i) have the
same active ingredient, in the same strength and dosage form, to be delivered via the same route of administration, (ii) are
intended for the same uses, and (iii) are bioequivalent. This is instead of independently demonstrating the proposed
product's safety and effectiveness, which are inferred from the fact that the product is the same as the RLD, which the FDA
previously found to be safe and effective.

505 (b)(2) NDAs. As discussed above, if a product is similar, but not identical, to an already approved product, it may be
submitted for approval via an NDA under section 505(b)(2) of the FDCA. Unlike an ANDA, this does not excuse the
sponsor from demonstrating the proposed product's safety and effectiveness. Rather, the sponsor is permitted to rely to some
degree on information from investigations that were not conducted by or for the applicant and for which the applicant has
not obtained a right of reference, and must submit its own product- specific data of safety and effectiveness to an extent
necessary because of the differences between the products. An NDA approved under 505(b)(2) may in turn serve as an RLD
for subsequent applications from other sponsors.

RLD Patents. In an NDA, a sponsor must identify patents that claim the drug substance or drug product or a method of
using the drug. When the drug is approved, those patents are among the information about the product that is listed in the
FDA publication, Approved Drug Products with Therapeutic Equivalence Evaluations, which is referred to as the Orange
Book. The sponsor of an ANDA or 505(b)(2) application seeking to rely on an approved product as the RLD must make one
of several certifications regarding each listed patent. A “Paragraph I” certification is the sponsor’s statement that patent
information has not been filed for the RLD. A “Paragraph II” certification is the sponsor’s statement that the RLD’s patents
have expired. A "Paragraph III" certification is the sponsor's statement that it will wait for the patent to expire before
obtaining approval for its product. A "Paragraph IV" certification is an assertion that the patent does not block approval of
the later product, either because the patent is invalid or unenforceable or because the patent, even if valid, is not infringed by
the new product.

U.S. Healthcare Reform

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act

of 2010, which we refer to together as the Affordable Care Act, is a sweeping measure intended to expand healthcare
coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals and
expansion of the Medicaid program. This law substantially changed the way healthcare is financed by both governmental
and private insurers and significantly impacts the pharmaceutical industry.

Changes that may affect our business include those governing enrollment in federal healthcare programs,

reimbursement changes, benefits for patients within a coverage gap in the Medicare Part D prescription drug program
(commonly known as the "donut hole"), rules regarding prescription drug benefits under the health insurance exchanges,
changes to the Medicaid Drug Rebate program, expansion of the Public Health Service Act's 340B drug pricing program
(340B Program), fraud and abuse, and enforcement. These changes impact existing government healthcare programs and
have resulted in the development of new programs, including Medicare payment for performance initiatives.

Some states have elected not to expand their Medicaid programs to individuals with an income of up to 133% of
the federal poverty level, as is permitted under the Affordable Care Act. For each state that does not choose to expand its
Medicaid program, there may be fewer insured patients overall, which could impact our sales of products and product
candidates for which we receive regulatory approval, and our business and financial condition. Where new patients receive
insurance coverage under any of the new Medicaid options made available through the Affordable Care Act, the possibility
exists that manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, a decision that
could impact manufacturer revenues.

Certain provisions of the Affordable Care Act have been subject to judicial challenges, as well as efforts to repeal

or replace, or otherwise modify them or to alter their interpretation and implementation. For example, on December 22,
2017, the U.S. government signed into law comprehensive tax legislation, referred to as the Tax Cuts and Jobs Act (the Tax
Act), which includes a provision repealing, effective January 1, 2019, the tax-based shared

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responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health
coverage for all or part of a year that is commonly referred to as the “individual mandate.” Further, the Bipartisan Budget
Act of 2018, among other things, amended the Medicare statute to reduce the coverage gap in most Medicare drug plans,
commonly known as the “donut hole,” by raising the required manufacturer point-of-sale discount from 50% to 70% off the
negotiated price effective as of January 1, 2019. On November 10, 2020, the Supreme Court heard oral argument over the
constitutionality of the individual mandate. Although on June 17, 2021, the Supreme Court rejected the challenge on the
basis that the plaintiffs lacked legal standing, it is unclear how other efforts to repeal, replace or otherwise modify, or
invalidate, the Affordable Care Act or its implementing regulations, or portions thereof, will affect the Affordable Care Act
or our business.

Additional legislative changes, regulatory changes, and further judicial challenges related to the Affordable Care

Act remain possible. Any such changes could decrease the number of individuals with health coverage. It is possible that the
Affordable Care Act, as currently enacted or as it may be amended, repealed, or replaced or otherwise modified in the
future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our
industry generally and on our ability to maintain or increase sales of our products or product candidates for which we
receive regulatory approval or to successfully commercialize our products and product candidates.

Additionally, on December 20, 2019, then-President Trump signed the Further Consolidated Appropriations Act for

2020 into law that includes a piece of bipartisan legislation called the Creating and Restoring Equal Access to Equivalent
Samples Act of 2019 or “the CREATES Act.” The CREATES Act aims to address the concern articulated by both the FDA
and others in the industry that some brand manufacturers have improperly restricted the distribution of their products,
including by invoking the existence of a REMS for certain products, to deny generic product developers access to samples
of brand products. Because generic product developers need samples to conduct certain comparative testing required by the
FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic products. To
remedy this concern, the CREATES Act establishes a private cause of action that permits a generic product developer to sue
the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable, market-based terms.”

Anti-Kickback and False Claims Laws and Other Regulatory Matters

In the United States, we are subject to complex laws and regulations pertaining to healthcare “fraud and abuse,”
including, but not limited to, the Federal Anti-Kickback Statute, the Federal False Claims Act, and other state and federal
laws and regulations. The Federal Anti-Kickback Statute makes it illegal for any person, including a prescription drug
manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that
is intended to induce the referral of business, including the purchase, order, or prescription of a particular drug, for which
payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are
punishable by up to five years in prison, criminal fines, administrative civil money penalties, and exclusion from
participation in federal healthcare programs. Violation of the Federal Anti-Kickback Statute can also be the basis for
liability under the Federal False Claims Act, described below. In addition, many states have adopted laws similar to the
Federal Anti-Kickback Statute. Some of these state prohibitions apply to the referral of patients for healthcare services
reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid.

The Federal False Claims Act prohibits anyone from knowingly presenting, or causing to be presented, for
payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false
or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.
Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are
deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding
information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of
wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information
and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of
our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been found liable under
the Federal False Claims Act in connection with their off- label promotion of drugs. Penalties for a False Claims Act
violation include three times the actual damages sustained by the government, plus mandatory

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civil penalties of between $10,000 and $25,000 for each separate false claim, the potential for exclusion from participation
in federal healthcare programs, and, although the Federal False Claims Act is a civil statute, conduct that results in a False
Claims Act violation may also implicate various federal criminal statutes. In addition, private individuals can bring actions
under the Federal False Claims Act and certain states have enacted laws modeled after the Federal False Claims Act.

In addition to the privacy and security requirements of the Health Insurance Portability and Accountability Act of

1996, as amended by the Health Information Technology for Economic and Clinical Health Act, (which we refer to
collectively as “HIPAA”), described below, HIPAA also expanded and created several additional federal crimes, including
healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits, among other
things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party
payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact
or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or
document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with
the delivery of or payment for healthcare benefits, items or services.

There are also an increasing number of state laws with requirements for manufacturers and/or marketers of

pharmaceutical products. Some states require the reporting of expenses relating to the marketing and promotion of drug
products and the reporting of gifts and payments to individual healthcare practitioners in these states. Other states prohibit
various marketing-related activities, such as the provision of certain kinds of gifts or meals. Still other states require the
reporting of certain pricing information, including information pertaining to and justification of price increases, or prohibit
prescription drug price gouging. In addition, states such as California, Connecticut, Nevada, and Massachusetts require
pharmaceutical companies to implement compliance programs and/or marketing codes. Many of these laws contain
ambiguities as to what is required to comply with the laws. In addition, as discussed below, a similar federal requirement
requires manufacturers to track and report to the federal government certain payments made to physicians and teaching
hospitals made in the previous calendar year. These laws may affect our sales, marketing and other promotional activities by
imposing administrative and compliance burdens on us. In addition, given the lack of clarity with respect to these laws and
their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state, and soon federal,
authorities.

The Physician Payments Sunshine Act, implemented as the Open Payments Program, and its implementing

regulations, requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under
Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to CMS information related to certain
payments made in the previous calendar year and other transfers of value to physicians and teaching hospitals, as well as
ownership and investment interests held by physicians and their immediate family members.

In addition, HIPAA, and its implementing regulations impose certain obligations on entities subject to the law, such

as health plans and most healthcare providers, and their business associates who provide certain services involving the use
or disclosure of HIPAA protected health information on their behalf, with respect to the privacy and security of such
protected health information. Further, most states have enacted laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and may not have the same
effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.

Compliance with such laws and regulations will require substantial resources. Because of the breadth of these

various fraud and abuse laws, it is possible that some of our business activities could be subject to challenge under one or
more of such laws. For example, pharmaceutical manufacturers have been subject to liability under the Federal Anti-
Kickback Statute for operation of certain patient assistance programs, because if implemented incorrectly those programs
can be perceived as providing payment to prescribers or patients to induce the prescriber or patient to utilize a particular
drug product. Accordingly, it will be important that our RxConnect patient assistance program be implemented in
accordance with all health care fraud and abuse laws. A challenge under any health care fraud and abuse laws could have
material adverse effects on our business, financial condition and results of operations. In the event governmental authorities
conclude that our business practices do not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations, they may impose sanctions under these laws, which are
potentially significant and may include civil monetary penalties, damages, exclusion of an entity or

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individual from participation in government health care programs, criminal fines and individual imprisonment, additional
reporting requirements if we become subject to a corporate integrity agreement or other settlement to resolve allegations of
violations of these laws, as well as the potential curtailment or restructuring of our operations. Further, we may be subject to
contractual damages and reputational harm as result of such non-compliance. Even if we are not determined to have violated
these laws, government investigations into these issues typically require the expenditure of significant resources and
generate negative publicity.

Coverage and Reimbursement for our Products

The cost of pharmaceuticals and medical devices continues to generate substantial governmental and third‑party

payor interest. We expect that the pharmaceutical industry will experience pricing pressures, given the trend toward
managed healthcare, the increasing influence of managed care organizations and pharmacy benefit managers (PBMs), and
additional regulatory and legislative proposals. Our results of operations and business could be adversely affected by current
and future third‑party payor policies, as well as healthcare legislative reforms.

Additionally, we must offer discounted pricing or rebates on purchases of pharmaceutical products under various

federal and state healthcare programs, including: the Centers for Medicare & Medicaid Services’ Medicaid Drug Rebate
Program, Medicare Part B Program and Medicare Part D Coverage Gap Discount Programs, the U.S. Department of
Veterans Affairs’ Federal Supply Schedule Program, and the Health Resources and Services Administration’s 340B Drug
Pricing Program. We must also report specific prices to government agencies under healthcare programs, such as the
Medicaid Drug Rebate Program and Medicare Part B Program. The calculations necessary to determine the prices reported
are complex, and the failure to report prices accurately may expose us to penalties.

Some third‑party payors also require pre‑approval of coverage for new or innovative drug therapies before they

will reimburse healthcare providers who use such therapies. While we cannot predict whether any proposed
cost‑containment measures will be adopted or otherwise implemented in the future, including any changes to any Medicare
reimbursement program, these requirements or any announcement or adoption of such proposals could have a material
adverse effect on our ability to obtain adequate prices for our product candidates and to operate profitably.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many
countries have instituted price ceilings on specific products and therapies. There can be no assurance that our products will
be considered medically reasonable and necessary for a specific indication, that our products will be considered
cost‑effective by third‑party payors, that an adequate level of reimbursement will be available, or that the third‑party payors’
reimbursement policies will not adversely affect our ability to sell our products profitably.

DEA Regulation

Several of our approved products are each a “controlled substance” as defined in the Controlled Substances Act of

1970, or CSA, because Adzenys XR-ODT and Adzenys ER contain amphetamine, Cotempla XR-ODT contains
methylphenidate, ZolpiMist contains zolpidem tartrate, Tuzistra XR contains codeine and our Tussionex generic contains
hydrocodone. Because amphetamine, methylphenidate and hydrocodone are all Schedule II controlled substances, The U.S.
Drug Enforcement Administration (“DEA”) has Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and our Tussionex
generic listed and regulated as Schedule II controlled substances. Tuzistra XR is listed and regulated as a Schedule III
controlled substance, while ZolpiMist is listed and regulated as a Schedule IV controlled substance. None of our pediatric
products (Poly-Vi-Flor, Tri-Vi-Flor and Karbinal ER) are considered “controlled substances.”

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any

controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For
example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules
of controlled substances are authorized. Similarly, separate registrations are also required for separate facilities.

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The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a

periodic basis. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to
destroy any controlled substance. In addition, special permits and notification requirements apply to imports and exports of
narcotic drugs.

The DEA establishes annually an aggregate quota for how much of a controlled substance may be produced in

and/or imported into the U.S. based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal
needs. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to
time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our or our
manufacturers’ quotas of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials.
Any delay, limitation or refusal by the DEA in establishing our or our manufacturers’ quota for controlled substances could
delay or stop our clinical trials or product launches, which could have a material adverse effect on our business, financial
position and results of operations.

To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle
controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or
diversion, can result in administrative, civil or criminal enforcement action that could have a material adverse effect on our
business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary
registrations, or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could
result in criminal proceedings.

Individual states also independently regulate controlled substances. We and our manufacturers will be subject to
state regulation on distribution of these products, including, for example, state requirements for licensures or registration.
Additionally, we use third-party logistics firms to inventory and fill sales orders for our commercial portfolio.

Human Capital

As of June 30, 2021, we employed 175 full time employees, including 67 who are involved in operations, 7 who
are directly involved in research and development, 35 who are involved in commercialization and 66 who are involved in
general and administrative activities. All of our colleagues are located in the U.S. Of these colleagues, 37% are female and
63% are male. Our colleagues are not represented by a labor union. We do not have written employment contracts with most
of our colleagues.

Our values – compliance, collaboration, integrity and high performance – are built on the foundation that the

colleagues we hire and the way we treat one another promote creativity, innovation and productivity, which spur our
success. This culture depends in large part on our ability to attract, retain and develop a diverse population of talents and
high-performing employees at all levels of our organization. Providing market competitive pay and benefit programs,
opportunities to participate in the success they help create, while engaging colleagues in important dialogue regarding
organization performance, we create a culture of inclusion in which all colleagues have the opportunity to thrive.

The success of our business is fundamentally connected to the well-being of our employees. In response to the
COVID-19 pandemic, we implemented modifications to our normal operations, including a work-from-home policy in
accordance with guidance issued by the CDC, the WHO and state and local authorities. In addition, employees were
provided multiple communications related to COVID safety through their managers, on the employee portal website, and in
posters located around the facilities which indicate workplace safety guidelines for those employees who continue to work
from our offices and manufacturing facilities. For further information regarding the impact of COVID-19 and actions taken
in response to the pandemic, including with respect to our employees, see Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations.

Available Information

Our principal executive offices are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112 USA,

and our phone number is (720) 437-6580.

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We maintain a website on the internet at http://aytubio.com. We make available, free of charge, through our

website, by way of a hyperlink to a third-party site that includes filings we make with the SEC website (www.sec.gov), our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports electronically filed or furnished pursuant to Section 15(d) of the Exchange Act. The information on our website is
not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we
make with the SEC. In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington D.C., 20549. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330.

Code of Ethics

We have adopted a written code of ethics that applies to our officers, directors and employees, including our

principal executive officer and principal accounting officer. We intend to disclose any amendments to, or waivers from, our
code of ethics that are required to be publicly disclosed pursuant to rules of the SEC by filing such amendment or waiver
with the SEC. This code of ethics and business conduct can be found in the corporate governance section of our website,
http://aytubio.com.

Item 1A. Risk Factors

Investing in our securities includes a high degree of risk. You should consider carefully the specific factors

discussed below, together with all of the other information contained in this Annual Report ON Form 10-K. If any of the
following risks actually occurs, our business, financial condition, results of operations and future prospects would likely be
materially and adversely affected. This could cause the market price of our securities to decline and could cause you to lose
all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL POSITION

We have a limited operating history, have incurred losses, and can give no assurance of profitability.

We are a commercial-stage specialty pharmaceutical company with a limited operating history. Prior to

implementing our commercial strategy in the fourth calendar quarter of 2015, we did not have a focus on profitability. Since
then, we have incurred losses in each year since our inception. Our net loss for the years ended June 30, 2021 and 2020 was
$58.3 million and $13.6 million, respectively. We have not demonstrated the ability to be a profit-generating enterprise to
date. Even though we expect to have revenue growth in the next several fiscal years, it is uncertain that the revenue growth
will be significant enough to offset our expenses and generate a profit in the future. We have a very limited operating history
on which investors can evaluate our potential for future success. Potential investors should evaluate us in light of the
expenses, delays, uncertainties, and complications typically encountered by early-stage healthcare businesses, many of
which will be beyond our control. These risks include the following:

● uncertain market acceptance of our products and product candidates;

● difficulties in maintaining coverage and reimbursement for our products;

● lack of sufficient capital;

● U.S. and foreign regulatory approval of our products and product candidates;

● unanticipated problems, delays, and expense relating to product development and implementation;

● lack of sufficient intellectual property;

● the ability to attract and retain qualified employees;

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● competition; and

● technological changes.

As a result of our limited operating history and the increasingly competitive nature of the markets in which we
compete, our historical financial data is of limited value in anticipating future operating expenses. Our planned expense
levels will be based in part on our expectations concerning future operations, which is difficult to forecast accurately based
on our limited operating history and our historical strategy of product and/or business acquisition to develop our product and
business portfolio. We may be unable to adjust spending in a timely manner to compensate for any unexpected budgetary
shortfall.

To obtain revenues from our products and product candidates, we must succeed, either alone or with others, in a
range of challenging activities, including expanding markets for our existing products and completing clinical trials of our
product candidates, obtaining positive results from those clinical trials, achieving marketing approval for those product
candidates, manufacturing, marketing and selling our existing products and those products for which we, or our
collaborators, may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for
our products from private insurance or government payors. We, and our collaborators, if any, may never succeed in these
activities and, even if we do, or one of our collaborators does, we may never generate revenues that are sufficient enough for
us to achieve profitability.

We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain
necessary capital when needed may force us to delay, limit or terminate our product expansion and development efforts
or other operations.

We are expending resources to expand the market for our products and develop our product candidates, none of
which might be as successful as we anticipate or at all and all of which might take longer and be more expensive than we
anticipate. As of June 30, 2021, our cash, cash equivalents and restricted cash totaling $49.9 million. During the year ended
June 30, 2021, we raised approximately $40.1 million, net of fees, from a combination of common stock offerings and
common stock warrant exercises.

Our operating plan may change as a result of many factors currently unknown to us, and we may need to seek

additional funds sooner than planned, through public or private equity or debt financings, government or other third-party
funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or
a combination of these approaches. In any event, we may require additional capital to continue the expansion of
commercialization efforts for our pharmaceutical, device and commercial health products, and to obtain regulatory approval
for, and to commercialize, our current product candidates. Raising funds in the current economic environment, as well as
our limited operating history, may present additional challenges. Even if we believe we have sufficient funds for our current
or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic
considerations.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may
adversely affect our ability to expand any existing product or develop and commercialize our product candidates. In
addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at
all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the
issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market
price of our shares to decline. The sale of additional equity or convertible securities could dilute all of our stockholders. The
incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain
restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or
license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our
business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an
earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or
product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our
business, operating results and prospects.

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If we are unable to obtain funding on a timely basis, we may be unable to expand the market for our

pharmaceutical, device and consumer health products, and/or be required to significantly curtail, delay or discontinue one or
more of our research or development programs for our current or any future product candidates or expand our operations
generally or otherwise capitalize on our business opportunities, as desired, which could materially affect our business,
financial condition and results of operations.

We will incur increased costs associated with, and our management will need to devote substantial time and effort to,
compliance with public company reporting and other requirements.

As a public company, we incur significant legal, accounting and other expenses. In addition, the rules and

regulations of the SEC and any national securities exchange to which we may be subject in the future impose numerous
requirements on public companies, including requirements relating to our corporate governance practices, with which we
will need to comply. Further, we will continue to be required to, among other things, file annual, quarterly and current
reports with respect to our business and operating results. Our management and other personnel will need to devote
substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and
regulations, and our efforts and initiatives to comply with those requirements could be expensive.

If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or
comply with applicable regulations could be impaired.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Pursuant to Section 404 of the Sarbanes-Oxley Act, our management conducted an assessment of the effectiveness of our
internal controls over financial reporting for the year ended June 30, 2021 and concluded that a certain control was not
effective. We concluded that we had a material weakness in internal control over financial reporting related to our analysis
for the accounting of goodwill and other intangible assets and accounting for the impairment of long-lived assets. As a
result, we have sought and received technical guidance from a third-party provider. In response, we have taken a number of
steps, including incorporating the third-party provider review and expertise in our analysis, and we believe that the issue has
been remediated.

However, if in the future we were to conclude that our internal control over financial reporting were not effective,
we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our
operations because there is presently no precedent available by which to measure compliance adequacy. As a consequence,
we may not be able to complete any necessary remediation process in time to meet our deadline for compliance with Section
404 of the Sarbanes-Oxley Act. Also, there can be no assurance that we will not identify one or more material weaknesses in
our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. The
presence of material weaknesses could result in financial statement errors which, in turn, could require us to restate our
operating results.

If we are unable to conclude that we have effective internal control over financial reporting or if our independent

auditors are unwilling or unable to provide us, when required, with an attestation report on the effectiveness of internal
control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in our
operating results, our stock price could decline and we may be subject to litigation or regulatory enforcement actions. In
addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, we may not be able to
maintain listing on the NASDAQ Capital Market.

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We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our
indebtedness when due.

As of closing of the Neos merger, we indirectly assumed $16.6 million of senior secured credit facility with

Deerfield, of which $16.0 million was outstanding as of June 30, 2021, and up to $25.0 million of secured revolving loans
with Encina. As of June 30, 2021, $7.9 million was outstanding under the secured revolving loan. All obligations under our
credit facilities are secured by substantially all of our existing property and assets subject to certain exceptions. These debt
financings and any future debt financings may create additional financial risk for us, particularly if our business or
prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at
maturity. Since our inception, we have had significant operating losses. As of June 20, 2021, we had accumulated deficit of
$178.3 million. Although we have strategies and plans to achieve profitability through revenue growth, we expect to
continue to incur net losses and have negative cash flow from operating activities for the foreseeable future as we continue
to market our approved products and continue to develop and seek marketing approval for our current and future product
candidates.

As a result, we may not have sufficient funds, or may be unable to arrange for additional financing, to pay the

amounts due on our outstanding indebtedness under our debt agreements. Further, funds from external sources may not be
available on economically acceptable terms, if at all. For example, if we raise additional funds through collaboration,
licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our product
candidates or technologies, or to grant licenses on terms that are not favorable to us. If adequate funds are not available
when and if needed, our ability to make interest or principal payments on our debt obligations, finance our operations, our
research and development efforts and other general corporate activities would be significantly limited and we may be
required to delay, significantly curtail or eliminate one or more of our programs.

Failure to satisfy our current and future debt obligations under our credit facilities with Deerfield or Encina could

result in an event of default and, as a result, our lenders could accelerate all of the amounts due. In the event of an
acceleration of amounts due under one or both of our debt agreements as a result of an event of default, we may not have
sufficient funds or may be unable to arrange for additional financing to repay our indebtedness. In addition, our lenders
could seek to enforce their security interests in any collateral securing such indebtedness.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of June 30, 2021, we had federal net operating loss carryforwards of approximately $466.7 million. The

available net operating losses, if not utilized to offset taxable income in future periods, will begin to expire in 2024 and,
except for certain indefinite-lived net operating loss carryforwards, will completely expire in 2037. Under the Internal
Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder, including, without limitation,
the consolidated income tax return regulations, various corporate ownership changes could limit our ability to use our net
operating loss carryforwards and other tax attributes to offset our income. Because Ampio’s equity ownership interest in our
company fell to below 80% in January 2016, we were deconsolidated from Ampio’s consolidated federal income tax group.
As a result, certain of our net operating loss carryforwards may not be available to us and we may not be able to use them to
offset our U.S. federal taxable income. As a consequence of the deconsolidation, it is possible that certain other tax
attributes and benefits resulting from U.S. federal income tax consolidation may no longer be available to us. Our company
and Ampio do not have a tax sharing agreement that could mitigate the loss of net operating losses and other tax attributes
resulting from the deconsolidation or our incurrence of liability for the taxes of other members of the consolidated group by
reason of the joint and several liability of group members. In addition to the deconsolidation risk, an “ownership change”
(generally a 50% change in equity ownership over a three-year period) under Section 382 of the Code could limit our ability
to offset, post-change, our U.S. federal taxable income. Section 382 of the Code imposes an annual limitation on the amount
of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss
carryforwards and certain recognized built-in losses. We believe that the June 2021 transaction with Neos caused an
ownership change of Neos, resulting in a limitation in our ability to use their pre-acquisition net operating loss carryovers.
We also believe that the same transaction may have caused, together with equity ownership changes in the past 5 years, an
ownership change resulting in limitation of our ability to us our pre-acquisition net operating loss carryovers. Either the
deconsolidation or the ownership change scenarios could result in increased future tax liability to us.

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The success of the Company will depend on its ability to obtain, commercialize and grow.

We currently have a limited number of products and may not be successful in marketing and commercializing these
products. In addition, we may seek to develop current or new product candidates. The testing, manufacturing and marketing
of these product candidates would require regulatory approvals, including approval from the FDA and similar bodies in
other countries. To the extent that we seek to develop product candidates, our future growth would be negatively affected if
we fail to obtain requisite regulatory approvals within the expected time frames, or at all, in the United States and
internationally for products in development and approvals for our existing products for additional indications.

RISKS RELATED TO COMMERCIALIZATION

We are heavily dependent on the commercial success of our commercial products. We have generated relatively small
revenues from the sales of these products, or any sales revenues from any of our product candidates, if approved, and we
may never achieve or maintain profitability.

Our ability to become profitable depends upon our ability to generate revenues from sales of our prescription and

consumer health product portfolios. We have limited commercial experience as a newly combined commercial entity, having
only generated revenues from the sale of our sleep product, Zolpimist, since June 2018, from our pediatric products since
acquiring that portfolio in November 2019 and from our ADHD products since acquiring that portfolio in March 2021.
None of our marketed prescription or consumer health products have thus far generated product sales revenues at levels
sufficient for us to attain profitability. We have not generated any revenues from product sales of any other product
candidates and, to date, have incurred significant operating losses.

We have incurred, and anticipate continuing to incur, significant costs associated with commercialization of our
approved products and, if approved, any other product candidates that we may develop. It is possible that we will never
attain sufficient product sales revenues to achieve profitability.

We have limited experience selling our current products as they were acquired from other companies or were recently
approved for sale. As a result, we may be unable to successfully commercialize our products and product candidates.

Despite our management’s extensive experience in launching and managing commercial-stage healthcare
companies, we have limited marketing, sales and distribution experience with our current product portfolio as it is currently
comprised. Our ability to achieve profitability depends on attracting and retaining customers for our current products and
building brand loyalty for our pharmaceuticals and consumer health product offerings. To successfully perform sales,
marketing, distribution and customer support functions, we will face a number of risks, including:

● our ability to attract and retain skilled support team, marketing staff and sales force necessary to increase the

market for our approved products and to maintain market acceptance for our product candidates;

● the ability of our sales and marketing team to identify and penetrate the potential customer base; and

● the difficulty of establishing brand recognition and loyalty for our products.

In addition, we may seek to enlist one or more third parties to assist with sales, distribution and customer support

globally or in certain regions of the world. If we do seek to enter into these arrangements, we may not be successful in
attracting desirable sales and distribution partners, or we may not be able to enter into these arrangements on favorable
terms, or at all. If our sales and marketing efforts, or those of any third-party sales and distribution partners, are not
successful, our currently approved products may not achieve increased market acceptance and our product candidates may
not gain market acceptance, which would materially impact our business and operations.

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We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will
suffer if we fail to compete effectively.

The biopharmaceutical industries are intensely competitive and subject to rapid and significant technological
change. We face significant existing competition in the United States and, if approved, would face significant competition in
markets outside the United States, from major multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. Further, makers of branded drugs could also enhance their own formulations in a
manner that competes with our enhancements of these drugs.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research

and development staff and more experienced marketing and manufacturing organizations. Mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a
result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling
and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large, established companies. Competition may increase further as a
result of advances in the commercial applicability of technologies and greater availability of capital for investment in these
industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug
delivery technologies that are more effective or less costly than that of our products or any product candidate that we are
currently developing or that we may develop.

If our competitors market products that are more effective, safer or less expensive than our products or that reach

the market sooner than our products we may enter the market too late in the cycle and may not achieve commercial success,
or we may have to reduce our price, which would impact our ability to generate revenue and obtain profitability. In addition,
the biopharmaceutical industry is characterized by rapid technological change. Because we have limited research and
development capabilities, it may be difficult for us to stay abreast of the rapid changes in each technology. If we fail to stay
at the forefront of technological change, we may be unable to compete effectively. Technological advances or products
developed by our competitors may render our technologies or product candidates obsolete, less competitive or not
economical.

If we are unable to differentiate our products or product candidates from branded drugs or existing generic therapies for
similar treatments, or if the FDA or other applicable regulatory authorities approve generic products that compete with
any of our products or product candidates, our ability to successfully commercialize such products or product candidates
would be adversely affected.

We expect to compete against branded drugs with distinct clinical attributes and to compete with their generic

counterparts that will be sold for a lower price. Although we believe that our Rx Portfolio and product candidates are or will
be differentiated from branded drugs and their generic counterparts, if any, including through clinical efficacy or through
improved patient compliance and ease of administration, it is possible that such differentiation will not impact our market
position. If we are unable to achieve significant differentiation for our products and product candidates against other drugs,
the opportunity for our products and, if approved, product candidates to achieve premium pricing and be commercialized
successfully would be adversely affected.

After an NDA, including a 505(b)(2) application, is approved, the covered product becomes a “listed drug” that, in

turn, can be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA. The
FDCA, implementing regulations and other applicable laws provide incentives to manufacturers to create modified, non-
infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These
manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same
active ingredient(s), dosage form, strength, route of administration, and conditions of use, or labeling as our product
candidate and that the generic product is bioequivalent to ours, meaning it is absorbed in the body at the same rate and to the
same extent as our product candidate. These generic equivalents, which must meet the same quality standards as the listed
drugs, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are
generally able to offer their products at lower prices.

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Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product,
such as our Rx Portfolio products, can be lost to the generic version. Accordingly, competition from generic equivalents to
our product candidates would materially adversely impact our revenues, profitability and cash flows and substantially limit
our ability to obtain a return on the investments we have made in our product candidates. For example, on July 25, 2016,
Neos received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”) advising them that Actavis filed
an ANDA with the FDA for a generic version of Adzenys XR-ODT. On October 17, 2017, we entered into a Settlement
Agreement and a Licensing Agreement with Actavis, pursuant to which Neos granted Actavis the right to manufacture and
market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain
circumstances. On October 31, 2017, Neos received a paragraph IV certification from Teva Pharmaceuticals USA, Inc.
(“Teva”) advising them that Teva filed an ANDA with the FDA for a generic version of Cotempla XR-ODT. On December
21, 2018, Neos entered into a Settlement Agreement and a Licensing Agreement with Teva, pursuant to which we have
granted Teva the right to manufacture and market its generic version of Cotempla XR-ODT under the ANDA beginning on
July 1, 2026, or earlier under certain circumstances.

The design, development, manufacture, supply and distribution of our products and product candidates are highly
regulated processes and technically complex.

We are subject to extensive regulation in connection with the preparation and manufacture of our products for

commercial sale. Components of a finished therapeutic product approved for commercial sale or used in late stage clinical
trials must be manufactured in accordance with cGMPs and equivalent foreign standards. These regulations govern
manufacturing processes and procedures, including record keeping, and the implementation and operation of quality
systems to control and assure the quality of investigational products and products approved for sale. Poor control of
production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in
the properties or stability of our products and product candidates that may not be detectable in final product testing. The
development, manufacture, supply and distribution of our approved products as well as any of our future potential product
candidates, are highly regulated processes and technically complex. We, along with our third party suppliers, must comply
with all applicable regulatory requirements of the FDA and foreign authorities. For instance, because each of our attention
deficit/hyperactivity disorder (“ADHD”) products, generic Tussionex, Tuzistra XR and ZolpiMist is a regulated drug
product and subject to the U.S. Drug Enforcement Administration (“DEA”) and state-level regulations, we have had to, and
will continue to, need to secure state licenses from each state in which we intend to sell such product allowing us to
distribute a regulated drug product in such state.

Regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing
facilities. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our
product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant
regulatory authority may require remedial measures that may be costly and/or time consuming for us to implement and that
may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent
closure of our facility. Any such remedial measures imposed upon us could materially harm our business. If we fail to
maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve
a pending application for a new drug product or revocation of a pre-existing approval. As a result, our business, financial
condition and results of operations may be materially harmed.

Our consumer health division relies heavily on obtaining products that change from a prescription to over the counter
through an FDA approval process. Any delays in this process might impact the financial performance of our consumer
health division.

Our consumer health division actively pursues opportunities where existing prescription drugs have recently, or are

expected to, change from a prescription to over-the-counter. Historically the FDA has highly scrutinized any product
application submitted to switch a product from physician prescribed prescription to unsupervised over-the-counter use by
the general public. The expansion of Rx-to-OTC switches is critical to our future growth. Reluctance of FDA to approve
Rx-to-OTC switches in new product categories could impact that growth and could impact the financial performance of our
consumer health division.

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Our approved products may not be accepted by physicians, patients, healthcare payors, health technology assessment
bodies or the medical community in general.

Even if the medical community accepts a product as safe and efficacious for its indicated use, physicians may

choose to restrict the use of the product if we or any collaborator is unable to demonstrate that, based on experience, clinical
data, side-effect profiles and other factors, our product is preferable to any existing medicines or treatments. We cannot
predict the degree of market acceptance of any of our approved products, which will depend on a number of factors,
including, but not limited to:

● the efficacy and safety of the product;

● changes in the standard of care for the targeted indication for any therapeutic candidate;

● the approved labeling for the product and any required warnings;

● the advantages and disadvantages of the product compared to alternative treatments;

● our and any collaborator’s ability to educate the medical community about the safety and effectiveness of the

product;

● the reimbursement policies of government and third-party payors pertaining to the product;

● the prevalence and severity of adverse events or publicity;

● the ability to manufacture our product in sufficient quantities and yields;

● potential product liability claims; and

● the market price of our product relative to competing treatments.

If our future therapeutic candidates fail to gain market access and acceptance, this will have a material adverse

impact on our ability to generate revenue to provide a satisfactory, or any, return on our investments. Even if some therapies
achieve market access and acceptance, the market may prove not to be large enough to allow us to generate significant
revenue.

Our pharmaceutical, device and consumer health products may prove to be difficult to effectively commercialize as
planned.

Various commercial, regulatory, and manufacturing factors may impact our ability to maintain or grow revenues
from sales of our pharmaceutical, device and consumer health product offerings. Specifically, we may encounter difficulty
by virtue of:

● our inability to adequately market and increase sales of any of these products;

● our inability to secure continuing prescribing of any of these products by current or previous users of the

product;

● our inability to effectively transfer and scale manufacturing as needed to maintain an adequate commercial

supply of these products;

● reimbursement and medical policy changes that may adversely affect the pricing, profitability or commercial

appeal of pharmaceutical products; and

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● our inability to effectively identify and align with commercial partners outside the U.S., or the inability of

those selected partners to gain the required regulatory, reimbursement, and other approvals needed to enable
commercial success of the Healight Platform.

We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, our product
candidates.

We may not be able to develop our current or any future product candidates. Our product candidates will require

substantial additional clinical development, testing, and regulatory approval before we are permitted to commence
commercialization. The clinical trials of our product candidates are, and the manufacturing and marketing of our product
candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the U.S.
and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory
approvals for the commercial sale of any product candidate, we must demonstrate through pre-clinical testing and clinical
trials that the product candidate is safe and effective for use in each target indication. This process can take many years and
may include post-marketing studies and surveillance, which will require the expenditure of substantial resources. Of the
large number of drugs in development in the U.S., only a small percentage successfully completes the FDA regulatory
approval process and is commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to
fund our development and clinical programs, we cannot assure you that any of our product candidates will be successfully
developed or commercialized.

For our more strictly regulated pharmaceutical products, such as our Rx Portfolio product offerings, we are not

permitted to market a pharmaceutical product in the U.S. until we receive approval of a New Drug Application, or an NDA,
for that product from the FDA, or in any foreign countries until we receive the requisite approval from such countries.
Obtaining approval of an NDA is a complex, lengthy, expensive and uncertain process, and the FDA may delay, limit or
deny approval of any product candidate for many reasons, including, among others:

● we may not be able to demonstrate that a product candidate is safe and effective to the satisfaction of the

FDA;

● the results of our clinical trials may not meet the level of statistical or clinical significance required by the

FDA for marketing approval;

● the FDA may disagree with the number, design, size, conduct or implementation of our clinical trials;

● the FDA may require that we conduct additional clinical trials;

● the FDA may not approve the formulation, labeling or specifications of any product candidate;

● the clinical research organizations, or CROs, that we retain to conduct our clinical trials may take actions

outside of our control that materially adversely impact our clinical trials;

● the FDA may find the data from pre-clinical studies and clinical trials insufficient to demonstrate that a

product candidate’s clinical and other benefits outweigh its safety risks, such as the risk of drug abuse by
patients or the public in general;

● the FDA may disagree with our interpretation of data from our pre-clinical studies and clinical trials;

● the FDA may not accept data generated at our clinical trial sites;

● if an NDA, if and when submitted, is reviewed by an advisory committee, the FDA may have difficulties

scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend
against approval of our application or may recommend that the FDA require, as a condition of approval,

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additional pre-clinical studies or clinical trials, limitations on approved labeling or distribution and use
restrictions;

● the FDA may require development of a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of

approval or post-approval;

● the FDA may not approve the manufacturing processes or facilities of third-party manufacturers with which

we contract; or

● the FDA may change its approval policies or adopt new regulations.

These same risks apply to applicable foreign regulatory agencies from which we may seek approval for any of our

product candidates.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory

approval for and successfully market any product candidate. Moreover, because a substantial portion of our business is or
may be dependent upon our product candidates, any such setback in our pursuit of initial or additional regulatory approval
would have a material adverse effect on our business and prospects.

Even if we in the future successfully complete clinical trials of our product candidates, those product candidates may not
be commercialized successfully for other reasons.

Even if we successfully complete clinical trials for one or more of our product candidates, those candidates may

not be commercialized for other reasons, including:

● failure to receive regulatory clearances required to market them as drugs;

● being subject to proprietary rights held by others;

● being difficult or expensive to manufacture on a commercial scale;

● having adverse side effects that make their use less desirable; or

● failing to compete effectively with products or treatments commercialized by competitors.

We rely on limited sources of supply for our products, and any disruption in the chain of supply may impact production
and sales of our products, and cause delays in developing and commercializing our product candidates and currently
manufactured and commercialized products.

Many of our products are produced in single annual production lots by single-source suppliers. Due to the limited

production quantities, production of these lots may not be prioritized by the third-party manufacturer, and may not be
scheduled and produced at all. If we fail to procure supply of our products, we could lose potential revenue and our
business, financial condition, results of operation and reputation could be adversely affected.

Our ADHD products are currently manufactured in our own production facility in Grand Prairie, Texas. We are
reliant on a limited number of suppliers for resin, drug compounds, coating and other component substances of our final
product candidates and products. If any of these single source suppliers were to breach or terminate its supply agreement, if
any, with us or otherwise not supply us, we would need to identify an alternative source for the supply of component
substances for our product candidates and products. Identifying an appropriately qualified source of alternative supply for
any one or more of the component substances for our product candidates or products could be time consuming, and we may
not be able to do so without incurring material delays in the development and commercialization of our approved products
or product candidates or a decrease in sales of our approved products, which could harm our financial position and
commercial potential for our product candidates and products. Any

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alternative vendor would also need to be qualified through an NDA supplement which could result in further delay,
including delays related to additional clinical trials. The FDA, DEA, or other regulatory agencies outside of the United
States may also require additional studies if we enter into agreements with new suppliers for the manufacture of our ADHD
products that differ from the suppliers used for clinical development of such product candidates.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or

commercialization of our products and product candidates, cause us to incur higher costs and prevent us from
commercializing them successfully. Furthermore, if our suppliers fail to deliver the required commercial quantities of
components and APIs on a timely basis and at commercially reasonable prices, including if our suppliers did not receive
adequate DEA quotas for the supply of certain scheduled components, and we are unable to secure one or more replacement
suppliers capable of production at a substantially equivalent cost, commercialization of our ADHD products may be delayed
or we could lose potential revenue and our business, financial condition, results of operation and reputation could be
adversely affected.

Manufacturing risks and inefficiencies may adversely affect our ability to produce our products.

We expect to engage third parties to manufacture all of our products, at the very least, in the near future. For any

future product, we expect to use third-party manufacturers because we will not have our own manufacturing capabilities. In
determining the required quantities of any product and the manufacturing schedule, we must make significant judgments
and estimates based on inventory levels, current market trends and other related factors. Because of the inherent nature of
estimates and our limited experience in marketing our current products, there could be significant differences between our
estimates and the actual amounts of product we require. If we do not effectively maintain our supply agreements, we will
face difficulty finding replacement suppliers, which could harm sales of those products. If we fail in similar endeavors for
future products, we may not be successful in establishing or continuing the commercialization of our products and product
candidates.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured these

components ourselves, including:

● reliance on third parties for regulatory compliance and quality assurance;

● possible breaches of manufacturing agreements by the third parties because of factors beyond our control;

● possible regulatory violations or manufacturing problems experienced by our suppliers; and

● possible termination or non-renewal of agreements by third parties, based on their own business priorities, at

times that are costly or inconvenient for us.

Further, if we are unable to secure the needed financing to fund our internal operations, we may not have adequate

resources required to effectively and rapidly transition our third-party manufacturing. We may not be able to meet the
demand for our products if one or more of any third-party manufacturers is unable to supply us with the necessary
components that meet our specifications. It may be difficult to find alternate suppliers for any of our products or product
candidates in a timely manner and on terms acceptable to us.

If we fail to manufacture our ADHD in sufficient quantities and at acceptable quality and pricing levels, or fail to obtain
adequate DEA quotas for controlled substances, or to fully comply with cGMP regulations, we may face delays in the
commercialization of these products or our product candidates, if approved, or be unable to meet market demand, and
may be unable to generate potential revenues.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the

development of advanced manufacturing techniques and process controls, and the use of specialized processing equipment.
Pharmaceutical companies often encounter difficulties in manufacturing, particularly in scaling up production of their
products. These problems include manufacturing difficulties relating to production costs and yields, quality control,
including stability of the product and quality assurance testing, shortages of qualified personnel, as well

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as compliance with federal, state and foreign regulations. If we are unable to demonstrate stability in accordance with
commercial requirements, or if our raw material manufacturers were to encounter difficulties or otherwise fail to comply
with their obligations to us, our ability to obtain FDA approval and market our products and product candidates would be
jeopardized. In addition, any delay or interruption in the supply of clinical trial supplies could delay or prohibit the
completion of our clinical trials, increase the costs associated with conducting our clinical trials and, depending upon the
period of delay, require us to commence new trials at significant additional expense or to terminate a trial. We purchase raw
materials and components from various suppliers in order to manufacture our ADHD products. If we are unable to source
the required raw materials from our suppliers, or if we do not obtain DEA quotas or receive inadequate DEA quotas, we
may experience delays in manufacturing our ADHD products, and may not be able to meet our customers’ demands for our
products.

In addition, we must comply with federal, state and foreign regulations, including cGMP requirements enforced by
the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality
assurance and the maintenance of records and documentation. We may be unable to comply with these cGMP requirements
and with other FDA and foreign regulatory requirements. A failure to comply with these requirements may result in fines
and civil penalties, suspension of production, suspension or delay in product approval, product seizure or voluntary recall, or
withdrawal of product approval. If the safety of any of our products or product candidates is compromised due to failure to
adhere to applicable laws or for other reasons, we may not be able to obtain, or to maintain once obtained, regulatory
approval for such products or product candidates or successfully commercialize such products or product candidates, and we
may be held liable for any injuries sustained as a result. Any of these factors could cause a delay in clinical development,
regulatory submissions, approvals or commercialization of our products or product candidates, entail higher costs or result
in our being unable to effectively commercialize our products or product candidates. Any manufacturing defect or error
discovered after products have been produced and distributed could result in even more significant consequences, including
costly recall procedures, re-stocking costs, damage to our reputation and potential for product liability claims.

Our Grand Prairie facility was formerly operated by PharmaFab, Inc., or PharmaFab, the predecessor of Neos. In

April 2007, the FDA announced entry of a Consent Decree of Permanent Injunction, or the Consent Decree, against
PharmaFab, one of its subsidiaries and two of its officials. The Consent Decree arose out of several perceived cGMP
deficiencies related to the manufacture of unapproved drugs or Drug Efficacy Study Implementation drugs that we no longer
manufacture. In July 2019, Neos filed a motion with the U.S. District Court of North Texas to vacate the Consent Decree,
which was unopposed by the Department of Justice and the FDA and was granted by the court on July 11, 2019. While the
Consent Decree has been vacated, there can be no assurance that we will not become subject to similar orders in the future,
which may result in us continuing to expend resources and attention to observe its terms, and there can be no assurance that
we will be in compliance with its requirements.

If our sole manufacturing facility becomes damaged or inoperable or we decide to or are required to vacate our facility,
our ability to manufacture our ADHD products or our generic Tussionex may be jeopardized. Our inability to continue
manufacturing adequate supplies of our products could adversely affect our ability to generate revenues.

All of our ADHD products and our generic Tussionex manufacturing capabilities are currently housed in our sole
manufacturing facility located in Grand Prairie, Texas. Our facility and equipment could be harmed or rendered inoperable
by natural or manmade disasters, including war, fire, tornado, power loss, communications failure or terrorism, any of which
may render it difficult or impossible for us to operate our drug delivery technology platform and manufacture our product
candidates or products for some period of time. While we seek to maintain finished goods inventory of our products outside
of this facility, it is unlikely that the level of such inventory would be sufficient if we were to sustain anything other than a
short-term disruption in our ability to manufacture our products and product candidates at our Grand Prairie, Texas facility.
The inability to manufacture our products and product candidates if our facility or our equipment is inoperable, for even a
short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those
customers or repair our reputation in the future. Furthermore, our facility and the equipment we use to manufacture our
products and product candidates could become damaged and time consuming to repair or replace. It would be difficult, time
consuming and expensive to rebuild our facility or repair or

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replace our equipment or to complete the transfer of our proprietary technology to a third party, particularly in light of the
requirements for a DEA registered manufacturing and storage facility like ours.

We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover

all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to
cover our potential losses and may not continue to be available to us on acceptable terms, if at all. An inability to continue
manufacturing adequate supplies of our ADHD products or our generic Tussionex at our Grand Prairie, Texas facility could
result in a disruption in the supply of our products to physicians and pharmacies, which would adversely affect our ability to
generate revenues.

The outsourcing of the manufacturing of our ADHD products to third parties, may negatively impact our business.

We plan to outsource the manufacturing of our ADHD products to third-party manufacturers to produce
commercial quantities of our ADHD products. Manufacturing partner requirements may require us to fund capital
improvements, perhaps on behalf of third parties, to support the scale-up of manufacturing and related activities. If our
third-party manufacturers are unable to provide commercial quantities of our ADHD products or on acceptable terms, we
will have to successfully transfer manufacturing technology to a different manufacturer which may impact our financial
performance. Engaging a new manufacturer for our ADHD products will require us to conduct comparative studies or
utilize other means to determine bioequivalence of the new and prior manufacturers’ products, which could negatively
impact our financial performance. If our third-party manufacturers are unable or unwilling to increase their manufacturing
capacity or if we are unable to establish alternative arrangements on a timely basis or on acceptable terms, the revenue that
we might receive from our ADHD products may be delayed or there may be a shortage in supply. Any inability to
manufacture our ADHD products in sufficient quantities when needed could seriously harm our business and our financial
results.

Manufacturers of our ADHD products must comply with good manufacturing practice ("GMP") requirements

enforced by the FDA, NMPA, EMA and other comparable foreign health authorities through facilities inspection programs.
These requirements include quality control, quality assurance, and the maintenance of records and documentation.
Manufacturers of our FDA regulated products may be unable to comply with these GMP requirements and with other FDA,
NMPA, EMA, state, and foreign regulatory requirements. A failure to comply with these requirements may result in fines
and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or
withdrawal of product approval. If the safety of any quantities supplied is compromised due to a manufacturer’s failure to
adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully
commercialize our drugs, which would seriously harm our business.

If we fail to successfully acquire new products, we may lose market position.

Acquiring new products is an important factor in our planned sales growth, including products that already have
been developed and found market acceptance. If we fail to identify existing or emerging prescription or consumer health
markets and trends and to acquire new products, we will not develop a strong revenue source to help pay for our
development activities as well as possible acquisitions. This failure would delay implementation of our business plan, which
could have a negative adverse effect on our business and prospects.

If we do not secure collaborations with strategic partners to test, commercialize and manufacture product candidates, we
may not be able to successfully develop products and generate meaningful revenues.

We may enter into collaborations with third parties to conduct clinical testing, as well as to commercialize and

manufacture our products and product candidates. If we are able to identify and reach an agreement with one or more
collaborators, our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to
successfully perform the functions assigned to them in these arrangements. Collaboration agreements typically call for
milestone payments that depend on successful demonstration of efficacy and safety, obtaining regulatory approvals, and
clinical trial results. Collaboration revenues are not guaranteed, even when efficacy and safety are demonstrated. Further, the
economic environment at any given time may result in potential collaborators electing to reduce their external spending,
which may prevent us from developing our product candidates.

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Even if we succeed in securing collaborators, the collaborators may fail to develop or effectively commercialize
our products or product candidates. Collaborations involving our product candidates pose a number of risks, including the
following:

● collaborators may not have sufficient resources or may decide not to devote the necessary resources due to
internal constraints such as budget limitations, lack of human resources, or a change in strategic focus;

● collaborators may believe our intellectual property is not valid or is unenforceable or the product candidate

infringes on the intellectual property rights of others;

● collaborators may dispute their responsibility to conduct development and commercialization activities
pursuant to the applicable collaboration, including the payment of related costs or the division of any
revenues;

● collaborators may decide to pursue a competitive product developed outside of the collaboration arrangement;

● collaborators may not be able to obtain, or believe they cannot obtain, the necessary regulatory approvals;

● collaborators may delay the development or commercialization of our product candidates in favor of

developing or commercializing their own or another party’s product candidate; or

● collaborators may decide to terminate or not to renew the collaboration for these or other reasons.

As a result, collaboration agreements may not lead to development or commercialization of our product candidates

in the most efficient manner or at all.

Collaboration agreements are generally terminable without cause on short notice. Once a collaboration agreement

is signed, it may not lead to commercialization of a product candidate. We also face competition in seeking out
collaborators. If we are unable to secure collaborations that achieve the collaborator’s objectives and meet our expectations,
we may be unable to advance our products or product candidates and may not generate meaningful revenues.

We or our strategic partners may choose not to continue an existing product or choose not to develop a product candidate
at any time during development, which would reduce or eliminate our potential return on investment for that product.

At any time and for any reason, we or our strategic partners may decide to discontinue the commercialization or

development of a product or product candidate. If we terminate a program in which we have invested significant resources,
we will reduce the return, or not receive any return, on our investment and we will have missed the opportunity to have
allocated those resources to potentially more productive uses. If one of our strategic partners terminates a program, we will
not receive any future milestone payments or royalties relating to that program under our agreement with that party. As an
example, we sold Primsol in March 2017, and abandoned Fiera and ProstaScint in June 2018.

We may never realize the expected benefits from the divestiture of Natesto.

The divestiture of Natesto is part of a strategy to transform ourselves into a high growth, specialty pharmaceutical
company. If we are unable to achieve our growth and profitability objectives due to competition, lack of acceptance of our
products, failure to generate favorable clinical data or gain regulatory approvals, or other risks as described in this section,
or due to other events, we will not be successful in transforming our business and may not see the appropriate market
valuation. Moreover, Natesto generated substantial revenue historically which we may not be able to replace. While over
time we expect to replace this revenue by investing in, acquiring and accelerating other

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revenue streams, there is a risk we will be unable to replace the revenue that Natesto generated, or that the cost of such will
be higher than expected. In addition, we may not ultimately receive the full benefits from the divestiture over the term as
expected. If we are unable to achieve our growth objectives, such failure will be exacerbated by the loss of revenue
generated by Natesto, and could materially impact our financial position and results of operations, resulting in a decline in
our stock price.

If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect,
the commercialization of our product candidates may be delayed, and our business will be harmed.

We sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical,

regulatory and other product development objectives. These milestones may include our expectations regarding the
commencement or completion of scientific studies and clinical trials, the submission of regulatory filings, or
commercialization objectives. From time to time, we may publicly announce the expected timing of some of these
milestones, such as the initiation or completion of an ongoing clinical trial, the initiation of other clinical programs, receipt
of marketing approval, or a commercial launch of a product. The achievement of many of these milestones may be outside
of our control. All of such milestones are based on a variety of assumptions which may cause the timing of achievement of
the milestones to vary considerably from our estimates, including:

● our available capital resources or capital constraints we experience;

● the rate of progress, costs and results of our clinical trials and research and development activities, including

the extent of scheduling conflicts with participating clinicians and collaborators, and our ability to identify and
enroll patients who meet clinical trial eligibility criteria;

● our receipt of approvals from the FDA and other regulatory agencies and the timing thereof;

● other actions, decisions or rules issued by regulators;

● our ability to access sufficient, reliable and affordable supplies of compounds used in the manufacture of our

product candidates;

● our efforts, or those efforts of our collaborators with respect to the commercialization of our products; and

● the securing of, costs related to, and timing issues associated with, product manufacturing as well as sales and

marketing activities.

If we fail to achieve announced milestones in the timeframes we announce and expect, the commercialization of

our product candidates may be delayed and our business, prospects and results of operations may be harmed.

Any third-party manufacturers we engage are subject to various governmental regulations, and we may incur significant
expenses to comply with, and experience delays in, our product commercialization as a result of these regulations.

The manufacturing processes and facilities of third-party manufacturers we have engaged for our current approved

products are, and any future third-party manufacturer will be, required to comply with the federal Quality System
Regulation, or QSR, which covers procedures and documentation of the design, testing, production, control, quality
assurance, labeling, packaging, sterilization, storage and shipping of devices. The FDA enforces the QSR through periodic
unannounced inspections of manufacturing facilities. Any inspection by the FDA could lead to additional compliance
requests that could cause delays in our product commercialization. Failure to comply with applicable FDA requirements, or
later discovery of previously unknown problems with the manufacturing processes and

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facilities of third-party manufacturers we engage, including the failure to take satisfactory corrective actions in response to
an adverse QSR inspection, can result in, among other things:

● administrative or judicially imposed sanctions;

● injunctions or the imposition of civil penalties;

● recall or seizure of the product in question;

● total or partial suspension of production or distribution;

● the FDA’s refusal to grant pending future clearance or pre-market approval;

● withdrawal or suspension of marketing clearances or approvals;

● clinical holds;

● warning letters;

● refusal to permit the export of the product in question; and

● criminal prosecution.

Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our

products, and would likely harm our business.

In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us.
We believe the FDA would request that we initiate a voluntary recall if a product was defective or presented a risk of injury
or gross deception. Regulatory agencies in other countries have similar authority to recall drugs or devices because of
material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert our
management attention and financial resources, expose us to product liability or other claims, and harm our reputation with
customers.

We face substantial competition from companies with considerably more resources and experience than we have, which
may result in others discovering, developing, receiving approval for, or commercializing products before or more
successfully than us.

We compete with companies that design, manufacture and market already-existing and new products. We anticipate

that we will face increased competition in the future as new companies enter the market with new technologies and/or our
competitors improve their current products. One or more of our competitors may offer technology superior to ours and
render our technology obsolete or uneconomical. Most of our current competitors, as well as many of our potential
competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating histories,
significantly greater resources to invest in new technologies, more substantial experience in product marketing and new
product development, greater regulatory expertise, more extensive manufacturing capabilities and the distribution channels
to deliver products to customers. If we are not able to compete successfully, we may not generate sufficient revenue to
become profitable. Our ability to compete successfully will depend largely on our ability to:

● expand the market for our approved products, especially our pharmaceutical and devices regulated by the

FDA;

● successfully commercialize our product candidates alone or with commercial partners;

● discover and develop product candidates that are superior to other products in the market;

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● obtain required regulatory approvals;

● attract and retain qualified personnel; and

● obtain patent and/or other proprietary protection for our product candidates.

Established pharmaceutical companies devote significant financial resources to discovering, developing or

licensing novel compounds that could make our products and product candidates obsolete. Our competitors may obtain
patent protection, receive FDA approval, and commercialize medicines before us. Other companies are or may become
engaged in the discovery of compounds that may compete with the product candidates we are developing.

For our approved products, we compete with companies that design, manufacture and market treatments that

compete with our products.

We anticipate that we will face increased competition in the future as new companies enter the market with new

technologies and our competitors improve their current products. One or more of our competitors may offer technology
superior to ours and render our technology obsolete or uneconomical. Most of our current competitors, as well as many of
our potential competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating
histories, significantly greater resources to invest in new technologies, more substantial experience in new product
development, greater regulatory expertise, more extensive manufacturing capabilities and the distribution channels to
deliver products to customers. If we are not able to compete successfully, we may not generate sufficient revenue to become
profitable.

Any new product we develop or commercialize that competes with a currently-approved product must demonstrate

compelling advantages in efficacy, convenience, tolerability and/or safety in order to address price competition and be
commercially successful. If we are not able to compete effectively against our current and future competitors, our business
will not grow, and our financial condition and operations will suffer.

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives,
may negatively impact our ability to generate revenues.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of

health care costs to contain or reduce costs of health care may adversely affect one or more of the following:

● our or our collaborators’ ability to set a price we believe is fair for our approved products;

● our ability to generate revenue from our approved products and achieve profitability; and

● the availability of capital.

The 2010 enactments of the Patient Protection and Affordable Care Act, or PPACA, and the Health Care and

Education Reconciliation Act, or the Health Care Reconciliation Act, significantly impacted the provision of, and payment
for, health care in the U.S. Various provisions of these laws are designed to expand Medicaid eligibility, subsidize insurance
premiums, provide incentives for businesses to provide health care benefits, prohibit denials of coverage due to pre-existing
conditions, establish health insurance exchanges, and provide additional support for medical research. Amendments to the
PPACA and/or the Health Care Reconciliation Act, as well as new legislative proposals to reform healthcare and
government insurance programs, along with the trend toward managed healthcare in the U.S., could influence the purchase
of medicines and medical devices and reduce demand and prices for our products and product candidates, if approved. This
could harm our or our collaborators’ ability to market any approved products and generate revenues. As we expect to
receive significant revenues from reimbursement of our Rx Portfolio products by commercial third-party payors and
government payors, cost containment measures that health care payors and providers are instituting and the effect of further
health care reform could significantly reduce potential revenues from the sale of any of our products and product candidates
approved in the future, and could cause an increase in our compliance,

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manufacturing or other operating expenses. In addition, in certain foreign markets, the pricing of prescription drugs and
devices is subject to government control and reimbursement may in some cases be unavailable. We believe that pricing
pressures at the federal and state level, as well as internationally, will continue and may increase, which may make it
difficult for us to sell any approved product at a price acceptable to us or any of our future collaborators.

In addition, in some foreign countries, the proposed pricing for a drug or medical device must be approved before it

may be lawfully marketed. The requirements governing pricing vary widely from country to country. For example, the
European Union provides options for its member states to restrict the range of medicinal products for which their national
health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member
state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls
on the profitability of the company placing the medicinal product on the market. A member state may require that
physicians prescribe the generic version of a drug instead of our approved branded product. There can be no assurance that
any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable
reimbursement and pricing arrangements for any of our products or product candidates. Historically, pharmaceutical
products launched in the European Union do not follow price structures of the U.S. and generally tend to have significantly
lower prices.

Our financial results will depend on the acceptance among clinicians, hospitals, third-party payors and the medical
community of our products and product candidates.

Our future success depends on the acceptance by our target customers, third-party payors and the medical

community that our products and product candidates are reliable, safe and cost-effective. Many factors may affect the
market acceptance and commercial success of our products and product candidates, including:

● our ability to convince our potential customers of the advantages and economic value our products and

product candidates over existing technologies and products;

● the relative convenience and ease of our products and product candidates over existing technologies and

products;

● the introduction of new technologies and competing products that may make our products and product

candidates less attractive for our target customers;

● our success in training medical personnel on the proper use of our products and product candidates;

● the willingness of third-party payors to reimburse our target customers that adopt our products and product

candidates;

● the acceptance in the medical community of our products and product candidates;

● the extent and success of our marketing and sales efforts; and

● general economic conditions.

If third-party payors do not reimburse our customers for the products we sell or if reimbursement levels are set too low
for us to sell one or more of our products at a profit, our ability to sell those products and our results of operations will
be harmed.

While our pharmaceutical products are approved and generating revenues in the U.S., they may not receive, or

continue to receive, physician or hospital acceptance, or they may not maintain adequate reimbursement from third party
payors. Additionally, even if one of our product candidates is approved and reaches the market, the product may not achieve
physician or hospital acceptance, or it may not obtain adequate reimbursement from third party payors. In the future, we
might possibly sell other product candidates to target customers substantially all of whom receive

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reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare,
Medicaid, other domestic and foreign government programs, private insurance plans and managed care programs.
Reimbursement decisions by particular third-party payors depend upon a number of factors, including each third-party
payor’s determination that use of a product is:

● a covered benefit under its health plan;

● appropriate and medically necessary for the specific indication;

● cost effective; and

● neither experimental nor investigational.

Third-party payors may deny reimbursement for covered products if they determine that a medical product was not

used in accordance with cost-effective diagnosis methods, as determined by the third-party payor, or was used for an
unapproved indication. Third-party payors also may refuse to reimburse for procedures and devices deemed to be
experimental.

Obtaining coverage and reimbursement approval for a product from each government or third-party payor is a time

consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for
the use of our potential product to each government or third-party payor. We may not be able to provide data sufficient to
gain acceptance with respect to coverage and reimbursement. In addition, eligibility for coverage does not imply that any
product will be covered and reimbursed in all cases or reimbursed at a rate that allows our potential customers to make a
profit or even cover their costs.

Third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level

of reimbursement for medical products and services. Levels of reimbursement may decrease in the future, and future
legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and
reimbursement available for any product or product candidate, which in turn, could negatively impact pricing. If our
customers are not adequately reimbursed for our products, they may reduce or discontinue purchases of our products, which
would result in a significant shortfall in achieving revenue expectations and negatively impact our business, prospects and
financial condition.

Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional
regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to commercialize our products and product candidates in
foreign markets for which we intend to primarily rely on collaboration with third parties. If we commercialize our products
or product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

● our inability to directly control commercial activities because we are relying on third parties;

● the burden of complying with complex and changing foreign regulatory, tax, accounting and legal

requirements;

● different medical practices and customs in foreign countries affecting acceptance in the marketplace;

● import or export licensing requirements;

● longer accounts receivable collection times;

● longer lead times for shipping;

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● language barriers for technical training;

● reduced protection of intellectual property rights in some foreign countries, and related prevalence of generic

alternatives to our products;

● foreign currency exchange rate fluctuations;

● our customers’ ability to obtain reimbursement for our products in foreign markets; and

● the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of our products or product candidates could also be adversely affected by the imposition of

governmental controls, political and economic instability, trade restrictions and changes in tariffs.

RISKS RELATED TO PRODUCT DEVELOPMENT AND REGULATORY APPROVAL

Our pre-commercial product candidates are expected to undergo clinical trials that are time-consuming and expensive,
with uncertain timelines and the outcomes of which are unpredictable, and for which there is a high risk of failure. If
clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other
regulators, we or our collaborators may incur additional costs or experience delays in completing, or ultimately be
unable to complete, the development and commercialization of these product candidates.

Before obtaining regulatory approvals for the commercial sale of future therapeutic candidates, we must

demonstrate through lengthy, complex and expensive nonclinical studies, preclinical studies and clinical trials that the
applicable therapeutic candidate is both safe and effective for use in each target indication. A therapeutic candidate must
demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. Most product
candidates that begin clinical trials are never approved by regulatory authorities for commercialization. We have limited
experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing
approval.

Pre-clinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to
extensive delays. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at
all. It may take several years to complete the pre-clinical testing and clinical development necessary to commercialize a
drug, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and
success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of
companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials
even after promising results in earlier trials and we cannot be certain that we will not face similar setbacks. The design of a
clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial
may not become apparent until the clinical trial is well advanced. An unfavorable outcome in one or more trials would be a
major set-back for that product candidate and for us. Due to our limited financial resources, an unfavorable outcome in one
or more trials may require us to delay, reduce the scope of, or eliminate one or more product development programs, which
could have a material adverse effect on our business, prospects and financial condition and on the value of our common
stock.

In connection with clinical testing and trials, we face a number of risks, including:

● a product candidate is ineffective, inferior to existing approved medicines, unacceptably toxic, or has

unacceptable side effects;

● patients may die or suffer other adverse effects for reasons that may or may not be related to the product

candidate being tested;

● the results may not confirm the positive results of earlier testing or trials; and

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● the results may not meet the level of statistical significance required by the FDA or other regulatory agencies

to establish the safety and efficacy of the product candidate.

If we do not successfully complete pre-clinical and clinical development, we will be unable to market and sell

products derived from our product candidates and generate revenues. Even if we do successfully complete clinical trials,
those results are not necessarily predictive of results of additional trials that may be needed before an NDA may be
submitted to the FDA. Although there are a large number of drugs in development in the U.S. and other countries, only a
small percentage result in the submission of an NDA to the FDA, even fewer are approved for commercialization, and only
a small number achieve widespread physician and consumer acceptance following regulatory approval. If our clinical trials
are substantially delayed or fail to prove the safety and effectiveness of our product candidates in development, we may not
receive regulatory approval of any of these product candidates and our business, prospects and financial condition will be
materially harmed.

Delays, suspensions and terminations in any clinical trial we undertake could result in increased costs to us and delay or
prevent our ability to generate revenues.

Human clinical trials are very expensive, time-consuming, and difficult to design, implement and complete. The

completion of trials for any product candidates, which as planned could take years to complete, may be delayed for a variety
of reasons, including delays in:

● demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;

● reaching agreement on acceptable terms with prospective CROs and clinical trial sites;

● validating test methods to support quality testing of the drug substance and drug product;

● obtaining sufficient quantities of the drug substance or device parts;

● manufacturing sufficient quantities of a product candidate;

● obtaining approval of an IND from the FDA;

● obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site; and

● determining dosing and clinical design and making related adjustments.

Identifying and qualifying patients to participate in our clinical trials will be critical to our success. Patient

enrollment depends on many factors, including:

● the size of the patient population required for analysis of the trial’s primary endpoints and the process for

identifying patients;

● identifying and enrolling eligible patients, including those willing to discontinue use of their existing

medications;

● the design of the clinical protocol and the patient eligibility and exclusion criteria for the trial;

● safety profile, to date, of the therapeutic candidate under study;

● the willingness or availability of patients to participate in our trials, including due to the perceived risks and

benefits, stigma or other side effects of use of a controlled substance;

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● perceived risks and benefits of our approach to treatment of indication;

● the proximity of patients to clinical sites;

● our ability to recruit clinical trial investigators with the appropriate competencies and experience;

● the availability of competing clinical trials;

● the availability of new drugs approved for the indication the clinical trial is investigating;

● clinicians’ and patients’ perceptions of the potential advantages of the drug being studied in relation to other

available therapies, including any new therapies that may be approved for the indications we are investigating;
and

● our ability to obtain and maintain patient informed consents.

Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials.

In addition, any negative results we may report in clinical trials may make it difficult or impossible to recruit and
retain patients in other clinical trials of that same therapeutic candidate. Delays in the enrollment for any clinical trial will
likely increase our costs, slow down the approval process and delay or potentially jeopardize our ability to commence sales
of our future therapeutic candidates and generate revenue. In addition, some of the factors that cause, or lead to, a delay in
the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of any
future therapeutic candidates.

The commencement and completion of clinical trials for our product candidates may be delayed, suspended or

terminated due to a number of factors, including:

● lack of effectiveness of product candidates during clinical trials;

● adverse events, safety issues or side effects relating to the product candidates or their formulation or design;

● inability to raise additional capital in sufficient amounts to continue clinical trials or development programs,

which are very expensive;

● the need to sequence clinical trials as opposed to conducting them concomitantly in order to conserve

resources;

● our inability to enter into collaborations relating to the development and commercialization of our product

candidates;

● failure by us or our collaborators to conduct clinical trials in accordance with regulatory requirements;

● our inability or the inability of our collaborators to manufacture or obtain from third parties materials

sufficient for use in pre-clinical studies and clinical trials;

● governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including
mandated changes in the scope or design of clinical trials or requests for supplemental information with
respect to clinical trial results;

● failure of our collaborators to advance our product candidates through clinical development;

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● delays in patient enrollment, variability in the number and types of patients available for clinical trials, and

lower-than anticipated retention rates for patients in clinical trials;

● difficulty in patient monitoring and data collection due to failure of patients to maintain contact after

treatment;

● a regional disturbance where we or our collaborative partners are enrolling patients in our clinical trials, such

as a pandemic, terrorist activities or war or a natural disaster; and

● varying interpretations of our data, and regulatory commitments and requirements by the FDA and similar

foreign regulatory agencies.

Many of these factors may also ultimately lead to denial of an NDA for a product candidate. If we experience
delays, suspensions or terminations in a clinical trial, the commercial prospects for the related product candidate will be
harmed, and our ability to generate product revenues will be delayed.

In addition, we may encounter delays or product candidate rejections based on new governmental regulations,

future legislative or administrative actions, or changes in FDA policy or interpretation during the period of product
development. If we obtain required regulatory approvals, such approvals may later be withdrawn. Delays or failures in
obtaining regulatory approvals may result in:

● varying interpretations of data and commitments by the FDA and similar foreign regulatory agencies; and

● diminishment of any competitive advantages that such product candidates may have or attain.

Furthermore, if we fail to comply with applicable FDA and other regulatory requirements at any stage during this

regulatory process, we may encounter or be subject to:

● diminishment of any competitive advantages that such product candidates may have or attain;

● delays or termination in clinical trials or commercialization;

● refusal by the FDA or similar foreign regulatory agencies to review pending applications or supplements to

approved applications;

● product recalls or seizures;

● suspension of manufacturing;

● withdrawals of previously approved marketing applications; and

● fines, civil penalties, and criminal prosecutions.

The medical device regulatory clearance or approval process is expensive, time consuming and uncertain, and the failure
to obtain and maintain required clearances or approvals could prevent us from broadly commercializing the Healight
Platforms for clinical use.

We expect the Healight Platform will be subject to 510k (or, potentially 510k De Novo) clearance by the FDA prior

to its marketing for commercial use in the U.S., and to regulatory approvals required by certain foreign governmental
entities prior to its marketing outside of the U.S.

In addition, any changes or modifications to a device that has received regulatory clearance or approval that could

significantly affect its safety or effectiveness, or would constitute a major change in its intended use, may require

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the submission of a new application for 510k clearance, pre-market approval, or foreign regulatory approvals. The 510k
clearance and pre-market approval processes, as well as the process of obtaining foreign approvals, can be expensive, time
consuming and uncertain. It generally takes from four to twelve months from submission to obtain 510k De Novo clearance,
and from one to three years from submission to obtain pre-market approval; however, it may take longer, and 510k, 510k De
Novo clearance or pre-market approval may never be obtained. We have limited experience in filing FDA applications for
510k, 510k De Novo clearance and pre-market approval. In addition, we are required to continue to comply with applicable
FDA and other regulatory requirements even after obtaining clearance or approval. There can be no assurance that we will
obtain or maintain any required clearance or approval on a timely basis, or at all. Any failure to obtain or any material delay
in obtaining FDA clearance or any failure to maintain compliance with FDA regulatory requirements could harm our
business, financial condition and results of operations.

The approval process for pharmaceutical and medical device products outside the U.S. varies among countries and may
limit our ability to develop, manufacture and sell our products internationally. Failure to obtain marketing approval in
international jurisdictions would prevent our product candidates from being marketed abroad.

In order to market and sell our products in the European Union and many other jurisdictions, we, and our
collaborators, must obtain separate marketing approvals and comply with numerous and varying regulatory requirements.
The approval procedure varies among countries and may involve additional testing. We may conduct clinical trials for, and
seek regulatory approval to market, our product candidates in countries other than the U.S. Depending on the results of
clinical trials and the process for obtaining regulatory approvals in other countries, we may decide to first seek regulatory
approvals of a product candidate in countries other than the U.S., or we may simultaneously seek regulatory approvals in the
U.S. and other countries. If we or our collaborators seek marketing approval for a product candidate outside the U.S., we
will be subject to the regulatory requirements of health authorities in each country in which we seek approval. With respect
to marketing authorizations in Europe, we will be required to submit a European Marketing Authorization Application, or
MAA, to the European Medicines Agency, or EMA, which conducts a validation and scientific approval process in
evaluating a product for safety and efficacy. The approval procedure varies among regions and countries and may involve
additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

Obtaining regulatory approvals from health authorities in countries outside the U.S. is likely to subject us to all of

the risks associated with obtaining FDA approval described above. In addition, marketing approval by the FDA does not
ensure approval by the health authorities of any other country, and approval by foreign health authorities does not ensure
marketing approval by the FDA.

Even if we, or our collaborators, obtain marketing approvals for our product candidates, the terms of approvals and
ongoing regulation of our products may limit how we or they market our products, which could materially impair our
ability to generate revenue.

Even if we receive regulatory approval for a product candidate, this approval may carry conditions that limit the

market for the product or put the product at a competitive disadvantage relative to alternative therapies. For instance, a
regulatory approval may limit the indicated uses for which we can market a product or the patient population that may
utilize the product, or may be required to carry a warning in its labeling and on its packaging. Products with black box
warnings are subject to more restrictive advertising regulations than products without such warnings. These restrictions
could make it more difficult to market any product candidate effectively. Accordingly, assuming we, or our collaborators,
receive marketing approval for one or more of our product candidates, we, and our collaborators expect to continue to
expend time, money and effort in all areas of regulatory compliance.

If the FDA or a comparable foreign regulatory authority approves any of our future therapeutic candidates, the
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and
recordkeeping for the therapy and underlying therapeutic substance will be subject to extensive and ongoing regulatory
requirements. These requirements include submissions of safety and other post-marketing information and reports,
registration, as well as continued compliance with current good manufacturing practice (“cGMP”) and with good clinical
practice (“GCP”) for any clinical trials that we conduct post-approval, all of which may result in significant expense and
limit our ability to commercialize such therapies. Later discovery of previously unknown problems with any approved

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therapeutic candidate, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers
or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

● restrictions on the labeling, distribution, marketing or manufacturing of our future therapeutic candidates,

withdrawal of the product from the market, or product recalls;

● untitled and warning letters, or holds on clinical trials;

● refusal by the FDA or other foreign regulatory body to approve pending applications or supplements to

approved applications we filed or suspension or revocation of license approvals;

● requirements to conduct post-marketing studies or clinical trials;

● restrictions on coverage by third-party payors;

● fines, restitution or disgorgement of profits or revenue;

● suspension or withdrawal of marketing approvals;

● product seizure or detention, or refusal to permit the import or export of the product; and

● injunctions or the imposition of civil or criminal penalties.

In addition, any regulatory approvals that we receive for our future therapeutic candidates may also be subject to

limitations on the approved indicated uses for which the therapy may be marketed or to the conditions of approval, or
contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to
monitor the safety and efficacy of such therapeutic candidates.

If there are changes in the application of legislation, regulations or regulatory policies or if we or one of our
distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various
actions. These include imposing fines on us, imposing restrictions on the therapeutic or its manufacture and requiring us to
recall or remove the therapeutic from the market. The regulators could also suspend or withdraw our marketing
authorizations, requiring us to conduct additional clinical trials, change our therapeutic labeling or submit additional
applications for marketing authorization. If any of these events occurs, our ability to sell such therapy may be impaired, and
we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely
affect our business, financial condition and results of operations.

Any of our products and product candidates for which we, or our collaborators, obtain marketing approval in the future
could be subject to post-marketing restrictions or withdrawal from the market and we, and our collaborators, may be
subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience
unanticipated problems with our products following approval.

Any of our approved products and product candidates for which we, or our collaborators, obtain marketing
approval, as well as the manufacturing processes, post approval studies and measures, labeling, advertising and promotional
activities for such products, among other things, are or will be subject to continual requirements of and review by the FDA
and other regulatory authorities. These requirements include submissions of safety and other post-marketing information
and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance
and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians
and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations
on the indicated uses for which the product may be marketed or to the conditions of approval, including the FDA
requirement to implement a REMS to ensure that the benefits of a drug outweigh its risks.

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The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to

monitor the safety or efficacy of a product. The FDA and other agencies, including the Department of Justice, closely
regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed
and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA
imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we, or our collaborators, do
not market any of our product candidates for which we, or they, receive marketing approval for only their approved
indications, we, or they, may be subject to warnings or enforcement action for off-label marketing. Violation of the FDCA
and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead
to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer
protection laws.

We are subject to various regulations pertaining to the marketing of our approved products.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on

the offer of payment or acceptance of kickbacks or other remuneration for the purchase of our products, including
inducements to potential patients to request our products and services. Additionally, any product promotion educational
activities, support of continuing medical education programs, and other interactions with health-care professionals must be
conducted in a manner consistent with the FDA regulations and the Anti-Kickback Statute. The Anti-Kickback Statute
prohibits persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly
or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or
service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.
Violations of the Anti-Kickback Statute can also carry potential federal False Claims Act liability. Additionally, many states
have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for
healthcare items or services reimbursed by any third-party payer, not only the Medicare and Medicaid programs, and do not
contain identical safe harbors. These and any new regulations or requirements may be difficult and expensive for us to
comply with, may adversely impact the marketing of our existing products or delay introduction of our product candidates,
which may have a material adverse effect on our business, operating results and financial condition.

Our products and product candidates may cause undesirable side effects that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or result in significant negative consequences following
marketing approval, if any.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt,
delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the
FDA or other regulatory authorities.

Further, if a product candidate receives marketing approval and we or others identify undesirable side effects
caused by the product after the approval, or if drug abuse is determined to be a significant problem with an approved
product, a number of potentially significant negative consequences could result, including:

● regulatory authorities may withdraw or limit their approval of the product;

● regulatory authorities may require the addition of labeling statements, such as a “Black Box warning” or a

contraindication;

● we may be required to change the way the product is distributed or administered, conduct additional clinical

trials or change the labeling of the product;

● we may decide to remove the product from the marketplace;

● we could be sued and held liable for injury caused to individuals exposed to or taking the product; and

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● our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product

candidate and could substantially increase the costs of commercializing an affected product or product candidates and
significantly impact our ability to successfully commercialize or maintain sales of our product or product candidates and
generate revenues.

Certain of our products contain, and future other product candidates may contain, controlled substances, the
manufacture, use, sale, importation, exportation, prescribing and distribution of which are subject to regulation by the
DEA.

Certain of our products, such as, Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT, Tuzistra XR, ZolpiMist and
our generic Tussionex (collectively, our “Controlled Substance Products”) which are approved by the FDA, are regulated by
the DEA as Schedule II, III or Schedule IV controlled substances. Before any commercialization of any product candidate
that contains a controlled substance, the DEA will need to determine the controlled substance schedule, taking into account
the recommendation of the FDA. This may be a lengthy process that could delay our marketing of a product candidate and
could potentially diminish any regulatory exclusivity periods for which we may be eligible. Our Controlled Substance
Products are, and our other product candidates may, if approved, be regulated as “controlled substances” as defined in the
Controlled Substances Act of 1970, or CSA, and the implementing regulations of the DEA, which establish registration,
security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, quota and other requirements
administered by the DEA. These requirements are applicable to us, to our third-party manufacturers and to distributors,
prescribers and dispensers of our product candidates. For example, Schedule II controlled substances are subject to various
restrictions, including, but not limited to, mandatory written prescriptions and the prohibition of refills. The DEA regulates
the handling of controlled substances through a closed chain of distribution. This control extends to the equipment and raw
materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.
A number of states and foreign countries also independently regulate these drugs as controlled substances. State-controlled
substance laws and regulations may have more extensive requirements than those determined by the DEA and FDA.
Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may
schedule products separately. While some states automatically schedule a drug when the DEA does so, other states require
additional state rulemaking or legislative action, which could delay commercialization. Some state and local governments
also require manufacturers to operate a drug stewardship program that collects, secures, transports and safely disposes of
unwanted drugs. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances
by definition have no established medicinal use, and may not be marketed or sold in the U.S. A pharmaceutical product may
be listed as Schedule II, III, IV or V, with Schedule II substances are considered to present the highest risk of abuse and
Schedule V substances the lowest relative risk of abuse among such substances.

ZolpiMist is regulated by the DEA as a Schedule IV controlled substance. Consequently, the manufacturing,

shipping, storing, selling and using of the products are subject to a high degree of regulation. Also, distribution, prescribing
and dispensing of these drugs are highly regulated.

Amphetamine, methylphenidate and hydrocodone, which are the active ingredients in our Adzenys XR-ODT,

Adzenys ER, Cotempla XR-ODT and generic Tussionex products, are listed by the DEA as a Schedule II controlled
substance under the CSA. Scheduled controlled substances are subject to DEA regulations relating to supply, procurement,
manufacturing, storage, distribution and physician prescription procedures. We currently manufacture these products in our
own facilities, which are registered with the DEA.

Registered entities are subject to DEA inspection and also must follow specific labeling and packaging
requirements, and provide appropriate security measures to control against diversion of controlled substances. Security
requirements vary by controlled substance schedule with the most stringent requirements applying to Schedule I and
Schedule II controlled substances. Required security measures include background checks on employees and physical
control of inventory through measures such as vaults and inventory reconciliations. Failure to follow these requirements can
lead to significant civil and/or criminal penalties and possibly even lead to a revocation of a DEA registration. The DEA
also has a production and procurement quota system that controls and limits the availability and production of

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Schedule I or II controlled substances. If we or any of our suppliers of raw materials that are DEA classified as Schedule I
or II controlled substances are unable to receive any quota or a sufficient quota to meet demand for our products, if any, our
business would be negatively impacted.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any

controlled substance. The registration is specific to the particular location, activity and controlled substance schedule.

Because of their restrictive nature, these laws and regulations could limit commercialization of our product

candidates containing controlled substances. Failure to comply with these laws and regulations could also result in
withdrawal of our DEA registrations, disruption in manufacturing and distribution activities, consent decrees, criminal and
civil penalties and state actions, among other consequences.

There is a risk we may be unable to sell and distribute certain of our products if we cannot comply with the serialization
requirements of the Drug Quality and Security Act within the necessary time frames.

Title II of the Drug Quality and Security Act of 2013 provided increased FDA oversight over the ability to track

and monitor the sale and distribution of prescription drugs. Over time, the level within the supply chain for which
prescription drugs are to be tracked gets farther and farther down the chain. Currently, we are required to provide product
identification information, or serialization, at the manufacturing batch, or lot level. However, going forward the law requires
such tracking to done farther down the distribution chain including, (i) wholesaler authentication and verification in
November 2019, (ii) pharmacy authentication and verification in 2020, and at the unit level throughout the entire supply
chain near the end of 2023. There is no guarantee that we will be able to satisfy each ever-stringent product identification
requirements. Failing to do so could result in a delay or inability to sell our products within the United States of America.

Failure to comply with health and data protection laws and regulations could lead to U.S. federal and state government
enforcement actions, including civil or criminal penalties, private litigation, and adverse publicity and could negatively
affect our operating results and business.

We and any potential collaborators may be subject to U.S. federal and state data protection laws and regulations,
such as laws and regulations that address privacy and data security. In the United States, numerous federal and state laws
and regulations, including state data breach notification laws, state health information privacy laws, and federal and state
consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal
information. In addition, we may obtain health information from third parties, including research institutions from which we
obtain clinical trial data, which are subject to privacy and security requirements under HIPAA, as amended by Health
Information Technology for Economic and Clinical Health (HITECH). To the extent that we act as a business associate to a
healthcare provider engaging in electronic transactions, we may also be subject to the privacy and security provisions of
HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-identifiable health information, mandates
the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the
reporting of certain security breaches to healthcare provider customers with respect to such information. Additionally, many
states have enacted similar laws that may impose more stringent requirements on entities like ours. Depending on the facts
and circumstances, we could be subject to significant civil, criminal, and administrative penalties if we obtain, use, or
disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not
authorized or permitted by HIPAA.

Compliance with U.S. and foreign privacy and data protection laws and regulations could require us to take on

more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our
ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government
enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse
publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and
other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who
share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have
violated individuals’ privacy rights, failed to comply with data protection laws, or breached our

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contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result
in adverse publicity that could harm our business.

We may use hazardous chemicals and biological materials in our business. Any claims relating to improper handling,
storage or disposal of these materials could be time consuming and costly.

Our research and development processes may involve the controlled use of hazardous materials, including
chemicals and biological materials. We cannot eliminate the risk of accidental contamination or discharge and any resultant
injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third
parties of these materials, and our liability may exceed any insurance coverage and our total assets. Federal, state and local
laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified
waste products, as well as the discharge of pollutants into the environment and human health and safety matters.
Compliance with environmental laws and regulations may be expensive and may impair our research and development
efforts. If we fail to comply with these requirements, we could incur substantial costs, including civil or criminal fines and
penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and
maintain compliance. In addition, we cannot predict the impact on our business of new or amended environmental laws or
regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.

Inadequate funding for the FDA, and other government agencies could prevent our new products, services and product
candidates from being developed or commercialized in a timely manner or otherwise prevent those agencies from
performing normal business functions on which the operation of our business may rely, which could negatively impact
our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including

government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and
statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In
addition, government funding of government agencies on which our operations may rely, including those that fund research
and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or

approved by necessary government agencies, which could adversely affect our business. Any government shutdown or other
disruption of normal activities at these regulatory agencies, such as the FDA, could lead to a delay or stop in critical
activities. If a prolonged government shutdown were to occur, it could significantly impact the ability of the FDA to timely
review and process our regulatory submissions, which could have a material adverse effect on our business.

We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs
and delays that prevent us from successfully commercializing product candidates.

We rely, and will rely in the future, on medical institutions, clinical investigators, contract research organizations,

contract laboratories, and collaborators to perform data collection and analysis and others to carry out our clinical trials. Our
development activities or clinical trials conducted in reliance on third parties may be delayed, suspended, or terminated if:

● the third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or

expected deadlines;

● we replace a third party; or

● the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to

clinical protocols, regulatory requirements, or for other reasons.

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Third party performance failures may increase our development costs, delay our ability to obtain regulatory

approval, and delay or prevent the commercialization of our product candidates. While we believe that there are numerous
alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter
into replacement arrangements without incurring delays or additional costs.

We must rely on a third party to develop the Healight Technology.

We must rely on Cedars-Sinai Medical Center to conduct testing and clinical trials of the Healight Technology. As

a result, we are expected to remain dependent on a third party to conduct ongoing trials and the timing and completion of
these trials will be partially controlled by such third party and may result in delays to the Healight development program.
Nevertheless, we are responsible for ensuring that each of the trials is conducted in accordance with the applicable protocol
and legal, regulatory, and scientific standards and our reliance on a third party does not relieve us of our regulatory
responsibilities. If we or Cedars-Sinai Medical Center fail to comply with applicable requirements, the FDA may require us
to perform additional clinical trials.

There is no guarantee that Cedars-Sinai Medical Center will devote adequate time and resources to the Healight

development activities or perform as contractually required. Furthermore, Cedars-Sinai Medical Center may also have
relationships with other entities, some of which may be our competitors. If Cedars-Sinai Medical Center fails to meet
expected deadlines, adhere to our clinical protocols, meet regulatory requirements, or otherwise performs in a substandard
manner, or terminates its engagement with us, the timelines for the Healight technology development may be extend,
delayed, suspended, or terminated.

The development of Healight faces uncertainties related to testing.

The development of Healight is based on scientific hypotheses and experimental approaches that may not lead to

desired results. It is possible that the timeframe for obtaining proof of principle and other results may be considerably longer
than originally anticipated, or may not be possible given time, resource, financial, strategic, and collaborator constraints.
Success in one stage of testing is not necessarily an indication that the Healight program will succeed in later stages of
testing and development. The discovery of unexpected side effects, inability to increase scale of manufacture, market
attractiveness, regulatory hurdles, competition, as well as other factors may make the Healight technology unattractive of
unsuitable for human use.

Our Enzastaurin product candidate is being developed for other indications by other sponsors. Any undesirable adverse
events that occur in relation to the activities by other sponsors could delay or prevent our regulatory approval, limit the
commercial profile of Enzastaurin, or result in significant negative consequences following any regulatory approval.

Undesirable adverse events that occur in relation to the activities by other sponsors related to our Enzastaurin

product candidate could cause us or regulatory authorities to interrupt, delay or halt development or could result in the delay
or denial of regulatory approval by the FDA or other comparable regulatory authorities. Drug-related adverse events
involving Enzastaurin by other sponsors could also harm our reputation, business, financial condition and business
prospects.

Additionally, if Enzastaurin receives regulatory approval, and we or others later identify undesirable side effects
caused by such drugs, a number of potentially significant negative consequences could result, including but not limited to:

● suspending the marketing of the drug;

● having regulatory authorities withdraw approvals of the drug;

● adding warnings on the label;

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● conducting post-marketing studies;

● being sued and held liable for harm caused to subjects or patients; and

● damage to our reputation.

Any of these events could prevent us from achieving or maintaining market acceptance of Enzastaurin, if approved,

and could significantly harm our business, results of operations and prospects.

We may seek Orphan Drug Designation or other designations for our product candidates, but even if designated we may
not ultimately realize the potential benefits of such designations.

We may seek Orphan Drug Designation or other designations for our product candidates from the FDA. Under the

Orphan Drug Act, the FDA may designate a drug product as an orphan drug if it is intended to treat a rare disease or
condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than
200,000 in the United States but where there is no reasonable expectation to recover the costs of developing and marketing a
treatment drug in the United States. In the United States, orphan drug designation entitles a party to financial incentives such
as opportunities for grant funding towards clinical trial costs, tax advantages, and application fee waivers. After the FDA
grants Orphan Drug Designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the
FDA. However, Orphan Drug Designation nor any other designation shortens the development time nor regulatory review
time of a product candidate nor gives the candidate any advantage in the regulatory review or approval process.

In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the

product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the
same drug for the same indication for a period of seven years, except in limited circumstances, such as a demonstration of
clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product
quantity for the orphan patient population. Exclusive marketing rights in the United States may also be unavailable if we or
our collaborators seek approval for an indication broader than the orphan designated indication and may be lost if the FDA
later determines that the request for designation was materially defective. Even if we obtain Orphan Drug Designation, we
may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated
with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivity for a product candidate, that
exclusivity may not effectively protect the product from competition because different drugs can be approved for the same
condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition
if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution
to patient care.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

We are dependent on our relationships and license agreements, and we rely on the intellectual property rights granted to
us pursuant to the license agreements.

A number of our patent and trademark rights are derived from our license agreements with third parties. Pursuant

to these license agreements, we have licensed rights to various patents, patent applications, trademarks and trademark
applications within and outside of the United States. We may lose our rights to this intellectual property if we breach our
obligations under such license agreements, including, without limitation, our financial obligations to the licensors. If we
violate or fail to perform any term or covenant of the license agreements, the licensors may terminate the license agreements
upon satisfaction of applicable notice requirements and expiration of any applicable cure periods. Additionally, any
termination of license agreements, whether by us or the licensors will not relieve us of our obligation to pay any license fees
owing at the time of such termination. If we fail to retain our rights under these license agreements, we will not be able to
commercialize certain products subject to patent or patent application or trademark or trademark application, and our
business, results of operations, financial condition and prospects would be materially adversely affected.

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The commercial success of our products depends, in large part, on our ability to use patents and trademarks
licensed to us by third parties in order to exclude others from competing with our products. The patent position of emerging
pharmaceutical companies like us can be highly uncertain and involve complex legal and technical issues. Until our licensed
intellectual property is interpreted by a court, either because we have sought to enforce it against a competitor or because a
competitor has preemptively challenged it, we will not know the breadth of protection that it will afford us. Our patents and
trademarks may not contain claims sufficiently broad to prevent others from practicing our technologies or marketing
competing products. Specifically with respect to our licensed patents, third parties may intentionally attempt to design
around our patents or design around our patents so as to compete with us without infringing our patents. Moreover, the
issuance of a patent is not conclusive as to its validity or enforceability, and so our patents may be invalidated or rendered
unenforceable if challenged by others.

We may renegotiate any of our existing license agreements or other material contracts on terms that might not be viewed
by the market as favorable.

From time to time we may renegotiate the terms of our existing licensing agreements. There can be no guarantee

that the terms of the renegotiated license agreement or other material contract will be viewed favorably by the market as
evidenced by our stock price although the renegotiated terms might be advantageous to our business.

Our ability to compete may decline if we do not adequately protect our proprietary rights or if we are barred by the patent
rights of others.

Our commercial success depends on obtaining and maintaining proprietary rights to our products and product

candidates as well as successfully defending these rights against third-party challenges. We will only be able to protect our
products and product candidates from unauthorized use by third parties to the extent that valid and enforceable patents, or
effectively protected trade secrets, cover them. Our ability to obtain patent protection for our products and product
candidates is uncertain due to a number of factors, including that:

● we may not have been the first to make the inventions covered by pending patent applications or issued

patents;

● we may not have been the first to file patent applications for our products and product candidates;

● others may independently develop identical, similar or alternative products, compositions or devices and uses

thereof;

● our disclosures in patent applications may not be sufficient to meet the statutory requirements for

patentability;

● any or all of our pending patent applications may not result in issued patents;

● we may not seek or obtain patent protection in countries that may eventually provide us a significant business

opportunity;

● any patents issued to us may not provide a basis for commercially viable products, may not provide any

competitive advantages, or may be successfully challenged by third parties;

● our compositions, devices and methods may not be patentable;

● others may design around our patent claims to produce competitive products which fall outside of the scope of

our patents; or

● others may identify prior art or other bases which could invalidate our patents.

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Even if we have or obtain patents covering our products and product candidates, we may still be barred from

making, using and selling them because of the patent rights of others. Others may have filed, and in the future may file,
patent applications covering products that are similar or identical to ours. There are many issued U.S. and foreign patents
relating to chemical compounds, therapeutic products, diagnostic devices, personal care products and devices and some of
these relate to our products and product candidates. These could materially affect our ability to sell our products and develop
our product candidates. Because patent applications can take many years to issue, there may be currently pending
applications unknown to us that may later result in issued patents that our products and product candidates may infringe.
These patent applications may have priority over patent applications filed by us.

Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes
periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents and/or applications due in
several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous
procedural provisions during the patent application process. We may or may not choose to pursue or maintain protection for
particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with
certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in
partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forgo patent protection or allow a patent
application or patent to lapse purposefully or inadvertently, our competitive position could suffer.

Legal actions to enforce our patent rights can be expensive and may involve the diversion of significant

management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our
patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or other actions against
those that have infringed on our patents, or used them without authorization, due to the associated expense and time
commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our
competitive position could suffer, which could harm our business, prospects, financial condition and results of operations.

Pharmaceutical and medical device patents and patent applications involve highly complex legal and factual questions,
which, if determined adversely to us, could negatively impact our patent position.

The patent positions of pharmaceutical and medical device companies can be highly uncertain and involve complex

legal and factual questions. The interpretation and breadth of claims allowed in some patents covering pharmaceutical
compositions may be uncertain and difficult to determine and are often affected materially by the facts and circumstances
that pertain to the patented compositions and the related patent claims. The standards of the U.S. Patent and Trademark
Office, or USPTO, are sometimes uncertain and could change in the future. Consequently, the issuance and scope of patents
cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and
patent applications may also be subject to interference proceedings, and U.S. patents may be subject to re-examination
proceedings, post-grant review and/or inter partes review in the USPTO. Foreign patents may be subject to opposition or
comparable proceedings in the corresponding foreign patent office, which could result in either loss of the patent or denial
of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In
addition, such interference, re-examination, post-grant review, inter partes review and opposition proceedings may be costly.
Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or
processes.

In addition, changes in or different interpretations of patent laws in the U.S. and foreign countries may permit

others to use our discoveries or to develop and commercialize our technology and products and product candidates without
providing any compensation to us or may limit the number of patents or claims we can obtain. The laws of some countries
do not protect intellectual property rights to the same extent as U.S. laws and those countries may lack adequate rules and
procedures for defending our intellectual property rights.

If we fail to obtain and maintain patent protection and trade secret protection of our products and product

candidates, we could lose our competitive advantage and competition we face would increase, reducing any potential
revenues and adversely affecting our ability to attain or maintain profitability.

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Developments in patent law could have a negative impact on our business.

From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO may change the

standards of patentability and any such changes could have a negative impact on our business.

In addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011,

includes a number of significant changes to U.S. patent law. These changes include a transition from a “first-to-invent”
system to a “first-to-file” system, changes the way issued patents are challenged, and changes the way patent applications
are disputed during the examination process. These changes may favor larger and more established companies that have
greater resources to devote to patent application filing and prosecution. The USPTO has developed regulations and
procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law
associated with the America Invents Act, and, in particular, the first-to-file provisions, became effective on March 16, 2013.
Substantive changes to patent law associated with the America Invents Act may affect our ability to obtain patents, and if
obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will ultimately
have on the cost of prosecuting our patent applications, our ability to obtain patents based on our discoveries and our ability
to enforce or defend any patents that may issue from our patent applications, all of which could have a material adverse
effect on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be
harmed.

In addition to patent protection, because we operate in the highly technical field of discovery and development of
therapies and medical devices, we rely in part on trade secret protection in order to protect our proprietary technology and
processes. However, trade secrets are difficult to protect. We expect to enter into confidentiality and intellectual property
assignment agreements with our employees, consultants, outside scientific and commercial collaborators, sponsored
researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to
third parties all confidential information developed by the party or made known to the party by us during the course of the
party’s relationship with us. These agreements also generally provide that inventions conceived by the party in the course of
rendering services to us will be our exclusive property. However, these agreements may not be honored and may not
effectively assign intellectual property rights to us.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using

physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a
trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary
information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and
providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to
protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult,
expensive, and time-consuming, and the outcome is unpredictable. In addition, courts outside the U.S. may be less willing to
protect trade secrets. Trade secrets may be independently developed by others in a manner that could prevent legal recourse
by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or
misappropriated, or if any such information was independently developed by a competitor, our competitive position could
be harmed.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the

U.S. Many companies have encountered significant problems in protecting and defending intellectual property rights in
certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the
enforcement of patents and other intellectual property protection, especially those relating to pharmaceuticals and medical
devices. This could make it difficult for us to stop the infringement of some of our patents, if obtained, or the
misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing
laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of
patents against third parties, including government agencies or government contractors. In these countries, patents may
provide limited or no benefit. Patent protection must ultimately be sought on a country-by-

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country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose
not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our

efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in
such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the U.S. and foreign
countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual
property.

Third parties may assert ownership or commercial rights to inventions we develop.

Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property.

We have or expect to have written agreements with collaborators that provide for the ownership of intellectual property
arising from our collaborations. These agreements provide that we must negotiate certain commercial rights with
collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the
collaboration. In some instances, there may not be adequate written provisions to address clearly the resolution of
intellectual property rights that may arise from a collaboration. If we cannot successfully negotiate sufficient ownership and
commercial rights to the inventions that result from our use of a third-party collaborator’s materials where required, or if
disputes otherwise arise with respect to the intellectual property developed with the use of a collaborator’s samples, we may
be limited in our ability to capitalize on the market potential of these inventions. In addition, we may face claims by third
parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us
are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership
disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the
commercial value of such inventions. Litigation may be necessary to resolve an ownership dispute, and if we are not
successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual
property. Either outcome could have an adverse impact on our business.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or
misappropriated trade secrets.

We might employ individuals who were previously employed at universities or other biopharmaceutical or medical

device companies, including our competitors or potential competitors. Although we try to ensure that our employees and
consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims
that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed
intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending
against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others
could be time consuming and costly, and an unfavorable outcome could harm our business.

There is significant litigation in the pharmaceutical and medical device industries regarding patent and other

intellectual property rights. While we are not currently subject to any pending intellectual property litigation, and are not
aware of any such threatened litigation, we may be exposed to future litigation by third parties based on claims that our
products or product candidates infringe the intellectual property rights of others. If our development and commercialization
activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such patents. A
patentee could prevent us from using the patented drugs, compositions or devices. We may need to resort to litigation to
enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of third-party proprietary
rights. From time to time, we may hire scientific personnel or consultants formerly employed by other companies involved
in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of
trade secret misappropriation or other similar claims as a result of prior

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affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial
resources, regardless of whether we win or lose. We may not be able to afford the costs of litigation. Any adverse ruling or
perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our
cash position and stock price. Any legal action against us or our collaborators could lead to:

● payment of damages, potentially treble damages, if we are found to have willfully infringed a party’s patent

rights;

● injunctive or other equitable relief that may effectively block our ability to further develop, commercialize,

and sell products; or

● we or our collaborators having to enter into license arrangements that may not be available on commercially

acceptable terms, if at all, all of which could have a material adverse impact on our cash position and business,
prospects and financial condition. As a result, we could be prevented from commercializing our products and
product candidates.

RISKS RELATED TO OUR ORGANIZATION, STRUCTURE AND OPERATION

Our Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum
for certain litigation that may be initiated by our stockholders, including claims under the Securities Act, which could
limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or
employees.

Our Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware shall, to the

fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our
behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or
agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General
Corporation Law, our certificate of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal
affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits
against us and our directors, officers, employees and agents. Stockholders who do bring a claim in the Court of Chancery
could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of
Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts
where a stockholder considering an action may be located or would otherwise choose to bring the action, and such
judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find the choice
of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may
incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business
and financial condition. Notwithstanding the foregoing, the exclusive provision shall not preclude or contract the scope of
exclusive federal or concurrent jurisdiction for actions brought under the Exchange Act, or the Securities Act of 1933, as
amended, or the Securities Act, or the respective rules and regulations promulgated thereunder.

We intend to acquire, through mergers, asset purchases or in-licensing, businesses or products, or form strategic
alliances, in the future, and we may not realize the intended benefits of such acquisitions or alliances.

We intend to acquire, through mergers, asset purchases or in-licensing, additional businesses or products, form

strategic alliances and/or create joint ventures with third parties that we believe will complement or augment our existing
business. If we acquire businesses or assets with promising markets or technologies, we may not be able to realize the
benefit of acquiring such businesses or assets if we are unable to successfully integrate them with our existing operations
and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new
products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or
enhancing our business. We cannot assure you that, following any such acquisition or alliance, we will achieve the expected
synergies to justify the transaction. These risks apply to our acquisition of ZolpiMist in June 2018 and Tuzistra XR in
November 2018, our acquisition of the Pediatric Portfolio in November 2019, the merger with Innovus

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Pharmaceuticals, Inc. in February 2020, and the merger with Neos Therapeutics, Inc. in March 2021. As an example, we
acquired Primsol in October 2015 and Natesto in 2016, but sold those assets in March 2017 and March 2021, respectively.
Depending on the success or lack thereof of any of our existing or future acquired products and product candidates, we
might seek to out-license, sell or otherwise dispose of any of those products or product candidates, which could adversely
impact our operations if the dispositions triggers a loss, accounting charge or other negative impact.

The combined company’s ability to successfully manage this expanded business will depend, in part, upon

management’s ability to implement an effective integration of the two companies and its ability to manage a combined
business with significantly larger size and scope with the associated increased costs and complexity. There can be no
assurances that the management of the combined company will be successful or that the combined company will realize the
expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

We may fail to realize the anticipated benefits and cost savings of the Neos merger, which could adversely affect the value
of shares of our common stock.

The success of the Neos merger will depend, in part, on our ability to realize the anticipated benefits and cost

savings from combining the businesses. Our ability to realize these anticipated benefits and cost savings is subject to certain
risks, including, among others:

● our ability to successfully combine the businesses of Aytu and Neos;

● the risk that the combined businesses will not perform as expected;

● the extent to which Aytu will be able to realize the expected synergies, which include potential savings from
re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an
optimized operating model between both companies and leveraging scale, and value creation resulting from
the combination of the businesses of Aytu and Neos;

● the possibility that Aytu paid more for Neos than the value it will derive from the merger;

● the assumption of known and unknown liabilities of Neos;

● the possibility that significant unanticipated costs may be incurred in the course of coordinating the merged

businesses; and

● the possibility of costly litigation challenging the merger.

If we is not able to successfully combine the businesses of Aytu and Neos within the anticipated time frame, or at

all, the anticipated cost savings and other benefits of the merger may not be realized fully or may take longer to realize than
expected, the combined businesses may not perform as expected and the value of the shares of Aytu common stock may be
adversely affected.

Aytu and Neos have operated independently, and there can be no assurances that their businesses can be integrated
successfully. It is possible that the integration process could result in the loss of key Aytu or Neos employees, the disruption
of either company’s or both companies’ ongoing businesses or in unexpected integration issues, higher than expected
integration costs and an overall post-completion integration process that takes longer than originally anticipated.
Specifically, issues that must be addressed in integrating the operations of Neos and Aytu in order to realize the anticipated
benefits of the merger so the combined business performs as expected include, among others:

● integrating the companies’ technologies, products and services;

● identifying and eliminating redundant and underperforming operations and assets;

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● harmonizing the companies’ operating practices, employee development, compensation and benefit programs,

internal controls and other policies, procedures and processes;

● addressing possible differences in corporate cultures and management philosophies;

● maintaining employee morale and retaining key management and other employees;

● attracting and recruiting prospective employees;

● consolidating the companies’ corporate, administrative and information technology infrastructure;

● managing the movement of certain businesses and positions to different locations;

● coordinating geographically dispersed organizations; and

● effecting potential actions that may be required in connection with obtaining regulatory approvals.

In addition, at times, the attention of certain members of each company’s management and each company’s

resources may be focused on the integration of the businesses of the two companies and diverted from day-to-day business
operations, which may disrupt each company’s ongoing business and the business of the combined company.

Following the merger, a significant amount of the combined company’s total assets will be related to acquired
intangible assets and goodwill, which are subject to annual impairment reviews, or more frequent reviews if events or
circumstances indicate that the carrying value may not be recoverable. Because of the significance of these assets, any
charges for impairment as well as amortization of intangible assets could have a material adverse effect on the combined
company’s results of operations and financial condition.

In fiscal 2021, the great majority of our gross revenue and gross accounts receivable were due to three significant
customers, the loss of which could materially and adversely affect our results of operations.

Three customers contributed greater than 10% of our gross revenue during the years ended June 30, 2021 and 2020.
During the years ended June 30, 2021 and 2020, three customers accounted for 54% and 46% of gross revenue, respectively.
The loss of one or more of our significant partners or collaborators could have a material adverse effect on our business,
operating results or financial condition.

We are also subject to credit risk from our accounts receivable related to our product sales. As of June 30, 2021,

three customers accounted for 85% of gross accounts receivable. As of June 30, 2020, four customers accounted for 60% of
gross accounts receivable.

We will need to develop and expand our company, and we may encounter difficulties in managing this development and
expansion, which could disrupt our operations.

As of June 30, 2021, we had 175 full-time employees, and in connection with the expansion of our commercial

product portfolio and our internal drug candidate development programs, we expect to continue to increase our number of
employees and the scope of our operations. To manage our anticipated development and expansion, we must continue to
implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and
train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention
away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due
to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train
additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of
business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of
our operations may lead to significant costs and may divert financial resources from other projects, such as the planned
expanded commercialization of our approved products and the development of

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our product candidates. If our management is unable to effectively manage our expected development and expansion, our
expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not
be able to implement our business strategy. Our future financial performance and our ability to expand the market for our
approved products and develop our product candidates, if approved, and compete effectively will depend, in part, on our
ability to effectively manage the future development and expansion of our company.

We depend on key personnel and attracting qualified management personnel and our business could be harmed if we
lose personnel and cannot attract new personnel.

Our success depends to a significant degree upon the technical and management skills of our directors, officers and

key personnel. Any of our directors could resign from our board at any time and for any reason. Although our executive
officers Joshua Disbrow and Richard Eisenstadt have employment agreements, the existence of an employment agreement
does not guarantee the retention of the executive officer for any period of time, and each agreement obligates us to pay the
officer lump sum severance of two years and one year, respectively, of salary if we terminate him without cause, as defined
in the agreement, which could hurt our liquidity. The loss of the services of either of these individuals would likely have a
material adverse effect on us. Our success also will depend upon our ability to attract and retain additional qualified
management, marketing, technical, and sales executives and personnel. We do not maintain key person life insurance for
any of our officers or key personnel. The loss of any of our directors or key executives, or the failure to attract, integrate,
motivate, and retain additional key personnel could have a material adverse effect on our business.

We compete for such personnel, including directors, against numerous companies, including larger, more
established companies with significantly greater financial resources than we possess. There can be no assurance that we will
be successful in attracting or retaining such personnel, and the failure to do so could have a material adverse effect on our
business, prospects, financial condition, and results of operations.

Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial
potential of our product candidates.

We will be exposed to potential product liability and professional indemnity risks that are inherent in the research,
development, manufacturing, marketing and use of therapeutic candidates. Any failure of future therapeutic candidates by
us and our corporate collaborators in clinical trials may expose us to liability claims as may the potential sale of any
therapies approved in the future. These claims might be made by patients who use our therapies, healthcare providers,
pharmaceutical companies, our corporate collaborators or other third parties that research or sell our therapies. Any claims
against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market
for our future therapeutic candidates or any prospects for commercialization of our future therapeutic candidates. Although
the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after
regulatory approval, may exhibit unforeseen side effects. If any of our future therapeutic candidates causes adverse side
effects during clinical trials or after regulatory approval, we may be exposed to substantial liabilities.

The risk that we may be sued on product liability claims is inherent in the development and commercialization of

pharmaceutical, medical device and personal care products and devices. Side effects of, or manufacturing defects in,
products that we develop and commercialized could result in the deterioration of a patient’s condition, injury or even death.
Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits increases. Claims may
be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class. Large
judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. These lawsuits
may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held
liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further
commercialization of the affected products.

We may be subject to legal or administrative proceedings and litigation other than product liability lawsuits which

may be costly to defend and could materially harm our business, financial condition and operations.

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Although we maintain general liability, clinical trial liability and product liability insurance, this insurance may not

fully cover potential liabilities. In addition, insurance coverage is increasingly expensive and difficult to obtain. For
example, we have experienced increasing difficulty in procuring insurance coverage for our products, in particular, our
opioid based products, due to their status as controlled substances. Inability to obtain or maintain sufficient insurance
coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability
claims could prevent or inhibit the commercial production and sale of any of our products and product candidates that
receive regulatory approval, which could adversely affect our business. Product liability claims could also harm our
reputation, which may adversely affect our collaborators’ ability to commercialize our products successfully. A successful
product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could
decrease our cash and adversely affect our business.

Public concern over the abuse of medications that are controlled substances, including increased legislative, legal and
regulatory action, could negatively affect our business.

Products containing controlled substances may generate public controversy. Certain governmental and regulatory

agencies, as well as state and local jurisdictions, are focused on the abuse of controlled substances such as opioids in the
United States. State and local governmental agencies have commenced investigations into pharmaceutical companies and
others in the supply chain in connection with the distribution of opioid medications. For example, on March 7, 2018 and
April 18, 2019, we received citations advising us that the County of Harris Texas and the County of Walker Texas filed
lawsuits on December 13, 2017 and January 11, 2019, respectively, against us and various other alleged manufacturers,
promoters, sellers and distributors of opioid pharmaceutical products. Through these lawsuits, each of Harris County and
Walker County seek to recoup as damages some of the expenses they allegedly have incurred to combat opioid use and
addiction. Each of Harris County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’
fees. In addition, multiple lawsuits have been filed against pharmaceutical companies alleging, among other claims, failures
to provide effective controls and procedures to guard against the diversion of controlled substances, negligence by
distributing controlled substances to pharmacies that serve individuals who abuse controlled substances, and failures to
report suspicious orders of controlled substances in accordance with regulations. Certain of these cases have recently been
settled, some for hundreds of millions of dollars. In the future, political pressures and adverse publicity could lead to delays
in, and increased expenses for, and limit or restrict, the introduction and marketing of our product or product candidates, the
withdrawal of currently approved products from the market, or result in other legal action.

In addition, we are aware of other legislative, regulatory or industry measures to address the misuse of prescription

opioid medications which could affect our business in ways that we may not be able to predict. For example, the State of
New York has undertaken efforts to create an annual surcharge on all manufacturers and distributors licensed to sell or
distribute opioids in New York, as well as a tax on sales of opioids in the state. Other states have implemented and are also
considering legislation that could require us to pay taxes, licensing fees, or assessments on the distribution of opioid
medications in those states. These laws and proposed bills vary in the amounts and the means of calculation. Liabilities for
taxes or assessments under any such laws will likely have an adverse impact on our results of operations, unless we are able
to mitigate them through operational changes or commercial arrangements where permitted and may result in us ceasing to
continue to sell our products in these jurisdictions.

RISK RELATED TO SECURITIES MARKETS AND INVESTMENT IN OUR SECURITIES

Our failure to meet the continued listing requirements of the NASDAQ Capital Market could result in a delisting of our
common stock.

If we fail to satisfy the continued listing requirements of the NASDAQ Capital Market, such as the corporate

governance requirements or the minimum closing bid price requirement, the exchange may take steps to delist our common
stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability
to sell or purchase our common stock when you wish to do so. In the event of a delisting notification, we anticipate that we
would take actions to restore our compliance with applicable exchange requirements, such as stabilize our market price,
improve the liquidity of our common stock, prevent our common stock from dropping below such

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exchange’s minimum bid price requirement, or prevent future non-compliance with such exchange’s listing requirements.

Future sales and issuances of our equity securities or rights to purchase our equity securities, including pursuant to
equity incentive plans, would result in additional dilution of the percentage ownership of our stockholders and could
cause our stock price to fall.

To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial

dilution. We may, as we have in the past, sell common stock, convertible securities or other equity securities in one or more
transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or
other equity securities in more than one transaction, investors may be further diluted by subsequent sales. Such sales may
also result in material dilution to our existing stockholders, and new investors could gain rights superior to existing
stockholders.

Pursuant to our Aytu 2015 Stock Plan, our Board of Directors is currently authorized to award up to a total of 5.0

million shares of common stock or options to purchase shares of common stock to our officers, directors, employees and
non-employee consultants. Stockholders will experience dilution in the event that additional shares of common stock are
issued under our Aytu 2015 Stock Plan, or options issued under our Aytu 2015 Stock Plan are exercised, or any warrants are
exercised for shares of our common stock.

Our share price is volatile and may be influenced by numerous factors, some of which are beyond our control.

The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in

response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors”
section and elsewhere in this prospectus, these factors include:

● the products or product candidates we acquire for commercialization;

● the products and product candidates we seek to pursue, and our ability to obtain rights to develop,

commercialize and market those product candidates;

● our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

● actual or anticipated adverse results or delays in our clinical trials;

● our failure to expand the market for our currently approved products or commercialize our product candidates,

if approved;

● unanticipated serious safety concerns related to the use of any of our product candidates;

● overall performance of the equity markets and other factors that may be unrelated to our operating

performance or the operating performance of our competitors, including changes in market valuations of
similar companies;

● conditions or trends in the healthcare, biotechnology and pharmaceutical industries;

● introduction of new products offered by us or our competitors;

● announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us

or our competitors;

● our ability to maintain an adequate rate of growth and manage such growth;

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● issuances of debt or equity securities;

● sales of our common stock by us or our stockholders in the future, or the perception that such sales could

occur;

● trading volume of our common stock;

● ineffectiveness of our internal control over financial reporting or disclosure controls and procedures;

● general political and economic conditions;

● effects of natural or man-made catastrophic events;

● other events or factors, many of which are beyond our control;

● adverse regulatory decisions;

● additions or departures of key scientific or management personnel;

● changes in laws or regulations applicable to our product candidates, including without limitation clinical trial

requirements for approvals;

● disputes or other developments relating to patents and other proprietary rights and our ability to obtain patent

protection for our product candidates;

● our dependence on third parties, including CROs and scientific and medical advisors;

● failure to meet or exceed any financial guidance or expectations regarding development milestones that we

may provide to the public;

● actual or anticipated variations in quarterly operating results; and

● failure to meet or exceed the estimates and projections of the investment community.

In addition, the stock market in general, and the stocks of small-cap healthcare, biotechnology and pharmaceutical

companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect
the market price of our common stock, regardless of our actual operating performance. The realization of any of the above
risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and
material adverse impact on the market price of our common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our
business, our stock price and any trading volume could decline.

Any trading market for our common stock that may develop will depend in part on the research and reports that

securities or industry analysts publish about us or our business. We have a limited number of securities and industry analysts
who publish research on us or our business and additional securities and industry analysts may never publish research on us
or our business. If we do not broaden the coverage of our company from securities or industry analysts, the trading price for
our stock could be negatively affected. If securities or industry analysts initiate coverage, and one or more of those analysts
downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our
stock could decrease, which might cause our stock price and any trading volume to decline.

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Our reverse stock split of 1-for-10 effected on December 8, 2020 may not achieve one or more of our objectives.

Historically, we have affected four reverse stock splits since June 8, 2015, each of which has impacted the trading

liquidity of the shares of our common stock. There can be no assurance that the market price per share of our common stock
after a reverse stock split will remain unchanged or increase in proportion to the reduction in the number of shares of our
common stock outstanding before the reverse stock split. The market price of our shares may fluctuate and potentially
decline after a reverse stock split. Accordingly, the total market capitalization of our common stock after a reverse stock
split may be lower than the total market capitalization before the reverse stock split. Moreover, the market price of our
common stock following a reverse stock split may not exceed or remain higher than the market price prior to the reverse
stock split.

Additionally, there can be no assurance that a reverse stock split will result in a per-share market price that will
attract institutional investors or investment funds or that such share price will satisfy investing guidelines of institutional
investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve. Further,
if a reverse stock split is effected and the market price of our common stock declines, the percentage decline may be greater
than would occur in the absence of a reverse stock split.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity
incentive plan or otherwise, could result in dilution of the percentage ownership of our stockholders and could cause our
stock price to fall.

We could need significant additional capital in the future to continue our planned operations. To raise capital, we

may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a
manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more
than one transaction, investors in a prior transaction may be materially diluted by subsequent sales. Additionally, any such
sales may result in material dilution to our existing stockholders, and new investors could gain rights, preferences and
privileges senior to those of holders of our common stock. Further, any future sales of our common stock by us or resales of
our common stock by our existing stockholders could cause the market price of our common stock to decline. Any future
grants of options, warrants or other securities exercisable or convertible into our common stock, or the exercise or
conversion of such shares, and any sales of such shares in the market, could have an adverse effect on the market price of
our common stock.

Some provisions of our charter documents and applicable Delaware law may discourage an acquisition of us by others,
even if the acquisition may be beneficial to some of our stockholders.

Provisions in our Certificate of Incorporation and Amended and Restated Bylaws, as well as certain provisions of

Delaware law, could make it more difficult for a third-party to acquire us, even if doing so may benefit some of our
stockholders. These provisions include:

● the authorization of 50.0 million shares of “blank check” preferred stock, the rights, preferences and privileges
of which may be established and shares of which may be issued by our Board of Directors at its discretion
from time to time and without stockholder approval;

● limiting the removal of directors by the stockholders;

● allowing for the creation of a staggered board of directors;

● eliminating the ability of stockholders to call a special meeting of stockholders; and

● establishing advance notice requirements for nominations for election to the board of directors or for

proposing matters that can be acted upon at stockholder meetings.

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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace members of our board of directors, which is responsible
for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business
combinations with an interested stockholder for a period of three years following the date on which the stockholder became
an interested stockholder, unless such transactions are approved by the board of directors. This provision could have the
effect of discouraging, delaying or preventing someone from acquiring us or merging with us, whether or not it is desired by
or beneficial to our stockholders.

Any provision of our Certificate of Incorporation or Bylaws or of Delaware law that is applicable to us that has the
effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for
their shares of our common stock in the event that a potentially beneficial acquisition is discouraged, and could also affect
the price that some investors are willing to pay for our common stock.

The elimination of personal liability against our directors and officers under Delaware law and the existence of
indemnification rights held by our directors, officers and employees may result in substantial expenses.

Our Certificate of Incorporation and our Bylaws eliminate the personal liability of our directors and officers to us

and our stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under
Delaware law. Further, our Certificate of Incorporation and our Bylaws and individual indemnification agreements we have
entered with each of our directors and executive officers provide that we are obligated to indemnify each of our directors or
officers to the fullest extent authorized by the Delaware law and, subject to certain conditions, advance the expenses
incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those
indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage awards
against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may
discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for
breaches of their fiduciary duties, even if such actions might otherwise benefit our stockholders.

We do not intend to pay cash dividends on our capital stock in the foreseeable future.

We have never declared or paid any dividends on our common stock and do not anticipate paying any dividends in

the foreseeable future. Any payment of cash dividends in the future would depend on our financial condition, contractual
restrictions, solvency tests imposed by applicable corporate laws, results of operations, anticipated cash requirements and
other factors and will be at the discretion of our Board of Directors. Our stockholders should not expect that we will ever
pay cash or other dividends on our outstanding capital stock.

GENERAL RISK FACTORS

Our business may be adversely affected by the effects of the COVID-19 pandemic.

Our business could be adversely affected by health epidemics in regions where we have business activities and

could cause significant disruption in the operations of third-party manufacturers (“CMOs” and contract research
organizations (“CROs”) upon whom we rely. For example, beginning in late 2019, the outbreak of a novel strain of virus
named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease
2019, or COVID-19, has evolved into a global pandemic. The coronavirus has spread to most regions of the world.

As a result of the coronavirus pandemic, we may experience disruptions that could severely impact our business

and clinical trials, including:

● We believe that the COVID-19 pandemic has had, and may continue to have, an adverse impact on demand
for our products due to government-imposed quarantines, stay-at-home orders, travel restrictions, mandated
business closings and other public health safety measures which may result in patients not visiting their
healthcare providers or their pharmacies to get their prescriptions filled. Initially, we suspended in-person

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interactions by our sales and marketing personnel in healthcare settings. We engaged with these customers
remotely, via webinar programs and virtual meetings, as we sought to continue to support healthcare
professionals and patient care. As parts of the country reopened, our sales and marketing personnel reengaged
with healthcare professionals, sometimes in limited number of in-person interactions. Remote interactions
may be less effective than in-person interactions.

● We currently rely on third-party suppliers and CMOs as well as to perform third-party logistics functions. If
any such third party in our supply chain for materials is adversely impacted by restrictions resulting from the
COVID-19 pandemic, including staffing shortages, production shutdowns and disruptions in delivery systems,
our supply chain may be disrupted, limiting our ability to manufacture commercial quantities of our products.

● In March 2020, we closed our offices and manufacturing facilities, and requested that most of our personnel,

including our administrative employees, work remotely, restricted on-site staff to only those personnel who
must perform essential activities that must be completed on-site and limited the number of staff in any given
location. We reopened our manufacturing in mid-June and our offices reponed on a voluntary basis for those
personnel who prefer to work from the office. Our increased reliance on personnel working remotely may
negatively impact productivity, or disrupt, delay or otherwise adversely impact our business.

● We may in the future conduct clinical trials for product candidates in geographies which are affected by the
coronavirus pandemic. Potential impacts of the coronavirus pandemic on our potential clinical trials may
include disruptions or delays in site initiations, patient enrollment and recruitment, standard study monitoring
practices, shipment of samples and availability of clinical trial materials, data analysis and reporting of results
due to changes in policies at various clinical sites or in federal, state, local or foreign laws, rules and
regulations. Other impacts could include quarantines or other travel restrictions. Interruption or delays in the
operations of the FDA could also impair our ability to discuss clinical programs. It is unknown how long these
pauses or disruptions could continue.

● Health regulatory agencies globally may experience disruptions in their operations as a result of the

coronavirus pandemic. The FDA and comparable foreign regulatory agencies may have slower response times
or be under-resourced to continue to monitor our clinical trials and, as a result, review, inspection, and other
timelines may be materially delayed. It is unknown how long these disruptions could continue, were they to
occur.

● The trading prices for our common shares and other biopharmaceutical companies have been highly volatile as a

result of the coronavirus pandemic. As a result, we may face difficulties raising further capital through sales of our
common shares or convertible debt or such sales may be on unfavorable terms. In addition, a recession, depression
or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely
affect our business and the value of our common shares.

The coronavirus pandemic continues to rapidly evolve. The ultimate impact of the coronavirus pandemic on our

business operations is highly uncertain and subject to change and will depend on future developments, which cannot be
accurately predicted, including the duration of the pandemic, the ultimate geographic spread of the disease, additional or
modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the
actions taken to contain coronavirus or address its impact in the short and long term. We do not yet know the full extent of
potential delays or impact on our business, our clinical trials, healthcare systems or the global economy.

Our business and operations would suffer in the event of system failures or security breaches.

We utilize information technology, or IT, systems and networks to process, transmit and store electronic

information in connection with our business activities. As use of digital technologies has increased, cyber incidents,
including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in
frequency and sophistication. These threats pose a risk to the security of our systems and networks and the

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confidentiality, availability and integrity of our data. There can be no assurance that we will be successful in preventing
cyber attacks or successfully mitigating their effects.

Despite the implementation of security measures, our internal computer systems and those of our contractors and

consultants are vulnerable to damage from such cyber attacks, including computer viruses, unauthorized access, ransomware
attacks, phishing expeditions, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event
could cause interruption of our operations. For example, the loss of data from completed clinical trials for our product
candidates could result in delays in our regulatory approval efforts and significantly increase our costs. To the extent that
any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential
or proprietary information, we could suffer reputational harm or face litigation or adverse regulatory action and the
development of our product candidates could be delayed.

Legislative or regulatory reform of the health care system in the United States may adversely impact our business,
operations or financial results.

Our industry is highly regulated and changes in law may adversely impact our business, operations or financial
results. In particular, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act of 2010 (collectively the “Affordable Care Act” or “ACA”), was signed into law. This
legislation changes the current system of healthcare insurance and benefits intended to broaden coverage and control costs.
The law also contains provisions that will affect companies in the pharmaceutical industry and other healthcare related
industries by imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies
include the following:

● mandatory rebates for drugs sold into the Medicaid program have been increased, and the rebate requirement

has been extended to drugs used in risk based Medicaid managed care plans.

● the 340B Drug Pricing Program under the Public Health Service Act has been extended to require mandatory

discounts for drug products sold to certain critical access hospitals, cancer hospitals and other covered entities.

● pharmaceutical companies are required to offer discounts on branded drugs to patients who fall within the

Medicare Part D coverage gap, commonly referred to as the “Donut Hole."

● pharmaceutical companies are required to pay an annual non tax deductible fee to the federal government

based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare
programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense.

Despite initiatives to invalidate the ACA, the U.S. Supreme Court has upheld certain key aspects of the legislation,

including a tax-based shared responsibility payment imposed on certain individuals who fail to maintain qualifying health
coverage for all or part of a year, which is commonly referred to as the “individual mandate.” However, as a result of tax reform
legislation passed in December 2017, the individual mandate was eliminated effective January 1, 2019. On December 14, 2018, a
U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and
inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the
remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling would
have no immediate effect, and on December 30, 2018, the same judge issued an order staying the judgment pending appeal. On
December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, and remanded the
case to the lower court to reconsider its earlier invalidation of the full ACA. Pending review, it is unclear what effect the latest
ruling will have on the status of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and
uncertain results. We will continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.

In addition, since January 2017, President Trump has signed two Executive Orders designed to delay the implementation

of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance

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mandated by the ACA. Further, the Trump administration has concluded that cost sharing reduction, or CSR, payments to
insurance companies required under the ACA have not received necessary appropriations from Congress and announced that it
would discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to
increase premiums on certain policies issued by qualified health plans under the ACA. Several state Attorneys General filed suit to
stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in
California on October 25, 2017 and again on July 18, 2018. Furthermore, on June 14, 2018, the U.S. Court of Appeals for the
Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to
third party payors who argued were owed to them. On December 10, 2019, the U.S. Supreme Court heard arguments in Moda
Health Plan, Inc. v. United States, which will determine whether the government must make risk corridor payments. On April 27,
2020, the U.S. Supreme Court decided that ACA requires the federal government to compensate insurers for significant losses their
health plans incurred during the first three years of the Act’s marketplaces, and that insurers can sue for nonpayment in the Court
of Federal Claims. The effects of a potential future gap in reimbursement on third party payors, the viability of the ACA
marketplace, providers, and potentially our business, are not yet known. In December 2018, CMS published a final rule permitting
further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk
adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine
this risk adjustment.

Moreover, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018

that delayed the implementation of certain ACA-mandated fees, including the so called “Cadillac” tax on certain high cost
employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the
medical device excise tax on non-exempt medical devices; however, on December 20, 2019, President Trump signed into law the
Further Consolidated Appropriations Act (H.R. 1865), which repeals the Cadillac tax, the health insurance provider tax, and the
medical device excise tax. It is impossible to determine whether similar taxes could be instated in the future.

In 2021, Congress may consider other legislation to repeal and replace elements of the ACA, and litigation and

legislation over the ACA are likely to continue, with unpredictable and uncertain results. Changes to the ACA or other
existing health care regulations could significantly impact our business and the pharmaceutical industry. Although it is too
early to determine the effect of legal challenges, pending legislation, and executive action on the ACA, the law appears
likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our
regulatory burdens and operating costs.

Additionally, other federal health reform measures have been proposed and adopted in the United States since the

ACA was enacted:

● the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.
A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at
least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the
legislation’s automatic reduction to several government programs. These changes included aggregate
reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013
and, due to subsequent legislative amendments, will remain in effect through 2027 unless additional
Congressional action is taken.

● the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several
providers, and increased the statute of limitations period for the government to recover overpayments to
providers from three to five years.

The Right to Try Act of 2018 provides a federal framework for certain patients to access certain investigational new drug

products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain
circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under
the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible
patients as a result of the Right to Try Act, but the manufacturer should develop an internal policy and respond to patient requests
according to that policy.

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Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their
marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other
things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs,
and reform government program reimbursement methodologies for products. In addition, the United States government, state
legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-
controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to
limit the growth of government paid health care costs. Individual states in the United States have become increasingly aggressive
in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including
price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

At the federal level, the Trump Administration’s budget proposal for fiscal year 2020 contained further drug price control

measures that could be enacted during the 2020 budget process or in other future legislation, including, for example, measures to
permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug
prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump
Administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained additional
proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize
manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS
has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately
implementing others under its existing authority. Additionally, in December 2019, the FDA issued a draft guidance document
outlining a potential pathway for manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug
that was originally intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The
regulatory and market implications of the draft guidance, if finalized, is unknown at this time. Proponents of drug reimportation
may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations
allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and
adversely affect our future revenues and prospects for profitability. Further, Congress and the Trump Administration have each
indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on
September 25, 2019, the Senate Finance Committee introduced the Prescription Drug Pricing Reduction Act of 2019, a bill
intended to reduce Medicare and Medicaid prescription drug prices. The proposed legislation would restructure the Part D benefit,
modify payment methodologies for certain drugs, and impose an inflation cap on drug price increases. An even more restrictive
bill, the Lower Drug Costs Now Act of 2019, was introduced in the House of Representatives on September 19, 2019, and would
require the Department of Health and Human Services (HHS) to directly negotiate drug prices with manufacturers. The Lower
Drugs Costs Now Act of 2019 has passed out of the House and was delivered to the Senate on December 16, 2019. However, it is
unclear whether either of these bills will make it through both chambers and be signed into law, and if either is enacted, what effect
it would have on our business. At the state level, legislatures have become increasingly active in passing legislation and
implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, have been designed to encourage importation from other countries and bulk purchasing. We
anticipate pricing scrutiny will continue and escalate, including on a global basis. As a result, our business and reputation may be
harmed, our stock price may be adversely impacted and experience periods of volatility, and our results of operations may be
adversely impacted.

CMS may also develop new payment and delivery models, such as bundled payment models. CMS finalized regulations

that give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may
have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.
Additionally, CMS finalized a rule that amends the Medicare Advantage and Medicare Part D prescription drug benefit regulations
to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. In May 2019,
CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part
B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. CMS is still
considering proposed changes to the definition of “negotiated prices” in the regulations. It is unclear what effect such changes will
have on our business and ability to receive adequate reimbursement for our products.

In addition, in September 2007, the Food and Drug Administration Amendments Act of 2007 was enacted giving the

FDA enhanced post-marketing authority including the authority to require post-marketing studies and clinical trials, labeling
changes based on new safety information and compliance with REMS approved by the FDA. The FDA’s exercise of this authority
could result in delays or increased costs during product development, clinical trials and regulatory review, increased

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costs to ensure compliance with post-approval regulatory requirements and potential restrictions on the sale and/or distribution of
approved products.

Moreover, we cannot predict what healthcare reform initiatives may be adopted in the future. Further federal and state
legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on
drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates that we may successfully
develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop
product candidates.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease various properties, including office buildings, manufacturing, research and development facilities and
sales offices within the U.S. We continuously review and evaluate our facilities as a part of our strategy to optimize our
business operations. The following table sets forth a list of our properties as of June 30, 2021.

Location
Englewood, CO
Grand Prairie, TX
Carlsbad, CA

Item 3. Legal Proceedings

Leased/Owned
 Leased
Leased
 Leased

Purpose

Corporate headquarters
Administrative offices, Laboratory and Manufacturing facilities
Warehouse

Harris and Walker County. On March 7, 2018 and April 18, 2019, Neos received citations advising Neos that the
County of Harris Texas (“Harris County”) and the County of Walker Texas (“Walker County”) filed lawsuits on December
13, 2017 and January 11, 2019, respectively, against Neos and various other alleged manufacturers, promoters, sellers and
distributors of opioid pharmaceutical products. Through these lawsuits, each of Harris County and Walker County seek to
recoup as damages some of the expenses they allegedly have incurred to combat opioid use and addiction. Each of Harris
County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’ fees.

Merger Action. Between January 27, 2021 and February 25, 2021, nine lawsuits were filed related to the Neos

Merger; on January 27, 2021, Wang v. Neos Therapeutics, Inc., et al., 1:21-cv-00095, was filed by purported Neos
stockholder Elaine Wang against Neos and its directors in the U.S. District Court for the District of Delaware; on January
29, 2021, Dupree v. Neos Therapeutics, Inc., et al., 1:121-cv-00124, was filed by purported Neos stockholder Michael
Dupree against Neos, its directors, the Merger Sub, and Aytu in the U.S. District Court for the District of Delaware; on
February 1, 2021, London v. Neos Therapeutics, Inc., et al., 1:21-cv-00874, was filed by purported Neos stockholder Jack
London against Neos and its directors in the U.S. District Court for the Southern District of New York; on February 3, 2021,
Kates v. Neos Therapeutics, Inc., et al., 1:21-cv-00953, was filed by purported Neos stockholder Erin Kates against Neos
and its directors in the U.S. District Court for the Southern District of New York; on February 3, 2021, Smith v. Neos
Therapeutics, Inc., et al., 1:21-cv-00940, was filed by purported Neos stockholder Hayley Smith against Neos, its directors,
the Merger Sub, and Aytu in the U.S. District Court for the Southern District of New York; on February 9, 2021, Tkatch v.
Neos Therapeutics, Inc., et al., 1:21-cv-01187, was filed by purported Neos stockholder Natalia Tkatch against Neos and its
directors, the Merger Sub, and Aytu in the U.S. District Court for the Southern District of New York; on February 16, 2021,
Bushansky v. Neos Therapeutics, Inc., et al., 1:121-cv-00208, was filed by purported Neos stockholder Stephen Bushansky
against Neos and its directors in the U.S. District Court for the District of Delaware; on February 16, 2021, Wheeler v. Neos
Therapeutics, Inc., et al., 1:121-cv-00213, was filed by purported Neos stockholder Jacob Wheeler against Neos and its
directors in the U.S. District Court for the District of Delaware; on February 25, 2021, Hein v. Neos Therapeutics, Inc., et
al., 1:121-cv-00287, was filed by purported Neos stockholder Matthew Hein against Neos and its directors in the U.S.
District Court for the District of Delaware. All of the cases have subsequently been dismissed and the merger actions are
considered to be closed.

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Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Data

Our common stock has been listed on the NASDAQ Capital Market under the symbol “AYTU” since October 20,
2017. The following table sets forth the range of high and low sales prices on the NASDAQ Capital Market, as applicable,
for the periods shown.

Fiscal Year ended June 30, 2020

First Quarter (ended September 30, 2019)
Second Quarter (ended December 31, 2019)
Third Quarter (ended March 31, 2020)
Fourth Quarter (ended June 30, 2020)

Fiscal Year ended June 30, 2021

First Quarter (ended September 30, 2020)
Second Quarter (ended December 31, 2020)
Third Quarter (ended March 31, 2021)
Fourth Quarter (ended June 30, 2021)

High

Low

$
$
$
$

$
$
$
$

 1.95
 1.35
 2.05
 2.02

High

 15.50
 14.00
 11.76
 7.71

$
$
$
$

$
$
$
$

 1.21
 0.67
 0.35
 1.19

Low

 9.00
 5.86
 5.89
 4.73

On December 8, 2020, we effected a reverse stock split in which each common stockholder received one share of

common stock for every 10 shares held (herein referred to collectively as the “Reverse Stock Split”). All share and per share
amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split.

On September 10, 2021, the closing price as reported on the NASDAQ of our common stock was $3.29. As of

September 10, 2021, there were 1,092 holders of record of our common stock.

Equity Compensation Plan Information

In June 2015, our shareholders approved the adoption of a stock and option award plan (the “Aytu 2015 Plan”). At
the special meeting of stockholders on July 26, 2017, our stockholders voted to increase the plan to 3.0 million shares. The
Aytu 2015 Plan permits grants of equity awards to employees, directors and consultants. At the Special meeting of the
stockholder on January 24, 2020, our Stockholders voted to increase the plan to 5.0 million shares.

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The following table displays equity compensation plan information as of June 30, 2021 relating to securities

reserved for future issuance upon exercise.

Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders(2)

Plan Category

Total

Number of 
Securities to  
 be Issued 
upon 
Exercise of
 Outstanding  
 Options, 
Warrants 
and Rights 
(Column A)
 2,062,290
 81,042
 2,143,332

$
$
$

     Number of 
Securities 
Remaining 
Available for 
Issuance under 
Equity 
Compensation 
Plans 
(Column C - 
Excluding 
Securities 
Reflected in 
(Column (A))
 2,937,710
 1,271,657
 4,209,367

Weighted-
Average
 Exercise 
Price of 
Outstanding
Options, 
Warrants
 and Rights 
(Column B)(1)

 23.54  
 6.36
 14.52

(1)

It reflects the weighted-average exercise prices of options outstanding. Restricted stocks and restricted stock units
(RSUs) do not have exercise prices (see Note 13 - Equity Incentive Plan).

(2) It reflects the equity plan we assumed pursuant to the Neos Merger and restricted stock previously issued outside of the

Aytu 2015 Plan (see Note 13 - Equity Incentive Plan).

Dividend Policy

We have never declared or paid any dividends on our capital stock. We currently intend to retain all available funds
and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any
cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our
board of directors. Our ability to pay dividends on our common stock is limited by restrictions under the terms of our credit
facility with Deerfield Private Design Fund III, L.P. and Deerfield Special Situations Fund, L.P. In addition, any future
indebtedness that we may incur could preclude us from paying dividends. Investors should not purchase our common stock
with the expectation of receiving cash dividends.

Item 6.   Reserved

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together

with our financial statements and the related notes appearing elsewhere in this Annual Report. Some of the information
contained in this discussion and analysis, including information with respect to our plans and strategy for our business and
related financing strategy, includes forward-looking statements that involve risks and uncertainties. You should read the
“Risk Factors” section of this Form 10-K for a discussion of important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking statements contained in the following discussion
and analysis.

Objective

The purpose of the Management Discussion and Analysis (the “MD&A”) is to present information that
management believes is relevant to an assessment and understanding of our results of operations and cash flows for the
fiscal year ended June 30, 2021 and our financial condition as of June 30, 2021. The MD&A is provided as a supplement to,
and should be read in conjunction with, our financial statements and notes. The MD&A is organized in the following
sections:

● Overview

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● Significant Developments. We discuss (i) impact of COVID-19 on our operations and (ii) material

acquisitions and divestitures.

● Liquidity and Capital Resources. We discuss (i) sources of our liquidity, (ii) cash flows, (iii) obligations due

on our debt obligations and (iv) expected payments under contractual obligations, commitments and
contingencies.

● Results of Operations. We discuss year-over-year changes in our statements of operations line items,

including the major drivers of these changes for fiscal year 2021, as compared with 2020.

● Critical Accounting Estimates. We discuss the critical accounting policies and estimates that require

significant management judgment.

Overview

We are commercial-stage specialty pharmaceutical company focused on commercializing novel therapeutics and

consumer healthcare products. We operate through two business segments: Aytu BioPharma segment, consisting of various
prescription pharmaceutical products sold through third party wholesalers, and Aytu Consumer health segment, which
consists of various consumer health products sold directly to consumers. We generate revenue by selling our products
through third party intermediaries in our marketing channels as well as directly to our customers. We develop and
manufacture our ADHD products at our manufacturing facilities, and use third party manufacturers for our other
prescription and consumer health products.

We have incurred significant losses in each year since inception. Our net losses were $58.3 million and $13.6

million for the years ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and 2020, we had an accumulated
deficit of approximately $178.3 million and $120.0 million, respectively. We expect to continue to incur significant
expenses in connection with our ongoing activities, including the successful integration of our acquisitions.

Significant Developments

Below are significant developments in our business and other factors affecting our business during the fiscal year

2021.

COVID-19

The ongoing COVID-19 pandemic continues to impact the global economy and create economic uncertainties

during fiscal years 2020 and 2021. The federal government and states imposed restrictions on travel and business operations
and placed limitations on the size of public and private gatherings. However, beginning the third quarter of fiscal 2021, with
the introduction of vaccines under emergency use authorizations, these restriction began to wind down and business
operating environments have improved.

We believe COVID-19 has negatively impacted the overall market for prescription products. The extent to which
COVID-19 continues to negatively impact our business in the future will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge
concerning the severity of the new variants of coronavirus, the actions taken to contain the coronavirus or treat its impact,
and the continued impact of each of these items on the economies and financial markets in the United States and abroad.
While states and jurisdictions have rollbacked stay-at-home and quarantine orders and reopened in phases, it is difficult to
predict what the lasting impact of the pandemic will be, and if we or any of the third parties with whom we engage were to
experience additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner
and on the timelines presently planned could have a material adverse impact on our business, results of operation and
financial condition. In addition, a recurrence or impact from new strains of COVID-19 cases could cause other widespread
or more severe impacts depending on where infection rates are highest. We will continue to monitor developments as we
deal with the disruptions and uncertainties relating to the COVID-19 pandemic.

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Acquisitions and Divestitures

On April 12, 2021, we closed on an asset purchase agreement with Rumpus Therapeutics, LLC through an asset

purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus
VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”), pursuant to which we acquired certain rights and other assets,
including key commercial global licenses, relating primarily to the pediatric-onset rare disease development asset
enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied for the treatment of
vascular Ehlers-Danlos Syndrome or vEDS. This asset was acquired for $1.5 million in cash, payment of aggregated fees of
$0.6 million and, upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out
payments, which are payable in cash or shares of our common stock, generally at our option.

On March 31, 2021, we terminated the Natesto license agreement previously entered into on July 1, 2016 as
amended on July 29, 2019. With the acquisition of Neos Therapeutics, Inc. (“Neos”), we believe that this divestiture will not
have significant impact on our financials, and will also allow us to focus on and further develop our prescription
pharmaceutical products (“Rx Portfolio”).

On March 19, 2021, we acquired Neos (the “Neos Merger”), a commercial-stage pharmaceutical company
developing, manufacturing and commercializing Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER in the U.S. using
Neos' internal commercial organization. These commercial products are extended-release (“XR”) medications in patient-
friendly, orally disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize our microparticle modified-release
drug delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for these
three products. In addition, Neos manufactures and sells generic Tussionex, an extended-release oral suspension for the
treatment of cough and upper respiratory symptoms of a cold.

We incurred restructuring costs as a result of our merger and acquisitions. These costs are primarily related to

severance payments to employees affected by the change in business structure. During the year ended June 30, 2021, we
incurred $4.9 million in severance cost, all of which was paid during the year ended June 30, 2021.

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Results of Operations

Comparison of the years ended June 30, 2021 and 2020.

Product revenue, net
Cost of sales
Gross profit

Operating expenses

Research and development
Advertising and direct marketing
Other selling and marketing
General and administrative
Acquisition related costs
Restructuring costs
Impairment of intangible assets
Amortization of intangible assets

Total operating expenses
Loss from operations
Other (expense) income
Other (expense), net
Gain / (Loss) from contingent consideration
 Gain (Loss) on extinguishment of debt
Gain from warrant derivative liability

Total other (expense) income

Loss before income tax
Income tax expense
Net loss

Year Ended June 30, 
2020
2021

     Change

     Change

$  65,632
 36,432
 29,200

(In thousands)
$  27,632
 8,281
 19,351

$  38,000  
 28,151
 9,849

 138 %
 340 %
 50.90 %

 5,623
 20,568
 9,740
 25,500
 2,919
 4,886
 12,825
 6,009
 88,070
   (58,870)

 1,722
 6,396
 5,007
 19,657
 2,348
 667
 195
 4,490
 40,482
   (21,131)

 3,901  
 14,172  
 4,733
 5,843
 571
 4,219
 12,630  
 1,519  
 47,588  
   (37,739) 

 (2,606)
 10,430
 (316)
 2
 7,510
   (13,621)

 (2,050)
 4,459
 (1,569)
 —
 840
   (58,030)
 259

 556
 (5,971) 
 (1,253)
 (2) 
 (6,670) 
   (44,409) 
 259  
$  (58,289) $  (13,621) $  (44,668) 

 —  

 227 %
 222 %
 95 %
 30 %
 24 %
 633 %
 6,477 %
 34 %
 118 %
 179 %

 (21)%
 (57)%
 397 %
 (100)%
 (89)%
 326 %
 —
 328 %

Product revenue. Total net product revenue was $65.6 million during the year ended June 30, 2021, an increase of

approximately $38.0 million, or 138%, compared to $27.6 million during the year ended June 30, 2020. The increase was
primarily driven by the full year contributions from our fiscal year 2020 acquisitions and the partial year revenue generated
from the ADHD product portfolio of Neos, which was acquired on March 19, 2021, as well as additional revenues from
COVID-19 test kit sales. Due to our entry into a termination and transition agreement with Acerus Pharmaceuticals
Corporation, on March 31, 2021, terminating the License and Supply Agreement related to Natesto, we will no longer
recognize revenue related to Natesto as of April 1, 2021.

Cost of sales. Total cost of sales was $36.4 million during the year ended June 30, 2021, an increase of $28.1

million, or 340%, compared to $8.3 million during the year ended June 30, 2020. The increase was primarily driven by the
full year operations of our fiscal year 2020 acquisitions and the partial year costs incurred for the production and sale of
ADHD product portfolio of Neos, which was acquired on March 19, 2021. In addition, we recognized approximately $7.3
million in write-downs for slow moving inventory during the year ended June 30, 2021. Neos manufactures the ADHD
products at its Grand Prairie, Texas facilities, and as such, allocates a significant portion of its intangible assets amortization
and fixed assets depreciation into cost of sales.

Research and development. Total research and development expense was $5.6 million during the year ended June
30, 2021, an increase of $3.9 million, or 192%, compared to $1.7 million during the year ended June 30, 2020. The increase
was due primarily to $2.9 million in costs related to the acquisition of in-process research and development that we
determined to have no alternative future use at the time of purchase and was expensed as incurred, and costs associated with
our Healight Platform license and initial research and development costs, as well as the acquisition of

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Neos on March 19, 2021, which incurs costs related to product development and FDA-required post-marketing clinical
trials.

Advertising and direct marketing. Advertising and direct marketing expenses include direct-to-consumer

marketing, advertising, sales and customer support and processing fees related to our consumer health segment. Total
advertising and direct marketing expense was $20.6 million for the year ended June 30, 2021, an increase of $14.2 million,
or 222%, compared to $6.4 million during the year ended June 30, 2020. The increase was primarily driven by the inclusion
of full year operations of the consumer health segment, which was acquired on February 14, 2020.

Other selling and marketing. Total other selling and marketing expense was $9.7 million during the year ended

June 30, 2021, an increase of $4.7 million, or 95%, compared to $5.0 million during the year ended June 30, 2020. The
increase was primarily driven by the partial year commercialization of the ADHD product portfolio of Neos, which was
acquired on March 19, 2021.

General and administrative. Total general and administrative expense was $25.5 million during the year ended
June 30, 2021, an increase of $5.8 million, or 30%, compared to $19.7 million during the year ended June 30, 2020. The
increase was primarily driven by the full year operations of our fiscal year 2020 acquisitions and the partial year expenses of
Neos, which was acquired on March 19, 2021.

Acquisition related costs. Acquisition related costs was $2.9 million during the year ended June 30, 2021, an
increase of $0.6 million, or 24%, compared to $2.3 million during the year ended June 30, 2020. The increase was due
primarily to the Neos Merger on March 19, 2021. Such costs include legal fees, due diligence expenses and financial
advisory fees.

Restructuring costs. Restructuring costs was $4.9 million during the year ended June 30, 2021, an increase of $4.2
million, compared to $0.7 million during the year ended June 30, 2020. The increase was due primarily to the Neos Merger
on March 19, 2021. Such costs primarily consisted of severance payments for terminated employees.

Impairment of intangible assets. Total impairment expense of intangible assets was $12.8 million during the year

ended June 30, 2021, and increase of $12.6 million, compared to $0.2 million for the year ended June 30, 2020. The
increase was due primarily to the $8.5 million write-off of the licensed intangible asset related to Tuzistra as a result of the
impact of COVID-19 and other factors negatively impacting product sales, and $4.3 million write-off of licensed intangible
asset related to the March 30, 2021 Natesto divestiture.

Amortization of intangible assets. Total amortization expense of intangible assets was $6.0 million during the year

ended June 30, 2021, an increase of $1.5 million, or 34%, compared to $4.5 million for the year ended June 30, 2020. The
increase was due primarily to the full year amortization of intangible assets related to our fiscal year 2020 acquisitions and
the partial year expense for Neos, which was acquired on March 19, 2021.

Other (expense) income, net. Total other (expense) income, net during the year ended June 30, 2021 was expense

of approximately $2.1 million, a decrease of $0.5 million, or 21%, compared to other expense of $2.6 million during the
year ended June 30, 2020. The decrease was primarily due to an increase in other income of $0.8 million from partial
proceeds from the Natesto divestiture, partially offset by an increase in interest expense from the increase in debt as a result
of the Neos Merger on March 19, 2021.

Gain (Loss) from contingent consideration. Gain from contingent considerations during the year ended June 30,
2021 was $4.5 million, a decrease of $5.9 million, or 57%, compared to $10.4 million during the year ended June 30, 2020.
Of the $4.5 million gain during the year ended June 30, 2021, $1.3 million gain was attributable to change in change in the
fair value of the ZolpiMist and Tuzistra contingent consideration liabilities and $3.2 million gain was attributable to change
in fair value of the contingent value rights ("CVR's") liability related to the Innovus Merger (see Note 10 – Fair Value
Considerations).

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Loss on debt extinguishment. During the year ended June 30, 2021, we recognized $1.3 million loss from

modification of our obligations under Fixed Payment Arrangement and $0.3 million loss from conversion of outstanding
debt to our shares of common stock.

Income tax expense. Our provision for income taxes during the year ended June 30, 2021 was $0.3 million at

effective tax rate of 0.45%, primarily comprised of deferred taxes.

Liquidity and Capital Resources

Sources of Liquidity

We finance our operations through a combination of public offerings of our common stock and warrants,

borrowings under our line of credit facility and cash generated from operations.

In June 2020, we initiated an at-the-market offering program ("ATM"), which allow us to sell and issue shares of

our common stock from time-to-time. Since initiated in June 2020 through June 30, 2021, we issued a total of 3,093,539
shares of common stock for aggregate proceeds of $23.1 million before estimated offering costs of $2.6 million.

We entered into three separate registered direct stock offerings on March 10, 2020, March 12, 2020 and March 19,

2020 (the “March Offerings”) in which we issued a combination of common stock and warrants. In July 2020, we issued
92,302 warrants to purchase 92,302 shares of our common stock with a weighted-average exercise price of $15.99 to an
investment bank. The warrants have a term of one year from the issuance date. These warrants had at issuance a fair value
of approximately $0.4 million and were valued using a Black-Scholes model.

In December 2020, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC (“Wainwright”)

(as amended and restated, the “Underwriting Agreement”), pursuant to which the underwriter exercised its over-allotment
option in full and purchased 4,791,667 shares of our common stock for total proceeds of $28.8 million before estimated
offering costs of $2.6 million. Effective June 2, 2021, we terminated the Underwriting Agreement with Wainwright, and
pursuant to such termination, there will be no future sales of our common stock under the agreement.

On June 2, 2021, we terminated our “at-the-market” sales agreement with Jefferies LLC. On June 4, 2021, we

entered into a Controlled Equity OfferingSM Sales Agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald &
Co. (“Cantor”), pursuant to which we agreed to sell up to $30.0 million of our common stock from time to time in “at-the-
market” offerings.

In October 2019, our Neos subsidiary entered into a senior secured credit agreement with Encina Business Credit,

LLC (“Encina”) as agent for the lenders (the “Loan Agreement”). Under the Loan Agreement, Encina will extend up to
$25.0 million in secured revolving loans to us (the “Revolving Loans”), of which up to $2.5 million may be available for
short-term swingline loans, against 85% of eligible accounts receivable (see Note 18).

Cash Flows

The following table sets forth the primary sources and uses of cash for the periods indicated:

Year Ended June 30, 
2020
2021
(In thousands)

Increase
(Decrease)

Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities

100

$  (25,964) $  (28,374) $
$  (2,782) $
 (5,656) $
$  30,314

$  71,069

 2,410
 2,874
$  (40,755)

    
    
    
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Net Cash Used in Operating Activities

Net cash used in operating activities during these periods primarily reflected our net losses, partially offset by

changes in working capital and non-cash charges including inventory write-down, changes in fair values of various
liabilities, stock-based compensation expense, depreciation, amortization and accretion and other charges.

During fiscal 2021, net operating cash outflows totaled $26.0 million. The use of cash was approximately $32.3

million less than the net loss due primarily to non-cash charges of depreciation, amortization and accretion, impairment of
intangible assets, stock-based compensation, inventory write-down and loss on debt extinguishment. These charges were
offset by gains from change in fair values of contingent consideration and contingent value rights. In addition, our use of
cash decreased due to changes in working capital including decreases in accounts receivable and inventory, offset by a
decrease in accounts payable.

During fiscal 2020, net operating cash outflows totaled $28.4 million. The use of cash was approximately $14.8
million greater than the net loss due primarily to non-cash gains from change in fair value of contingent consideration and
derecognition of contingent consideration. In addition, our use of cash increased due to changes in working capital including
increases in accounts receivable, inventory, prepaid and other assets. These charges were offset by depreciation,
amortization and accretion and an increase in accrued liabilities and accrued compensation.

Net Cash Used in Investing Activities

Net cash used in investing activities is generally related to our merger and acquisitions as well as purchase of assets

to support our operations.

Net cash used in investing activities of $2.8 million during the year ended June 30, 2021 was primarily due to

$15.5 million principally for the paydown of debt of Neos as part of the Neos Merger, $2.3 million for the Rumpus asset
acquisition and $0.7 million payment of contingent considerations, partially offset by $15.7 million cash acquired due to the
Neos Merger.

Net cash used in investing activities of $5.7 million during the year ended June 30, 2020 was primarily due to $1.4

million cash paid for the Innovus merger, $4.5 million for the acquisition of the Pediatric Portfolio from Cerecor, and $0.2
million payment of contingent consideration, partially offset by $0.4 million cash acquired due to the Innovus merger.

Net Cash from Financing Activities

Net cash provided by financing activities of $30.3 million during the year ended June 30, 2021 was primarily from
$28.8 million gross proceeds from public offering of our shares in December 2020, offset by $2.6 million in related offering
costs and $16.3 million gross proceeds from issuance of our common stock under the ATM, offset by $2.3 million in related
offering costs. These increases were partially offset by $6.1 million in payments of fixed payment arrangements, $2.7
million paydown on the revolving loan and $1.0 million repayment of term loans.

Net cash provided by financing activities of $71.1 million during the year ended June 30, 2020. This was primarily
related to the (i) October 2019 Offering for gross proceeds of $10.0 million, offset by the offering cost of $0.7 million which
was paid in cash; (ii) $49.0 million raised in the March 2020 Offerings, offset by offering costs of approximately $4.5
million, (iii) $27.0 million raised as the result of warrant exercises in March 2020, and (iv) gross proceeds of $6.8 million
from the at-the-market offering program in June 2020, offset by offering costs of $0.2 million.

Capital Resources

We have obligations related to our loan and credit facilities, contingent considerations related to our acquisitions,

milestone payments and purchase commitments.

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Loan and Credit

Upon closing of the Neos Merger, we indirectly assumed $15.6 million principal and $1.0 million in exit fee
obligation under Neos’ credit facility with Deerfield. As of June 30, 2021, outstanding under the Deerfield facility, including
the exit fee was $16.0 million. Interest is due quarterly at a rate of 12.95% per year. Payment on the Deerfield facility,
including the exit fee and any unpaid interest, is due on May 11, 2022. If all or any of the principal is prepaid or required to
be prepaid prior to December 31, 2021, then we shall pay, in addition to such prepayment and accrued interest thereon, a
prepayment premium equal to 6.25% of the amount of principal prepaid.

Our Neos subsidiary’s Loan Agreement with Encina, provide us with up to $25.0 million in Revolving Loans, of
which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The
Revolving Loans bear variable interest through maturity at the one-month London Interbank Offered Rate, plus an
applicable margin of 4.50%. In addition, we are required to pay an unused line fee of 0.50% of the average unused portion
of the maximum revolving facility amount during the immediately preceding month. Interest is payable monthly in arrears,
upon a prepayment of a loan and on the maturity date. The maturity date under the Loan Agreement is May 11, 2022.

We may permanently terminate the Loan Agreement by prepaying all outstanding principal amounts and accrued
interest at any time, subject to at least five (5) business days prior notice to the lender and the payment of a prepayment fee
equal to (i) 1.0% of the aggregate principal amount prepaid if such prepayment occurs after October 2, 2020 but on or
before October 2, 2021, and (ii) 0.5% of the aggregate principal amount prepaid if such prepayment occurs after October 2,
2021 but before May 11, 2022.

Contractual Obligations, Commitments and Contingencies

As a result of our acquisitions and licensing agreements, we are contractually and contingently obliged to pay,

when due, various fixed and milestone payments (see Note 16 – Commitments and Contingencies for additional
information).

Upon closing of the Pediatric Portfolio acquisition in October 2019, we assumed fixed payment obligations that

required us to make a payment of $4.1 million in the fiscal year 2022, $3.1 million in fiscal year 2023 and annual payments
of $2.1 million in each of the fiscal years 2024 and 2025. In addition, in fiscal year 2022, upon occurrence of certain events,
we may be required to pay approximately $3.0 million in milestone payments.

In February 2020, upon closing of our Innovus Merger, all of Innovus shares were converted to our common stock

and CVRs, which represents contingent additional consideration of up to $16.0 million payable to satisfy future
performance milestones. Depending on satisfaction of these conditions, we may be required to pay $2.0 million in fiscal
year 2022 and additional $5.0 million in each of the fiscal years 2023 and 2024.

Our Innovus subsidiary is also contractually obliged for inventory purchase commitments, for which we are

expected to pay approximately $0.7 million in July 2021 and $0.7 million in fiscal year 2022.

In February 2015, Innovus acquired Novalere, which included the rights associated with distributing FlutiCare. As

part of the Novalere acquisition, Innovus is obligated to make five payments of $0.5 million, between fiscal year 2026
through fiscal year 2033, when certain levels of FlutiCare sales are achieved.

In connection with our acquisition of the Rumpus assets, as discussed above under the section “Acquisitions and

Divestitures”, we are required to make a payment of $0.6 for an option license fee in April 2022.

Critical Accounting Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial

statements, which have been prepared in accordance with accounting principles generally accepted in the United States
(“U.S. GAAP”). The preparation of our financial statements requires us to make estimates and judgments

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that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities at the date
of the financial statements, as well as reported revenue and expenses during the reporting periods. On an ongoing basis, we
evaluate our estimates and judgments. We base our estimates on our historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual
results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to the notes to our audited financial

statements included elsewhere in this Annual Report on Form 10 K, we believe the following accounting policies to be
critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition

We generate revenue from product sales through our Aytu BioPharma segment and Aytu Consumer Health

Segment. We recognize revenue when all of the following criteria are satisfied: (i) identification of the promised goods or
services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including
whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on
variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) as each performance
obligation is individually satisfied.

Revenue from our Aytu BioPharma segment involves significant judgment and estimates of the net sales price,

including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler
(distributor) fees, wholesaler chargebacks and estimated rebates) to be incurred on the respective product sales, and we
recognize the estimated amount as revenue when control of the product is transferred to our customers (e.g., upon delivery).
Variable consideration is determined using either an expected value or a most likely amount method. The estimate of
variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration
will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the
context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently
resolved. Estimating variable consideration and the related constraint requires the use of significant management judgment
and other market data. We provide for prompt payment discounts, wholesaler fees and wholesaler chargebacks based on
customer contractual stipulations. We analyze recent product return history to determine a reliable return rate. Additionally,
management analyzes historical savings offers and rebate payments based on patient prescriptions and information obtained
from third party providers to determine these respective variable considerations.

Savings offers

We offer savings programs for our patients covered under commercial payor plans in which the cost of a
prescription to such patients is discounted. The amount of redeemed savings offers is recorded based on information from
third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a
gross to net sales adjustments at the time revenue is recognized. Historical trends of savings offers will be regularly
monitored, which may result in adjustments to such estimates in the future.

Prompt payment discounts

Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount

allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized.

Wholesale distribution fees

Wholesale distribution fees are based on definitive contractual agreements for the management of our products by
wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized.

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Rebates

The Rx Portfolio products are subject to commercial managed care and government managed Medicare and

Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal
and/or state governments. Calculations related to rebate accruals are estimated based on information from third-party
providers. Estimated rebates are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is
recognized. Historical trends of estimated rebates will be regularly monitored, which may result in adjustments to such
estimates in the future.

Returns

Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product
ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to
recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such
product starting six months prior to expiry date to twelve months post expiry date. Estimated returns are recorded as accrued
expenses and as a gross to net sales adjustments at the time revenue is recognized. We analyzed return data available from
sales since inception date to determine a reliable return rate.

Wholesaler chargeback

The Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is
discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the
discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to
us. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net sales
adjustment at the time revenue is recognized based on information provided by third parties.

Inventories

Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of cost or net

realizable value, with cost determined on a first-in, first-out basis. Until objective and persuasive evidence exists that
regulatory approval has been received and future economic benefit is probable, pre-launch inventories are expensed into
research and development. Post-FDA approval, manufacturing costs for the production of our products are being capitalized
into inventory. We periodically review the composition of our inventories in order to identify obsolete, slow-moving, excess
or otherwise unsaleable items. Unsaleable items will be written-down to net realizable value in the period identified.

Stock-based compensation expense

Stock-based compensation awards, including grants of stock options, restricted stock and restricted stock units, and

modifications to existing awards, are recognized in the statement of operations based on their fair values on the date of
grant. Stock option grants are valued on the grant date using the Black-Scholes option pricing model and compensation
costs are recognized ratably over the period of service using the graded method. Restricted stock and restricted stock unit
grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratable over
the requisite service period. Forfeitures are adjusted for as they occur.

We calculated the fair value of options using the Black Scholes option pricing model. Restricted stock and
restricted stock unit grants are valued based on the estimated grant date fair value of our common stock. The Black Scholes
option pricing model requires the input of subjective assumptions, including stock price volatility and the expected life of
stock options. The application of this valuation model involves assumptions that are highly subjective, judgmental and
sensitive in the determination of compensation cost. We have not paid and do not anticipate paying cash dividends.
Therefore, the expected dividend rate is assumed to be 0%. The expected stock price volatility for stock option awards is
based on our stock price volatility in the valuation model. The risk-free rate was based on the U.S. Treasury yield curve in
effect commensurate with the expected life assumption. The average expected life of stock options was determined
according to the “simplified method” as described in SAB Topic 110, which is the midpoint

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between the vesting date and the end of the contractual term. The risk-free interest rate was determined by reference to
implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date
of grant. Forfeitures are adjusted for as they occur.

There is a high degree of subjectivity involved when using option pricing models to estimate stock-based

compensation. There is currently no market-based mechanism or other practical application to verify the reliability and
accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to
actual values. Although the fair value of employee stock-based awards is determined using an option pricing model, such a
model value may not be indicative of the fair value that would be observed in a market transaction between a willing buyer
and willing seller. If factors change and we employ different assumptions when valuing our options, the compensation
expense that we record in the future may differ significantly from what we have historically reported.

Impairment of Long-lived Assets

We assess impairment of long-lived assets when events or changes in circumstances indicates that their carrying

value amount may not be recoverable. Long-lived assets consist of property and equipment, net and goodwill and other
intangible assets, net. Circumstances which could trigger a review include, but are not limited to: (i) significant decreases in
the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or
expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful
life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the
carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

Contingent considerations

We classify contingent consideration liabilities related to business acquisitions within Level 3 as factors used to

develop the estimated fair value are unobservable inputs that are not supported by market activity. We estimate the fair value
of contingent consideration liabilities based on projected payment dates, discount rates, probabilities of payment, and
projected revenues. Projected contingent payment amounts are discounted back to the current period using a discounted cash
flow methodology.

The fair value of the contingent value rights was based on a model in which each individual payout was deemed

either (a) more likely than not to be paid out or (b) less likely than not to be paid out. From there, each obligation was then
discounted at a 30% discount rate to reflect the overall risk to the contingent future payouts pursuant to the CVRs. This
value is then remeasured for future expected payout as well as the increase in fair value due to the time value of money.
These gains or losses, if any, are included as a component of operating cash flows.

Fixed payment arrangements are comprised of minimum product payment obligations relating to either make
whole payments or fixed minimum royalties arising from a business acquisition. The fixed payment arrangements were
recognized at their amortized cost basis using a market appropriate discount rate and are accreted up to their ultimate face
value over time. The liabilities related to fixed payment arrangements are not remeasured at each reporting period, unless
we determine the circumstances have changed such that the fair value of these fixed payment obligations would have
changed due to changes in company specific circumstances or interest rate environments.

Warrants

We account for liability classified warrants by recording the fair value of each instrument in its entirety and

recording the fair value of the warrant derivative liability. The fair value of liability classified derivative financial
instruments were calculated using a lattice valuation model. Equity classified warrants are valued using a Black-Scholes
model. Changes in the fair value of liability classified derivative financial instruments in subsequent periods were recorded
as derivative income or expense for the warrants and reported as a component of cash flows from operations.

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Item 7A.   Quantitative and Qualitative Disclosures about Market Risks

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide

information under this item.

Item 8.      Financial Statements and Supplementary Data

The financial statements required by this item are identified in Item (a)(1) of Part IV and begin at page F-1 of this

Annual Report on Form 10-K and are incorporated herein by reference.

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate “disclosure controls and procedures,” as

such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that
are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of our
disclosure controls and procedures as of June 30, 2021, our principal executive officer and principal financial officer
concluded that, as a result of the material weakness in our internal control over financial reporting as described below and in
Part I Item 1A. of the Annual Report on Form 10-K, our disclosure controls and procedures were not effective as of the end
of the period covered by this Report. Notwithstanding the material weakness, our management believes that the financial
statements included elsewhere in this report present fairly, in all material respects, our financial position, results of
operations, changes in stockholders’ equity (deficit) and cash flows in conformity with GAAP.

In connection with the preparation of our financial statements for the period ended June 30, 2021, we concluded

that we had a material weakness in internal control over financial reporting related to our analysis for the accounting of
goodwill and other intangibles and accounting for the impairment of long-lived assets. As a result, we have sought and
received technical guidance from a third-party provider. This deficiency did not result in a revision of any of our previously
issued financial statements. However, if not addressed, the deficiency could result in a material misstatement in the future.
In response, we have taken a number of steps, including incorporating the third-party provider review and expertise in our
analysis, and we believe that our controls are now designed properly and operating effectively.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting

(as such term is defined in Rules 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our
internal control over financial reporting as of June 30, 2021. In making this assessment, our management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013). Our management has concluded that, as of June 30, 2021, our internal control over financial reporting is
effective based on these criteria.

Plante Moran, PLLC, the independent registered public accounting firm that audited our financial statements

included in this Annual Report on Form 10-K, was not required to issue an attestation report on our internal control over
financial reporting.

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Changes in Internal Control over Financial Reporting

Other than the material weakness discussed above, there were no changes in our internal controls over financial
reporting, known to the Chief Executive Officer or the Chief Financial Officer that occurred during the period covered by
this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

The Company’s assessment over changes in our internal controls over financial reporting excluded those processes

or controls that exist at our Neos subsidiary, which we acquired from the March 19, 2021 Neos Merger. Neos’ last annual
report for the year ended December 31, 2020 has been audited without any qualifications. Since the merger, there has been
no significant change to its internal control over financial reporting.

Item 9B.     Other Information

None.

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Item 10.     Directors and Executive Officers, and Corporate Governance

PART III

The following table sets forth the names and ages of all of our directors and executive officers as of August 31,

2021. Our Board of Directors is currently comprised of five members, who are elected annually to serve for one year or until
their successor is duly elected and qualified, or until their earlier resignation or removal. We have two executive officers that
serve at the discretion of the Board of Directors and are appointed by the Board of Directors.

Name
Joshua R. Disbrow
Richard Eisenstadt
Michael E. Macaluso
Carl C. Dockery
John A. Donofrio, Jr.
Gary V. Cantrell

Age
46
62
69
58
53
66

     Position
  Chairman and Chief Executive Officer
  Chief Financial Officer, Secretary, and Treasurer
  Director
  Director
  Director
  Director

The following is a biographical summary of the experience of our executive officers and directors during the past
five years, and an indication of directorships held by the directors in other companies subject to the reporting requirements
under the federal securities law.

Joshua R. Disbrow – Chairman and Chief Executive Officer

Joshua R. Disbrow has been employed by us since April 16, 2015 and a member of our Board of Directors since

January 2016. Prior to the closing of the merger with Luoxis Diagnostics, Inc. and Vyrix Pharmaceuticals, Inc. that formed
Aytu BioPharma, Mr. Disbrow was the Chief Executive Officer of Luoxis since January 2013. Mr. Disbrow served as the
Chief Operating Officer of Ampio Pharmaceuticals, Inc. (“Ampio”) from December 2012 until April 2015. Prior to joining
Ampio, he served as the Vice President of Commercial Operations at Arbor Pharmaceuticals LLC (“Arbor”), a specialty
pharmaceutical company, from May 2007 through October 2012, which he joined as the company’s second employee and
oversaw the launch and subsequent growth of the company’s commercial operations. Mr. Disbrow led the launch of the
company’s first product, subsequently launching numerous products and scaling the commercial organization across sales,
marketing, managed care, sales training and national accounts. In less than five years, Arbor grew from a company from the
pre-commercialization stage to product sales of over $250 million. Prior to joining Arbor, Mr. Disbrow served as Regional
Sales Manager with Cyberonics, Inc., a medical device company focused on neuromodulation therapies from June 2005
through April 2007. Prior to joining Cyberonics he was the Director of Marketing at LipoScience Inc., an in vitro
diagnostics company. Mr. Disbrow holds an MBA from Wake Forest University and BS in Management from North
Carolina State University. Mr. Disbrow currently serves on the Board of Zynex Medical, Inc. Mr. Disbrow’s experience in
executive management and marketing within the pharmaceutical industry, monetizing company opportunities, and corporate
finance led to the conclusion that he should serve as a member of our Board of Directors.

Gary V. Cantrell – Director

Gary Cantrell joined our Board of Directors in July 2016. He has 30 years of experience in the life sciences
industry ranging from clinical experience as a respiratory therapist to his current executive consulting business as Principal
of Averaden, LLC, where he has served since July 2015. As Principal of Averaden, LLC, Mr. Cantrell consulted exclusively
with Mayne Pharma Group Limited (“Mayne”) (ASX: MYX) as Business Development Executive focused on acquiring
branded prescription assets for Mayne’s U.S. Specialty Brands Division, a position he held from July 2015 to October 2017.
Mr. Cantrell served as CEO of Yasoo Health Inc. (“Yasoo”), a global specialty nutritional company from 2007 through June
2015, highlighted by the sale of its majority asset AquADEKs to Actavis plc.in March 2016. Previously, he was President of
The Catevo Group, a U.S.-based healthcare consulting firm. Prior to that, he was Executive Vice President, Sales and
Marketing for TEAMM Pharmaceuticals Inc., an Accentia Biopharmaceuticals company, where he led all commercial
activities for a public specialty pharmaceutical business. His previous 22 years were at GlaxoSmithKline plc where he held
progressively senior management positions in sales, marketing and business

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development. Mr. Cantrell is a graduate of Wichita State University and serves as an advisor to several emerging life science
companies. He served as a director for Yasoo Health Inc., Yasoo Health Limited and Flexible Stenting Solutions, Inc., a
leading developer of next generation peripheral arterial, venous, neurovascular and biliary stents, which was sold to Cordis,
while a Division of Johnson & Johnson in March 2013. Mr. Cantrell served as a director of Vyrix from February 2014 to
April 2015. Mr. Cantrell’s experience in consulting and executive management within the pharmaceutical industry led to the
conclusion that he should serve as a member of our Board of Directors.

Carl C. Dockery – Director

Carl Dockery joined our Board of Directors in April 2016. Mr. Dockery is a financial executive with 30 years of

experience as an executive in the insurance and reinsurance industry and more recently since 2006 as the founder and
president of a registered investment advisory firm, Alpha Advisors, LLC. Mr. Dockery’s career as an insurance executive
began in 1988 as an officer and director of two related and closely held insurance companies, including serving as secretary
of Crossroads Insurance Co. Ltd. of Bermuda and as vice president of Gulf Insurance Co. Ltd. of Grand Cayman. Familiar
with the London reinsurance market, in the 1990s, Mr. Dockery worked at Lloyd’s and the London Underwriting Centre
brokering various types of reinsurance placements. Mr. Dockery served as a director of CytoDyn Inc. (OTCQB: CYDY), a
biotechnology company, from September 2014 until September 2019. Mr. Dockery graduated from Southeastern University
with a Bachelor of Arts in Humanities. Mr. Dockery’s financial expertise and experience, as well as his experience as a
director of a publicly traded biopharmaceutical company led to the conclusion that he should serve as a member of our
Board of Directors.

John A. Donofrio, Jr. – Director

John Donofrio joined our Board of Directors in July 2016. He is a senior pharmaceutical executive with 28 years of

experience in industry including a broad range of areas in finance, including consolidated financial reporting, international
accounting and internal controls, financial systems development and implementation, cost accounting, inventory
management, supply chain, transfer pricing, budget and forecast planning, integration of mergers and acquisitions and
business development. Since March 2019, he has served as the President of EPI Health, a privately-held specialty
pharmaceutical company commercializing products in the dermatology market. He previously served as Chief Financial
Officer at TrialCard from March of 2018 to March 2019. TrialCard is a technology-driven pharmaceutical services company
providing patient access and support programs to the pharmaceutical and biotechnology industries. Prior to joining
TrialCard, Mr. Donofrio was the Chief Financial Officer and Head of North American Business Development for Merz
North America, or Merz, from August 2013 to March 2018. Merz is a specialty healthcare company that develops and
commercializes innovative treatment solutions in aesthetics, dermatology and neurosciences in the United States and
Canada. At Merz, Mr. Donofrio was accountable for financial performance, cost management, internal controls, business
development and strategic business planning and analysis for the finance organization in North America. Prior to joining
Merz, Mr. Donofrio served as Vice President, Stiefel Global Finance, U.S. Specialty Business and Puerto Rico for Stiefel, a
GlaxoSmithKline plc company from July 2009 to July 2013. In that role, Mr. Donofrio was responsible for the financial
strategy, management reporting, and overall control framework for the Global Dermatology Business Unit. He was also the
Senior Finance Partner accountable for the U.S. Specialty Business Units of GlaxoSmithKline plc. Mr. Donofrio served as a
director of Vyrix from February 2014 to April 2015. Mr. Donofrio holds a degree in Accounting from North Carolina State
University. Mr. Donofrio’s financial expertise and experience in the pharmaceutical industry led to the conclusion that he
should serve as a member of our Board of Directors.

Michael E. Macaluso – Director

Michael Macaluso joined our Board of Directors in April 2015. Mr. Macaluso is also the Chairman and Chief

Executive Officer of Ampio. Mr. Macaluso has been a member of Ampio’s board of directors since March 2010 and
Ampio’s Chief Executive Officer since January 2012. Mr. Macaluso served in the roles of President and Chief Executive
Officer of Isolagen, Inc. (AMEX: ILE) from June 2001 until September 2004. Mr. Macaluso also served on the Board of
Directors of Isolagen from June 2001 until April 2005. From October 1998 until June 2001, Mr. Macaluso was the owner of
Page International Communications, a manufacturing business. Mr. Macaluso was a founder and principal of International
Printing and Publishing, a position Mr. Macaluso held from 1989 until 1997, when he sold that business to a private equity
firm. Mr. Macaluso’s experience in executive management within the pharmaceutical industry,

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monetizing company opportunities, and corporate finance led to the conclusion that he should serve as a member of our
Board of Directors.

Richard Eisenstadt – Chief Financial Officer, Secretary, and Treasurer

Richard Eisenstadt has served as our Chief Financial Officer, Secretary and Treasurer since March 31, 2021. Prior

to joining us, Mr. Eisenstadt served as Chief Financial Officer from May 2014 to March 2021 of Neos Therapeutics, Inc.
Mr. Eisenstadt served as Chief Financial Officer of ArborGen Inc. from January 2013 to May 2014, and as Vice President of
Finance and Chief Financial Officer of Tranzyme, Inc., now part of Mallinckrodt Pharmaceuticals (NYSE: MNK) from June
2003 to December 2012. He previously held financial leadership positions at Cogent Neuroscience, Inc. and Nimbus CD
International, Inc. Mr. Eisenstadt received his M.B.A. from James Madison University and his B.A. in Economics from the
University of North Carolina, Chapel Hill.

Family Relationships

Jarrett T. Disbrow, our Executive VP, Corporate Operations, is the brother of Joshua R. Disbrow, our Chief

Executive Officer and a director. There are no other family relationships among or between any of our other current or
former executive officers and directors.

Involvement in Certain Legal Proceedings

None of our directors or executive officers has been involved in any legal proceeding in the past 10 years that

would require disclosure under Item 401(f) of Regulation S-K promulgated under the Securities Act.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act requires our officers and directors and persons who own more than

10% of our outstanding common stock to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. These officers, directors and stockholders are required by regulations under the Securities Exchange
Act to furnish us with copies of all forms they file under Section 16(a).

Based solely on our review of the copies of forms we have received, we believe that all such required reports have

been timely filed.

Code of Ethics

The information required by this Item regarding our Code of Ethics is found in Part I, Item 1, under the caption

“Code of Ethics.”

Board Committees

Our Board has established an Audit Committee, Compensation Committee and a Nominating and Governance
Committee. Our Audit Committee consists of Mr. Donofrio (Chair), Mr. Macaluso and Mr. Dockery. Our Compensation
Committee consists of Mr. Macaluso (Chair), Mr. Cantrell, Mr. Dockery and Mr. Donofrio. Our Nominating and
Governance Committee consists of Mr. Dockery (Chair), Mr. Cantrell and Mr. Donofrio. The independence of our directors
is discussed in Part III, Item 13 under the caption “Director Independence.”

Each of the above-referenced committees operates pursuant to a formal written charter. The charters for these

committees, which have been adopted by our Board, contain a detailed description of the respective committee’s duties and
responsibilities and are available on our website at http://www.aytubio.com under the “Investor Relations—Corporate
Governance” tab.

Our Board has determined Mr. Donofrio qualifies as an audit committee financial expert, as defined in Item 407(d)

(5) of Regulation S-K promulgated by the SEC.

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Stockholder Proposals

Our bylaws establish procedures for stockholder nominations for elections of directors and bringing business

before any annual meeting or special meeting of stockholders. A stockholder entitled to vote in the election of directors may
nominate one or more persons for election as directors at a meeting only if written notice of such stockholder’s intent to
make such nomination or nominations has been delivered to our Corporate Secretary at our principal executive offices not
less than 90 days nor more than 120 days prior to the first anniversary of the prior year’s annual meeting. In the event that
the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the prior year’s
annual meeting, the stockholder notice must be given not more than 120 days nor less than the later of 90 days prior to the
date of the annual meeting or, if it is later, the 10th day following the date on which the date of the annual meeting is first
publicly announced or disclosed by us. These notice deadlines are the same as those required by the SEC’s Rule 14a-8.

Pursuant to the bylaws, a stockholder’s notice must set forth among other things: (a) as to each person whom the

stockholder proposes to nominate for election or reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the
rules and regulations thereunder; and (b) as to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the
proposal is made.

There have been no changes to these nominating procedures since the adoption of the bylaws.

Item 11.    Executive Compensation

Executive Compensation

In accordance with Item 402 of Regulation S-K promulgated by the SEC, we are required to disclose certain

information regarding the makeup of and compensation for our company’s directors and named executive officers.

In establishing executive compensation, our Board is guided by the following goals:

● compensation should consist of a combination of cash and equity awards that are designed to fairly pay the

executive officers and directors for work required for a company of our size and scope;

● compensation should align the executive officers’ and directors’ interests with the long-term interests of

stockholders; and

● compensation should assist with attracting and retaining qualified executive officers and directors.

Compensation of Directors

Our current compensation package for non-employee directors, effective July 1, 2020, consists of: an annual cash
retainer of $70,000 for each non-executive Board chair, $40,000 for each other director, $20,000 for the committee chair of
the Audit and Compensation Committees, $10,000 for each other member of the Audit and Compensation Committees,
$10,000 for the committee chair of the Nominating and Governance committee, and $5,000 for each other member of the
Nominating and Governance committee; a grant of 6,500 restricted shares of stock upon appointment to the board; and an
annual stock option grant of 1,500 shares thereafter.

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The following table provides information regarding all compensation paid to non-employee directors of Aytu

during the fiscal year ended June 30, 2021.

    Fees Earned      All Other

Name

Gary V. Cantrell (2)(3)
Carl C. Dockery (2)(3)
John A. Donofrio Jr. (2)(3)
Michael E. Macaluso (2)(3)
Steven J. Boyd (2)(3)(4)

or Paid in 
Cash
$  55,000
$  70,000
$  75,000
$  70,000
$

Compensation
(1)
$  1,218,848
$  1,218,848
$  1,218,848
$  1,218,848

 — $

 — $

Total
$  1,273,848
$  1,288,848
$  1,293,848
$  1,288,848
 —

(1) This column reflects the aggregate grant date fair value of restricted stock and stock options.
(2) As of June 30, 2021, the number of restricted shares held by each non-employee director was as follows: 203,071 restricted
shares for Mr. Cantrell; 203,071 restricted shares for Mr. Dockery; 203,071 restricted shares for Mr. Donofrio; 208,071
restricted shares for Mr. Macaluso.

(3) As of June 30, 2021, the number of stock options held by each non-employee director was as follows: (i) 4,005 shares for Mr.
Dockery; (ii) 4,004 shares for Mr. Donofrio; (iii) 4,012 shares for Mr. Macaluso; and (iv) 2,004 shares for Mr. Cantrell.

(4) Steven J. Boyd resigned as a member of the board of directors effective August 30, 2021.

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Executive Officer Compensation

The following table sets forth all cash compensation earned, as well as certain other compensation paid or accrued

for the years ended June 30, 2021 and 2020 to each of the following named executive officers.

Year
(b)

Salary 
($)
(c)

Bonus 
($)
(d)

Stock 
Award
 ($)
(e)

Option 
Award 
($)(1)
(f)

Change in 
Pension 
Value and 
Nonqualified 
Deferred 
Compensation 
Earnings 
($)
(h)

Non-Equity 
Incentive  
Plan
Compensation 
($)
(g)

All Other 
Compensation 
($)
(i)

Total ($)
(j)

Name and
Principal
Position
(a)
Named Executive
Officers:

Joshua R.
Disbrow

Chief Executive
Officer
since
December 2012  2020

  2021

$

545,000

$

462,203

$

5,192,000

$

 —  

 —  

 —  

 — $

6,199,203

$

607,620

$

185,000

$  652,500

$

140,330

$

 — $

 — $

 — $

1,585,450

Richard Eisenstadt
(1)

Chief Financial
Officer,
Secretary
and Treasurer
since April
2021

David A. Green
(2)

Former Chief
Financial
Officer,
Secretary

  2021

$

151,934

$

175,000

$  455,947

$

 — $

 — $

 — $

 — $  782,881

  2021

$

345,192

$

430,463

$

 — $

 — $

 — $

 — $  500,000

$

1,275,655

and Treasurer   2020

$

400,046

$

150,000

$  362,500

$

140,330

$

 — $

 — $

 — $

1,052,876

(1) Option awards are reported at fair value at the date of grant. See Item 15 of Part IV, “Notes to the Financial Statements —

Note 10 — Fair Value Considerations.”

(2) Mr. Eisenstadt was appointed to Chief Financial Officer, Secretary and Treasurer effective March 31, 2021.
(3) Mr. Green ceased to be employed as Chief Financial Officer, Secretary and Treasurer effective March 31, 2021.

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Our executive officers are reimbursed by us for any out-of-pocket expenses incurred in connection with activities
conducted on our behalf. Executives are reimbursed for business expenses directly related to Aytu business activities, such
as travel, primarily for business development as we grow and expand our product lines. On average, each executive incurs
between $1,000 to $3,000 of out-of-pocket business expenses each month. The executive management team meets weekly
and determines which activities they will work on based upon what we determine will be most beneficial to our company
and our shareholders. No interest is paid on amounts reimbursed to the executives.

Outstanding Equity Awards at Fiscal Year-End 2021

The following table contains certain information concerning unexercised options for the Named Executive Officers

as of June 30, 2021.

Option Awards

Stock Awards

Number of
Number of 
 Securities 
Securities 
Underlying 
Underlying 
Unexercised  Unexercised 

Options 

Options 

Equity
 Incentive 
Plan 
Awards: 
Number 
of 
Securities 
Underlying 
Unexercised 

Exercisable  Unexercisable Unearned Options 

(#)

(#)

(#)

  Number   
of 
Shares 
  or Units   
  of Stock 

That 
Have 
Not 
Vested 
(#)

Market
 Value of 
Shares or 
Units of 
Stock 
That 
Have Not 
Vested ($)
(1)

Option 
Exercise 
Price ($)

Option
 Expiration 
Date

     Equity

 Incentive 
Plan 

Equity
Incentive 
Plan
Awards: 
Market
 or Payout 
Value of 
  Unearned  Unearned 

  Awards: 
  Number 

of 

Shares, 
  Units or 
Other 
Rights 
That 

  Have Not 

Vested 
(#)

Shares, 
Units or 
Other 
Rights 
That 
Have Not 
Vested 
($)

 2,500  

 7,500  

 — $

 14.50  

6/8/2030  

 — $

 —  

 —   $

 —

 13  
 15  
 —
 —
 —
 —
 —
 2,528

 —  

 —  
 —
 —

 10,000  

 —  
 —
 —
 —
 —
 —
 —
 7,500

 —  

 —  
 —
 —

 —  

 —  3,280.00   11/11/2025  
 —  3,280.00  
7/7/2026  
 —
 —
 —
 —
 —
 — $

 —
 —
 —
 750
 —  44,550
 —  800,000
 —  33,750
 48
 —
 879,098

 —
 —
 —
 —
 —

 —  
 —
 3,758
 223,196
 4,008,000
 169,088
 240
$  4,404,281

 — $

 —
 —
 — $

 —

 —
 —

 —

 510

$

 2,555

 5,440
 —
 —  55,000
 60,950

 27,254
 275,550
$  305,359

 —   
 —
 —
 —
 —
 —
 —
 — $

 — $

 —
 —
 — $

 — $

 14.50  

6/8/2030  

 — $

 —  

 —   $

 —
 —
 —
 —
 —
 —
 —
 —

 —

 —
 —
 —

 —

Name

Named
Executive
Officers:

Joshua R.
Disbrow
Chief
Executive
Officer

Total

Richard
Eisenstadt
Chief
Financial
Officer

Total

David A.
Green
Former
Chief
Financial
Officer

(1) Based on $5.01 per share which was the closing price of our common stock on NASDAQ on June 30, 2021, the last trading

day of that fiscal year.

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Employment Agreements

We entered into an employment agreement with Joshua Disbrow in connection with his employment as our Chief
Executive Officer. The agreement is for a term of 24 months beginning on April 16, 2015, subject to termination by us with
or without Cause or as a result of officer’s disability, or by the officer with or without Good Reason (as defined below).
Mr. Disbrow is entitled to receive $330,000 in annual salary, plus a discretionary performance bonus with a target of 125%
of his base salary. Mr. Disbrow is also eligible to participate in the benefit plans maintained by us from time to time, subject
to the terms and conditions of such plans. On April 7, 2021, we extended this agreement for another 24 months.

We entered into an employment agreement with Richard Eisenstadt, effective March 31, 2021, to serve as our
Chief Financial Officer. The agreement is subject to termination by us with or without Cause (as defined below) or as a
result of Mr. Eisenstadt’s disability, or by Mr. Eisenstadt with or without Good Reason (as defined below). Mr. Eisenstadt is
entitled to receive $400,000 in annual salary, plus a discretionary performance bonus with a target of 40% of his base salary,
based on his individual achievements and company performance objectives established by the board or the compensation
committee in consultation with Mr. Eisenstadt. Mr. Eisenstadt is also eligible to participate in the benefit plans maintained
by us from time to time, subject to the terms and conditions of such plans.

We entered into an employment agreement with David A. Green, effective December 18, 2017, to serve as our
Chief Financial Officer. The agreement is subject to termination by us with or without Cause (as defined below) or as a
result of Mr. Green’s disability, or by Mr. Green with or without Good Reason (as defined below). Mr. Green is entitled to
receive $250,000 in annual salary, plus a discretionary performance bonus with a target of 50% of his base salary, based on
his individual achievements and company performance objectives established by the board or the compensation committee
in consultation with Mr. Green. Mr. Green is also eligible to participate in the benefit plans maintained by us from time to
time, subject to the terms and conditions of such plans. Effective March 31, 2021, Mr. Green resigned from his position with
the Company.

On July 1, 2020, we entered into employment agreements with Joshua Disbrow (the “CEO Amendment”) and

David Green (the “Former CFO Amendment”) The material terms of the respective amendments are as follows.

CEO Amendment

●

Effective June 1, 2020, increase base salary to $500,000 and lower annual bonus % target from 100% to 60% of
base salary

●

Effective January 1, 2021, increase base salary to $590,000

● Granted 100,000 options on terms set forth in a separate option agreement

● Granted 450,000 shares of restricted stock on the terms set forth in a separate restricted stock agreement.

● Granted 800,000 shares of restricted stock on the terms set forth in a separate restricted stock agreement.

Former CFO Amendment

●

●

Effective June 1, 2020, increase base salary to $375,000

Effective January 1, 2021, increase base salary to $400,000

● Granted 100,000 options on terms set forth in a separate option agreement

● Granted 250,000 shares of restricted stock on the terms set forth in a separate restricted stock agreement.

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The CEO Amendment and the former CFO Amendment are filed as exhibits to this Form 10-K. The foregoing

description of the CEO Amendment and the former CFO Amendment is qualified in its entirety by reference to the text of
the CEO Amendment and the former CFO Amendment as attached to this Form 10-K.

Payments Provided Upon Termination for Good Reason or Without Cause

Pursuant to the employment agreements, in the event employment is terminated without Cause by us or the officer
terminates his employment with Good Reason, we will be obligated to pay him any accrued compensation and a lump sum
payment equal to two times his base salary in effect at the date of termination, as well as continued participation in the
health and welfare plans for up to two years. All vested stock options shall remain exercisable from the date of termination
until the expiration date of the applicable award. So long as a Change in Control is not in effect, then all options which are
unvested at the date of termination Without Cause or for Good Reason shall be accelerated as of the date of termination such
that the number of option shares equal to 1/24th the number of option shares multiplied by the number of full months of
such officer’s employment shall be deemed vested and immediately exercisable by the officer. Any unvested options over
and above the foregoing shall be cancelled and of no further force or effect and shall not be exercisable by such officer.

“Good Reason” means, without the officer’s written consent, there is:

● a material reduction in the officer’s overall responsibilities or authority, or scope of duties (it being understood that

the occurrence of a Change in Control shall not, by itself, necessarily constitute a reduction in the officer’s
responsibilities or authority);

● a material reduction of the level of the officer’s compensation (excluding any bonuses) (except where there is a
general reduction applicable to the management team generally, provided, however, that in no case may the base
salary be reduced below certain specified amounts); or

● a material change in the principal geographic location at which the officer must perform his services.

“Cause”, means:

● conviction of, or entry of a plea of guilty to, or entry of a plea of nolo contendere with respect to, any crime, other

than a traffic violation or a misdemeanor;

● willful malfeasance or willful misconduct by the officer in connection with his employment;

● gross negligence in performing any of his duties;

● willful and deliberate violation of any of our policies;

● unintended but material breach of any written policy applicable to all employees adopted by us which is not cured to

the reasonable satisfaction of the board;

● unauthorized use or disclosure of any proprietary information or trade secrets of us or any other party as to which

the officer owes an obligation of nondisclosure as a result of the officer’s relationship with us;

● willful and deliberate breach of his obligations under the employment agreement; or

● any other material breach by officer of any of his obligations which is not cured to the reasonable satisfaction of the

board.

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Payments Provided Upon a Change in Control

In the event of a Change in Control of us, all stock options, restricted stock and other stock-based grants granted or

may be granted in the future by us to the officers will immediately vest and become exercisable.

“Change in Control” means: the occurrence of any of the following events:

● the acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the

Exchange Act) (the “Acquiring Person”), other than us, or any of our Subsidiaries, of beneficial ownership (within
the meaning of Rule 13d-3- promulgated under the Exchange Act) of 50% or more of the combined voting power or
economic interests of the then outstanding voting securities of us entitled to vote generally in the election of
directors (excluding any issuance of securities by us in a transaction or series of transactions made principally for
bona fide equity financing purposes); or

● the acquisition of us by another entity by means of any transaction or series of related transactions to which we are
party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding
any issuance of securities by us in a transaction or series of transactions made principally for bona fide equity
financing purposes) other than a transaction or series of related transactions in which the holders of the voting
securities of us outstanding immediately prior to such transaction or series of related transactions retain,
immediately after such transaction or series of related transactions, as a result of shares in us held by such holders
prior to such transaction or series of related transactions, at least a majority of the total voting power represented by
the outstanding voting securities of us or such other surviving or resulting entity (or if we or such other surviving or
resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); or

● the sale or other disposition of all or substantially all of the assets of us in one transaction or series of related

transactions.

Our only obligation to Joshua Disbrow and Richard Eisenstadt had a Change in Control occurred as of June 30,

2021, would be the acceleration of the vesting of all equity securities held by them at that date. On June 30, 2021, the
closing price of our common stock was below the exercise price for all of the options held by Joshua Disbrow and therefore
there would have been no economic benefit to them upon the acceleration of vesting of those options. RSU acceleration is
now a part of our contracts.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information with respect to the beneficial ownership of our common stock as of

August 31, 2021 for:

● each beneficial owner of more than 10% of our outstanding common stock;

● each of our director and named executive officers; and

● all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute

beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to
those securities and include common stock that can be acquired within 60 days of August 31, 2021. The percentage
ownership information shown in the table is based upon 27,551,912 shares of common stock outstanding as of August 31,
2021.

Except as otherwise indicated, all of the shares reflected in the table are shares of common stock and all persons

listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to

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applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other
purpose.

In computing the number of shares of common stock beneficially owned by a person and the percentage ownership
of that person, we deemed outstanding shares of common stock subject to options and warrants held by that person that are
immediately exercisable or exercisable within 60 days of August 31, 2020. We did not deem these shares outstanding,
however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing
less than 1% is denoted with an asterisk (*). The information in the tables below are based on information known to us or
ascertained by us from public filings made by the stockholders. Except as otherwise indicated in the table below, addresses
of the director, executive officers and named beneficial owners are in care of Aytu BioPharma, Inc., 373 Inverness Parkway,
Suite 206, Englewood, Colorado 80112.

5% Stockholders

Stonepine Capital Management, LLC and related entities(1)

 1,398,776  

5.1 %

     Number of       Percentage of 

Shares 
Beneficially   
Owned

Shares 
Beneficially 
Owned

Non-employee Directors
Macaluso, Michael(2)
Cantrell, Gary(3)
Dockery, Carl(4)
Donofrio, John(5)

Named Officers

Disbrow, Joshua(6)
Richard Eisenstadt(7)

 212,091  
 206,093  
 208,077  
 207,075  

 902,318  
 7,784

All directors and executive officers as a group, including those named above (six persons)

 1,743,438  

*
*
*
*

3.3 %
*
6.3 %

* Represents beneficial ownership of less than 1%.

(1) Based on a Schedule 13G/A filed with the SEC on December 31, 2021, Stonepine Capital Management ("SCM") is the

general partner and investment advisor of investment funds, including Stonepine Capital, L.P. ("Capital"). Jon M. Plexico
("Plexico") and Thomas P. Lynch ("Lynch") are the control persons of SCM. Each of SCM, Capital, Plexico, and Lynch have
sole voting and dispositive power with respect to 1,398,776 shares and may be deemed to be the beneficial owner of such
shares. The principal business address of the beneficial owners is 919 NW Bond Street, Suite 204, Bend, OR 97703.

(2) Consists of (i) 8 shares of common stock, (ii) 208,071 restricted shares, and (iii) 4,012 shares of common stock issuable upon

the exercise of vested options.

(3) Consists of (i) 1,018 shares of common stock, (ii) 203,071 restricted shares, and (iii) 2,004 shares of common stock issuable

upon the exercise of vested options.

(4) Consists of (i) 1,001 shares of common stock, (ii) 203,071 restricted shares, (iii) 4,005 shares of common stock issuable upon
the exercise of vested options, and 2,094 shares of common stock held by Alpha Venture Capital Partners, L.P Mr. Dockery is
the President of the general partner of Alpha Venture Capital Partners, L.P. and therefore may be deemed to beneficially own
the shares beneficially owned by Alpha Venture Capital Partners, L.P.

(5) Consists of (i) 203,071 restricted shares, and (iii) 4,004 shares of common stock issuable upon the exercise of vested options.

.

(6) Consists of (i) 18,408 shares of common stock, (ii) 879,098 restricted shares, (iii) 2,556 shares of common stock issuable

upon the exercise of vested options, and (iv) 2,256 shares of common stock issuable upon the exercise of warrants. Does not
include 116 shares of common stock held by an irrevocable trust for estate planning in which Mr. Disbrow is a beneficiary.
Mr. Disbrow does not have or share investment control over the shares held by the trust, Mr. Disbrow is not the trustee of the
trust (nor is any member of Mr. Disbrow’s immediate family) and Mr. Disbrow does not have or share the power to revoke the
trust. As such, under Rule 16a 8(b) and related rules, Mr. Disbrow does not have beneficial ownership over the shares
purchased and held by the trust.

(7) Consists of 7,784 shares of common stock.

118

 
 
 
 
   
  
 
 
   
  
 
 
 
 
 
 
Table of Contents

Item 13.    Certain Relationships, Related Transactions, and Director Independence

Related Party Transactions

We describe below all transactions and series of similar transactions, other than compensation arrangements, during

the last three fiscal years, to which we were a party or will be a party, in which:

● the amounts involved exceeded or will exceed $120,000; and

● any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the

immediate family of the foregoing persons, had or will have a direct or indirect material interest.

Tris Pharmaceutical, Inc.

On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply Agreement

(the “Tris License Agreement”). On November 1, 2019, the Company acquired the rights to Karbinal as a result of the
acquisition of the Pediatric Portfolio from Cerecor, Inc. (See Notes 4 and 16). Mr. Ketan Mehta serves as a Director on the
Board of Directors of the Company, and is also the Chief Executive Officer of Tris Pharma, Inc. (“Tris”). During the years
ended June 30, 2021 and 2020, the Company paid Tris approximately $3.2 and $1.3 million, respectively for a combination
of royalty payments, inventory purchases and other payments as contractually required. The Company’s liabilities, including
accrued royalties, contingent consideration and fixed payment obligations were $19.7 million and $22.9 million as of
June 30, 2021 and 2020, respectively. In October 2020, the Company paid Tris approximately $1.6 million related to its
Karbinal fixed payment obligation. On March 19, 2021, Mr. Ketan Mehta resigned as a Director on the Board of the
Company, and Tris will no longer be considered a related party in the future.

Review, Approval or Ratification of Transactions with Related Persons

Effective upon its adoption in July 2016, pursuant to the Audit Committee Charter, the Audit Committee is

responsible for reviewing and approving all related party transactions as defined under Item 404 of Regulation S-K, after
reviewing each such transaction for potential conflicts of interests and other improprieties. Our policies and procedures for
review and approval of transactions with related persons are in writing in our Code of Conduct and Ethics available on our
website at http://www.aytubio.com under the “Investor Relations—Corporate Governance” tab.

Prior to the adoption of the Audit Committee Charter, and due to the small size of our company, we did not have a

formal written policy regarding the review of related party transactions, and relied on our Board of Directors to review,
approve or ratify such transactions and identify and prevent conflicts of interest. Our Board of Directors reviewed any such
transaction in light of the particular affiliation and interest of any involved director, officer or other employee or stockholder
and, if applicable, any such person’s affiliates or immediate family members.

Director Independence

Our common stock is listed on the NASDAQ Capital Market. Therefore, we must comply with the exchange

rules regarding director independence. Audit Committee members must satisfy the independence criteria set forth in
Rule 10A-3 under the Securities Exchange Act of 1934, as amended, for listed companies. In order to be considered to be
independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or
her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or
indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be
an affiliated person of the listed company or any of its subsidiaries.

Six of our seven directors are independent under the definition of NASDAQ. Josh Disbrow is not independent

under either definition due to being an executive officer of our Company.

119

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Item 14.  Principal Accountant Fees and Services

Plante Moran, PLLC, or Plante Moran, (formerly known as EKS&H LLLP) has served as our independent auditor
since April 2015 and has been appointed by our Audit Committee to continue as our independent auditor for the fiscal year
ending June 30, 2021.

The following table presents aggregate fees for professional services rendered by our independent registered public

accounting firm, Plante Moran, for the audit of our annual financial statements for the respective periods.

Year Ended June 30, 
2020
2021

Audit fees
Audit related fees*
Total fees

$

$

$

(In thousands)
 216
 63
 279

$

 226
 68
 294

* Audit-related fees for both fiscal year 2021 and 2020 were comprised of fees related to registration statements, including S-3,
S-4 and S-8 filings, our March 2020 and December 2020 registered offerings and June 2020 and June 2021 at-the-market
(ATM) offerings.

120

    
 
 
Table of Contents

Item 15.    Exhibits and Consolidated Financial Statement Schedules

(a)(1)

Financial Statements

PART IV

The following documents are filed as part of this Form 10-K, as set forth on the Index to the Consolidated

Financial Statements found on page F-1.

● Reports of Independent Registered Public Accounting Firm

● Consolidated Balance Sheets as of June 30, 2021 and 2020

● Consolidated Statements of Operations for the years ended June 30, 2021 and 2020

● Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended June 30, 2021 and 2020

● Consolidated Statements of Cash Flows for the years ended June 30, 2021 and 2020

● Notes to Consolidated Financial Statements

(a)(2)

Financial Statement Schedules

Not Applicable.

121

Table of Contents

(a)(3) Exhibits

Exhibit
No.

Description

     Registrant’s

Form

Date Filed

Exhibit
Number

Filed
Herewith

1.1

1.2

2.1

2.2

2.3

2.4

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.10

3.11

3.12

3.13

4.1

Controlled Equity OfferingSM Sales Agreement, dated June 4,
2021, by and between the registrant and Cantor Fitzgerald & Co.

Amended and Restated Underwriting Agreement, dated December
10, 2020, between Aytu BioScience, Inc. and H.C. Wainwright &
Co., LLC

Agreement and Plan of Merger, dated as of September 12, 2019,
by and among Aytu BioScience, Inc., Aytu Acquisition Sub, Inc.
and Innovus Pharmaceuticals, Inc.

Asset Purchase Agreement, dated October 10, 2019.

Agreement and Plan of Merger, dated as of December 10, 2020, by
and among Aytu BioScience, Inc., Neutron Acquisition Sub, Inc.
and Neos Therapeutics, Inc.

Asset Purchase Agreement, dated April 12, 2021.

Certificate of Incorporation effective June 3, 2015.

Certificate of Amendment of Certificate of Incorporation effective
June 1, 2016.

Certificate of Amendment of Certificate of Incorporation, effective
June 30, 2016.

Certificate of Designation of Preferences, Rights and Limitations
of Series A Convertible Preferred Stock, filed on August 11, 2017.

Certificate of Amendment of Certificate of Incorporation, effective
August 25, 2017.

8-K

8-K

8-K

8-K

8-K

10-Q

8-K

8-K

8-K

8-K

8-K

06/04/21

12/14/20

09/18/19

10/15/19

12/10/20

05/17/21

06/09/15

06/02/16

07/01/16

08/16/17

08/29/17

Certificate of Designation of Preferences, Rights and Limitations
of Series B Convertible Preferred Stock filed on March 2, 2018.

S-1/A

02/27/18

Certificate of Amendment to the Restated of Certificate of
Incorporation, effective August 10, 2018.

Amended and Restated Bylaws.

8-K

8-K

08/10/18

06/09/15

1.1

1.1

2.1

2.1

2.1

2.4

3.1

3.1

3.1

3.1

3.1

3.6

3.1

3.2

Certificate of Designation of Preferences, Rights and Limitations
of Series E Convertible Preferred Stock.

10-Q

02/07/19

10.4

Certificate of Designation of Preferences, Rights and Limitations
of Series F Convertible Preferred Stock.

Certificate of Designation of Preferences, Rights and Limitations
of Series G Convertible Preferred Stock.

Certificate of Amendment to the Restated Certificate of
Incorporation, effective December 7, 2020.

Certificate of Amendment of Certificate of Incorporation of Aytu
Bioscience, Inc., effective March 19, 2021.

Form of Placement Agent Warrant issued in 2015 Convertible
Note Financing.

8-K

8-K

8-K

8-K

8-K

10/15/19

110/4/19

12/08/20

03/22/21

07/24/15

3.1

3.1

3.1

3.1

4.2

122

    
    
    
    
Table of Contents

Exhibit
No.

Description

     Registrant’s

Form

Date Filed

Exhibit
Number

Filed
Herewith

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

4.14

4.15

4.16

10.1#

10.2#

10.3

10.4#

10.5#

10.6#

Warrant Agent Agreement, dated May 6, 2016 by and between
Aytu BioScience, Inc. and VStock Transfer, LLC.

First Amendment to May 6, 2016 Warrant Agent Agreement
between Aytu BioScience, Inc. and VStock Transfer LLC.

Warrant Agent Agreement, dated November 2, 2016 by and
between Aytu BioScience, Inc. and VStock Transfer, LLC.

Form of Amended and Restated Underwriters’ Warrant (May 2016
Financing).

Form of Amended and Restated Underwriters’ Warrant
(October 2016 Financing).

Form of Common Stock Purchase Warrant issued on August 15,
2017.

Form of Common Stock Purchase Warrant for March 2018
Offering.

Form of Pre-Funded Purchase Warrant.

Form of Placement Agents Warrant.

Form of Warrant.

Form of Placement Agents Warrant.

Form of Warrant.

Form of Placement Warrant.

Form of Wainwright Warrant.

Form of Underwriter's Warrant.

Asset Purchase Agreement between the Registrant (as assigned to
it by Ampio/Vyrix) and Valeant International (Barbados) SRL,
effective as of December 2, 2011.

Manufacturing and Supply Agreement between the Registrant (as
assigned to it by Ampio/Vyrix) and Ethypharm S.A., dated
September 10, 2012.

License, Development and Commercialization Agreement
between the Registrant (as assigned to it by Ampio/Vyrix) and
Daewoong Pharmaceuticals Co., Ltd., effective as of August 23,
2011 (incorporated by reference to Exhibit 10.1 of Ampio
Pharmaceuticals Form 8-K/A filed October 5, 2011; File No. 001-
25182).

Distribution Agreement between the Registrant (as assigned to it
by Ampio/Vyrix) and FBM Industria Farmaceutica, Ltda., dated as
of March 1, 2012.

Distribution and License Agreement between the Registrant (as
assigned to it by Ampio/Vyrix) and Endo Ventures Limited, dated
April 9, 2014.

Sponsored Research Agreement between the Registrant (as
assigned to it by Ampio/Luoxis) and Trauma Research LLC, dated
September 1, 2009.

123

8-K

S-1

8-K

8-K

8-K

8-K

S-1

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

05/06/16

09/21/16

11/2/16

03/1/17

03/1/17

08/16/17

02/27/18

03/13/20

03/13/20

03/13/20

03/13/20

03/20/20

03/20/20

07/02/20

12/14/20

4.1

4.5

4.1

4.1

4.2

4.1

4.8

4.1

4.2

4.1

4.2

4.1

4.2

4.1

4.1

8-K/A

06/08/15

10.4

8-K/A

06/08/15

10.5

8-K/A

06/08/15

10.7

8-K/A

06/08/15

10.8

8-K/A

06/08/15

10.9

    
    
    
    
Table of Contents

Exhibit
No.

10.7#

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20†

10.21†

10.22

10.23#

10.24†

10.25

10.26

10.27†

10.28

Description

     Registrant’s

Form

Date Filed

Exhibit
Number

Filed
Herewith

Addendum No. 4 to Sponsored Research Agreement between the
Registrant (as assigned to it by Ampio/Luoxis) and Trauma
Research LLC, dated March 17, 2014.

Promissory Note issued by Ampio to the Registrant on April 16,
2015.

Subscription Agreement between the Registrant and Ampio, dated
April 16, 2015.

Voting Agreement between the Registrant and Ampio, dated April
21, 2015 (incorporated by reference to Exhibit 10.1 to Ampio’s
Form 8-K filed April 22, 2015; File No. 001-35182).

Asset Purchase Agreement between Jazz Pharmaceuticals, Inc.
and Rosewind Corporation, dated May 20, 2015.

Form of Note Purchase Agreement for 2015 Convertible
Note Financing.

Asset Purchase Agreement, dated October 5, 2015, between Aytu
BioScience, Inc. and FSC Laboratories, Inc.

Master Services Agreement between Biovest International, Inc.
and Aytu BioScience, Inc., entered into on October 8, 2015, and
effective October 5, 2015.

Form of Subscription Agreement for January 2016 common stock
purchases.

License and Supply Agreement between the Registrant and Acerus
Pharmaceuticals Corporation, dated April 22, 2016.

Subscription Agreement between the Registrant and Acerus
Pharmaceuticals Corporation, dated April 22, 2016.

Purchase Agreement, dated July 27, 2016, by and between Aytu
BioScience, Inc. and Lincoln Park Capital Fund, LLC.

Registration Rights Agreement dated July 27, 2016, by and
between Aytu BioScience, Inc. and Lincoln Park Capital Fund,
LLC.

Employment Agreement, effective as of April 16, 2017, between
Aytu BioScience, Inc. and Joshua R. Disbrow.

Employment Agreement, effective as of April 16, 2017, between
Aytu BioScience, Inc. and Jarrett T. Disbrow.

Asset Purchase Agreement, dated March 31, 2017, between
Allegis Holdings, LLC and Aytu BioScience, Inc.

Merger Agreement, dated May 3, 2017, between Nuelle, Inc. and
Aytu BioScience, Inc.

2015 Stock Option and Incentive Plan, as amended on July 26,
2017.

Securities Purchase Agreement, dated August 11, 2017, between
Aytu BioScience, Inc. and the investors named therein.

Registration Rights Agreement, dated August 11, 2017, between
Aytu BioScience, Inc. and the investors named therein.

Employment Agreement, effective as of December 18, 2017,
between Aytu BioScience, Inc. and David A. Green.

Warrant Exercise Agreement dated March 23, 2018.

124

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

10-Q

10-K

8-K

8-K

8-K

8-K

8-K

05/27/15

10.14

04/22/15

10.11

04/22/15

10.12

05/27/15

10.14

07/24/15

10.1

10/07/15

10.18

10/13/15

10.19

01/20/16

04/25/16

04/25/16

07/28/16

07/28/16

04/18/17

04/18/17

05/11/17

10.1

10.1

10.2

10.1

10.2

10.1

10.2

10.1

08/31/17

10.25

07/27/17

08/16/17

08/16/17

12/19/17

03/28/18

10.1

10.1

10.2

10.1

10.1

    
    
    
    
Table of Contents

Exhibit
No.

10.29

10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38†

10.39†

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

10.49

10.50

10.51

10.52

10.53

Description

     Registrant’s

Form

Date Filed

     Exhibit
Number

Filed
Herewith

10-K

09/06/18

10.31

Amended and Restated Exclusive License Agreement, dated
June 11, 2018, between Aytu BioScience, Inc. and Magna
Pharmaceuticals, Inc.

Promissory Note, dated November 29, 2018, between Aytu
BioScience, Inc. and Armistice Capital Master Fund Ltd.

Waiver of Blocker.

Common Stock Purchase Warrant.

Exchange Agreement, dated February 5, 2019.

License, Development, Manufacturing and Supply
Agreement, dated November 2, 2018.

Amendment No.1 to Securities Purchase Agreement.

Independent Contractor Services Agreement.

Second Amendment to Lease Agreement, dated April 4,
2019.

Employment Agreement with Jarret T. Disbrow, dated
April 16, 2019.

Employment Agreement with Joshua R. Disbrow, dated
April 16, 2019.

Amended and restated License and Supply Agreement with
Acerus Pharmaceuticals, dated July 29, 2019.

Form of Contingent Value Rights Agreement.

Registration Rights Agreement, dated October 11, 2019.

Securities Purchase Agreement, dated October 15, 2019.

Placement Agency Agreement with Ladenburg Thalmann &
Co. Inc., dated October 15, 2019.

First Amendment to Asset Purchase Agreement with
Cerecor, Inc., dated November 1, 2019.

Registration Rights Agreement with Cerecor, Inc., dated
November 1, 2019.

Form of Cerecor Voting Agreement, dated November 1,
2019.

Form of Security Holder Voting Agreement, dated November
1, 2019.

Form of Officer Voting Agreement, dated November 1, 2019

Transition Services Agreement, dated November 1, 2019.

8-K

10-Q

10-Q

10-Q

10-Q

8-K

8-K

11/29/18

02/07/19

02/07/19

02/07/19

02/07/19

04/26/19

05/02/19

10-Q

05/14/19

10-Q

05/14/19

10-Q

05/14/19

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

8-K

08/02/19

09/18/19

10/15/19

10/15/19

10/15/19

11/04/19

11/04/19

11/04/19

11/04/19

11/04/19

11/04/19

Consent and Limited Waiver Agreement, dated November 1,
2019.

8-K/A

11/04/19

Consent and Limited Waiver Agreement, dated November 1,
2019.

8-K/A

11/07/19

Waiver and Amendment to the July 29, 2019 Amended and
Restated License and Supply Agreement, dated November
29, 2019.

8-K

12/02/19

10.1

125

10.1

10.6

10.5

10.3

10.2

10.1

10.1

10.3

10.2

10.1

10.1

10.1

10.3

10.2

10.1

10.1

10.2

10.3

10.4

10.5

10.7

10.6

10.6

    
    
    
Table of Contents

Exhibit
No.

10.54

10.55

10.56

10.57

10.58

10.59†

10.60†

10.61

10.62

10.63

10.64†

10.65

10.66

10.67

10.68†

10.69†

10.70†

10.71

10.72

Description

     Registrant’s

Form

Date Filed

     Exhibit
Number

Filed
Herewith

Form of Securities Purchase Agreement, dated March 10,
2020.

Form of Securities Purchase Agreement, dated March 12,
2020

Form of Securities Purchase Agreement, dated March 19,
2020.

Early Payment Agreement, dated May 29, 2020.

Form of Restricted Stock Cancelation and Exchange
Agreement.

Amended Employment Agreement with Joshua R. Disbrow
dated July 1, 2020.

Amended Employment Agreement with David A. Green
dated July 1, 2020.

License Agreement with Avrio Genetics, LLC, dated January
20, 2020.

Consent, Waiver and Sixth Amendment to Facility
Agreement, by and among Aytu BioScience, Inc., Neos
Therapeutics, Inc., Neos Therapeutics Brands, LLC, Neos
Therapeutics, LP, Neos Therapeutics Commercial, LLC,
PharmaFab Texas, LLC, Deerfield Private Design Fund III
L.P., Deerfield Partners, L.P. and Deerfield Mgmt, L.P., dated
March 19, 2021.

Consent, Waiver and Amendment No. 1 to Loan and
Security Agreement, by and among Aytu BioScience, Inc.,
Neos Therapeutics, Inc., Neos Therapeutics Brands, LLC,
Neos Therapeutics, LP, Neos Therapeutics Commercial,
LLC, PharmaFab Texas, and Encina Business Credit, LLC,
dated March 19, 2021.

Employment Agreement between Aytu BioPharma, Inc. and
Richard Eisenstadt, dated March 31, 2021.

Indemnification Agreement between Aytu BioPharma, Inc.
and Gerald McLaughlin, dated March 19, 2021.

Indemnification Agreement between Aytu BioPharma, Inc.
and Beth P. Hecht, dated March 19, 2021

Termination and Transition Agreement between Aytu
BioPharma, Inc. and Acerus Pharmaceuticals Corporation,
dated March 31, 2021.

Separation Agreement between Aytu BioPharma, Inc. and
David A. Green, dated March 31, 2021.

Second Amendment to Employment Agreement with Joshua
R. Disbrow dated April 7, 2021.

Employment Agreement between Aytu BioPharma, Inc. and
Nathaniel Massari, dated April 12, 2021.

Employment Agreement between Aytu BioPharma, Inc. and
Christopher Brooke, dated April 12, 2021

Option and Exclusive License Agreement between Rumpus
VEDS, LLC and Denovo Biopharma LLC, dated December
21, 2019.

126

8-K

8-K

8-K

8-K

8-K

10-K

10-K

10-Q

03/13/20

03/13/20

03/20/20

06/01/20

07/02/20

10.1

10.1

10.1

10.1

10.1

10/06/20

10.62

10/06/20

10.63

02/11/21

10.1

8-K

03/22/21

10.1

8-K

8-K

10-Q

10-Q

10-Q

10-Q

10-Q

10-Q

10-Q

03/22/21

4/05/21

05/17/21

05/17/21

10.2

10.1

10.7

10.8

05/17/21

10.9

05/17/21

10.10

05/17/21

10.11

05/17/21

10.12

05/17/21

10.13

10-Q

05/17/21

10.14

    
    
    
Table of Contents

Exhibit
No.

10.73

10.74

10.75

10.76

10.77

10.78

10.79

10.80

21.1

23.1

24.1

31.1

31.2

32.1

101 INS

101 SCH

101 CAL

101 DEF

101 LAB

101 PRE

104

Description

     Registrant’s

Form

Date Filed

Exhibit
Number

Filed
Herewith

Exclusive License Agreement between Rumpus VEDS, LLC and
Johns Hopkins University, dated December 20, 2019.

10-Q

05/17/21

10.15

Commitment Letter between Aytu BioScience, Inc. and Neos
Therapeutics, Inc.

8-K

12/10/20

10.1

8-K

12/10/20

10.2

8-K

8-K

8-K

12/10/20

12/10/20

12/10/20

10.3

10.4

10.5

Deerfield Consent Letter, dated as of December 10, 2020, by and
among Aytu BioScience, Inc., Neos Therapeutics, Inc. and the
lenders party thereto.

Commitment Letter, dated as of December 10, 2020, by and
among Aytu BioScience, Inc., Neos Therapeutics, Inc. and Encina
Business Credit, LLC

Form of Aytu Stockholder Voting Agreement

Form of Neos Stockholder Voting Agreement

Asset Purchase Agreement, dated July 1, 2021 by and between
Aytu BioPharma, Inc. and UAB “Caerus Biotechnologies’

Termination Agreement, dated June 29, 2021 by and between Aytu
BioPharma, Inc. and Avrio Genetics, LLC

List of Subsidiaries.

Consent of Plante and Moran, Independent Registered Public
Accounting Firm.

Power of Attorney (contained on signature page hereto)

Certificate of the Chief Executive Officer of Aytu BioScience, Inc.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certificate of the Chief Financial Officer of Aytu BioScience, Inc.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certificate of the Chief Executive Officer and the Chief Financial
Officer of Aytu BioScience, Inc. pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

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Inline XBRL Taxonomy Schema Linkbase Document

Inline XBRL Taxonomy Calculation Linkbase Document

Inline XBRL Taxonomy Definition Linkbase Document

Inline XBRL Taxonomy Labels Linkbase Document

Inline XBRL Taxonomy Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101)

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

†

Indicates is a management contract or compensatory plan or arrangement.

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#

The company has received confidential treatment of certain portions of this agreement. These portions have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

& Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit (indicated by asterisks) have been omitted as the

registrant has determined that (1) the omitted information is not material and (2) the omitted information would likely cause
competitive harm to the registrant if publicly disclosed.

Item 16.    Form 10-K Summary

None

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Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Date: September 28, 2021

AYTU BIOPHARMA, INC.

By: /s/ Joshua R. Disbrow
Joshua R. Disbrow
Chairman and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

We the undersigned directors and officers of Aytu BioPharma, Inc. (the “Company”), hereby severally constitute

and appoint Joshua R. Disbrow and Richard Eisenstadt, and each of them singly, our true and lawful attorneys, with full
power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, to file any and
all amendments to this Annual Report on Form 10‑K, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys‑in‑fact and agents, and
each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said
attorneys‑in‑fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by
virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the Registrant in the capacities indicated, on September 28, 2021.

Signature

Title

/s/ Joshua R. Disbrow

Joshua R. Disbrow

/s/ Richard I. Eisenstadt

Richard I. Eisenstadt

Michael E. Macaluso

/s/ Carl C. Dockery

Carl C. Dockery

/s/ John A. Donofrio, Jr.

John A. Donofrio, Jr.

/s/ Gary V. Cantrell

Gary V. Cantrell

Chairman and Chief Executive Officer
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial and Accounting Officer)

Director

Director

Director

Director

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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
AYTU BIOPHARMA, INC.

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

130

Page
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F-4
F-5
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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Aytu BioPharma, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Aytu BioPharma, Inc. and Subsidiaries (the “Company”)
as of June 30, 2021 and 2020; the related consolidated statements of operations, stockholders' equity, and cash flows for the
years then ended; and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30,
2021 and 2020, and the results of its operations and its cash flows for each of the years then ended in conformity with
accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the
critical audit matters or on the accounts or disclosures to which they relate.

Goodwill, Aytu BioPharma Reporting Unit – Refer to Notes 2 and 8 to the consolidated financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves comparing the carrying value of each reporting unit to the
estimated fair value of the reporting unit. The Company’s determination of estimated fair value of the reporting unit is
determined by the income approach. The determination of the estimated fair value requires management to make significant
estimates and assumptions related to the valuation of the reporting unit. Changes in these assumptions could have a
significant impact on either the fair value of the reporting unit, the amount of any goodwill impairment charge, or both. The
Company’s consolidated goodwill balance was $65.8 million as of June 30, 2021, of which $57.2 million was

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allocated to the Aytu BioPharma unit, which is the reporting unit that exhibits significant sensitivity to changes in estimates
and assumptions given the limited cushion between the carrying value and estimated fair value. As of June 30, 2021, the
estimated fair value of the Aytu BioPharma reporting unit exceeded its carrying value by more than 12%.

We identified the valuation of goodwill for the Aytu BioPharma reporting unit as a critical audit matter because of the
significant estimates and assumptions management to estimate its fair value. These assumptions included revenue growth
rates, forecasted margins, and the selection of a discount rate. Our performance of audit procedures to evaluate the
assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the need to involve
our fair value specialists.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the fair value of the Aytu BioPharma reporting unit focused on revenue growth rates, gross
margin, and the selection of the discount rate and included the following procedures, among others:

● We obtained an understanding of management’s process to determine reporting units and estimate the fair

value of its reporting units and ensure the accuracy of key data used in their estimation process. We also
evaluated the design of key controls used by management to develop their fair value estimates.

● We assessed the reasonableness of management’s forecast by comparing the forecasted revenue growth rates
and gross margins used to Aytu BioPharma’s historical results and internal communications to management
and the board of directors as well as information included the in Company press releases.

● With the assistance of our internal valuation specialists, we assessed the sensitivity of the Company's

impairment conclusions to changes in the forecasts, discount rates, and earnings multiples. We evaluated the
assumptions used by management, including testing the underlying source information and the mathematical
accuracy of the calculations by developing a range of independent estimates and comparing those to the rates,
including weighted average cost of capital and discount rates, selected by management.

Business Combination – Refer to Notes 2 and 4 to the consolidated financial statements

Critical Audit Matter Description

On March 19, 2021, the Company completed the merger with Neos Therapeutics, Inc. (“Neos) for total consideration of
$69.1 million. The Company accounted for the merger under the acquisition method of accounting for business
combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their
respective fair values, resulting in developed technology rights of $30.2 million, developed products technology of $22.7
million, other identifiable intangible assets of $3.6 million, and goodwill of $37.7 million. Management estimated the fair
value of the intangible assets using discounted cash flow analyses, which were based on the Company’s best estimates of
future sales, earnings and cash flows after considering such factors as general market conditions, product lifecycles, long
term business plans and recent operating performance. Determining the fair value of the intangible assets acquired required
significant judgment, including the amount and timing of expected future cash flows and the selected discount rates.

We identified the assumptions related to estimating the amount and timing of expected future cash flows and discount rates
to be a critical audit matter given the inherent judgment involved in estimating these amounts. Performing audit procedures
to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an
increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the Neos business combination included the following, among others:

● We obtained an understanding of management’s process to estimate the fair value of the acquired assets and

assumed liabilities and ensure the accuracy of key data used in their fair value calculations. We also evaluated
the design of key controls used by management to develop their fair value estimate.

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Table of Contents

● We assessed the reasonableness of management’s forecasts of future cash flows by performing inquiries of
appropriate individuals outside of the finance organization, comparing the projections to historical results,
contractual agreements, and internal communications to management and board of directors.

● With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation

methodology and (2) the discount rates utilized, including testing the source information underlying the
determination of the discount rates, testing the mathematical accuracy of the calculation, and developing a
range of independent estimates and comparing those to the discount rates selected by management.

● We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of

the audit.

/s/ Plante & Moran, PLLC
Denver, Colorado

September 28, 2021

We have served as the Company’s auditor since 2015.

F-3

AYTU BIOPHARMA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In thousands, except shares and per-share)

Table of Contents

Assets

Current assets

Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventory, net
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use asset
Intangible assets, net
Goodwill
Other long-term assets
Total long-term assets

Total assets

Liabilities

Current liabilities

Accounts payable and other
Accrued liabilities
Accrued compensation
Short-term line of credit
Current portion of debt
Current portion of operating lease liabilities
Current portion of fixed payment arrangements
Current portion of CVR liabilities
Current portion of contingent consideration

Total current liabilities

Long-term debt, net of current portion
Long-term operating lease liability, net of current portion
Long-term fixed payment arrangements, net of current portion
Long-term CVR liabilities, net of current portion
Long-term contingent consideration, net of current portion
Other long-term liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity

$

$

$

June 30, 

2021

2020

$

$

$

49,649
252
28,176
16,339
9,780
1,038
105,234
5,140
3,563
85,464
65,802
465
160,434
265,668

19,255
51,295
5,939
7,934
16,668
940
3,134
218
4,055
109,438
180
2,624
6,324
1,177
8,002
355
128,100

48,082
251
5,633
9,999
5,715
5,742
75,422
259
634
48,855
28,090
33
77,871
153,293

11,640
8,831
3,117
—
982
300
2,340
840
713
28,763
—
725
11,172
4,732
12,875
11
58,278

Preferred Stock, par value $.0001; 50,000,000 shares authorized; no shares issued or outstanding
as of June 30, 2021 and 2020
Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding
27,490,412 and 12,583,736, respectively, as of June 30, 2021 and 2020
Additional paid-in capital
Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

—  

—

3
315,864
(178,299)
137,568
265,668

$

1
215,024
(120,010)
95,015
153,293

$

See the accompanying Notes to the Consolidated Financial Statements.

F-4

    
    
      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
 
Table of Contents

AYTU BIOPHARMA, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(In thousands, except share and per-share)

Product revenue, net
Cost of sales
Gross profit

Operating expenses

Research and development
Selling and marketing
General and administrative
Acquisition related costs
Restructuring costs
Impairment of intangible assets
Amortization of intangible assets

Total operating expenses
Loss from operations
Other (expense) income
Other (expense), net
Gain / (Loss) from contingent consideration
Gain (Loss) on extinguishment of debt
Gain from warrant derivative liability

Total other (expense) income

Loss before income tax
Income tax expense
Net loss

Weighted average number of common shares outstanding
Basic and diluted net loss per common share

$

Year Ended June 30, 
2020
2021
27,632
8,281
19,351

65,632 $
36,432
29,200

5,623
30,308
25,500
2,919
4,886
12,825
6,009
88,070  
(58,870)  

1,722
11,403
19,657
2,348
667
195
4,490
40,482
(21,131)

(2,050)
4,459
(1,569)
—
840  

(2,606)
10,430
(316)
2
7,510
(13,621)
—
$
(13,621)
  16,746,679   4,519,201
(3.01)
$

259  
(58,289) $

(3.48) $

(58,030)

See the accompanying Notes to the Consolidated Financial Statements.

F-5

 
 
 
 
 
 
 
  
 
  
 
 
 
 
Table of Contents

AYTU BIOPHARMA, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except shares)

Preferred Stock

Balance beginning of period
Issuance of stock for business acquisition, net of issuance costs
Issuance of preferred stock in private placement, net of $742 issuance costs
Preferred converted into common stock

Balance end of period

Common Stock

Balance beginning of period
Stock-based compensation
Issuance of stock for business acquisition, net of issuance costs
Issuance of common stock from March 2020 offerings, net of $4,524 issuance
costs
Issuance of common stock from 2020 Shelf, net of $731 and $1,860  issuance 
costs in 2021 and 2020, respectively
Preferred converted into common stock
Issuance of common stock related to debt conversion
Warrants exercised
Issuance of common stock from December 2020 offering, net of $2,640
issuance costs
Issuance of common stock to consultants
Issuance of common stock related to settlement
Issuance of common stock for CVRs payout

Balance end of period
Additional Paid-In Capital

Balance beginning of period
Stock-based compensation
Issuance of stock for business acquisition, net of issuance costs
Issuance of preferred stock in private placement, net of $742 issuance costs
Warrants issued in private placement
Issuance of common stock from March 2020 offerings, net of $4,524 issuance
costs
Warrants issued from March 2020 offerings
Issuance of common stock from 2020 Shelf, net of $731 and $1,860  issuance 
costs in 2021 and 2020, respectively
Preferred converted into common stock
Issuance of common stock related to debt conversion
Issuance of common stock from December 2020 offering, net of $2,640
issuance costs
Warrants exercised
Issuance of common stock to consultants
Issuance of common stock related to settlement
Tax withholding for stock-based compensation
Estimated fair value of replacement equity awards
Issuance of common stock for CVRs payout

Balance end of period

Accumulated Deficit

Balance beginning of period
Net loss

Balance end of period
Total stockholders' equity

Year Ended June 30, 

2021

2020

Shares

     Amount

Shares

     Amount

— $
—     
—
—
—

12,583,736
1,722,125
5,471,804

—

2,663,312
—
130,081
—

4,816,164
—
—
103,190
27,490,412

—
—
—
—
—

1
—
1

—

1
—
—
—

—
—
—
—
3

$

3,594,981
11,803,747     
10,000
(15,408,728)
—

1,753,808
195,291
380,971

3,636,527

430,227
2,539,873
184,205
3,310,276

—
16,500
12,238
123,820
12,583,736

—
—
—
—
—

—
—

—
—
—

—
—
—
—
—
—
—
—

215,024
3,574
53,102
—
—

—
—

15,569
—
1,058

26,110
—
—
—
(5)
432
1,000
315,864

—
—
—
—
—

—
—

—
—
—

—
—
—
—
—
—
—
—

—
1
—
(1)
—

—
—
—

1

—
—
—
—

—
—
—
—
1

113,477
1,079
9,965
5,250
4,009

33,278
11,182

4,983
94
2,579

—
26,990
231
174
—
—
1,733
215,024

—
—
—
27,490,412

(120,010)
(58,289)
(178,299)
137,568

$

—
—
—
12,583,736

(106,389)
(13,621)
(120,010)
95,015

$

See the accompanying Notes to the Consolidated Financial Statements

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AYTU BIOPHARMA, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)

Operating Activities

Net loss
Adjustments to reconcile net loss to cash used in operating activities:

Year Ended June 30, 
2020
2021

$

(58,289)

$

(13,621)

Depreciation, amortization and accretion
Impairment of intangible assets
Stock-based compensation expense
Loss (gain) from contingent considerations
Inventory write-down
Changes in allowance for bad debt
Loss on debt extinguishment
Amortization of senior debt discount (premium)
Other noncash adjustments

Changes in operating assets and liabilities:

Accounts receivable
Inventory
Prepaid expenses and other current assets
Accounts payable and other
Accrued liabilities
Other operating assets and liabilities, net
Net cash used in operating activities

Investing Activities

Contingent consideration payment
Cash received from acquisition
Cash payment for business acquisition
Cash payment for asset acquisition
Other investing activities

Net cash used in investing activities

Financing Activities

Proceeds from issuance of stock
Payment of stock issuance costs
Warrant exercises
Payment made to fix payment arrangement
Payments made to borrowings
Proceeds from borrowings
Other financing activities

Net cash provided by financing activities

Net change in cash, restricted cash and cash equivalents
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

Cash and cash equivalents
Restricted cash

Total cash, cash equivalents and restricted cash
Supplemental cash flow data
Cash paid for interest
Non-cash investing and financing activities:

Contingent value rights payout
Issuance of common stock for note conversion
Estimated fair value of replacement equity awards
Fair value of liabilities assumed
Fair value of non-cash assets acquired
Issuance cost related to S‑3
Issuance of stock for business acquisition
Other noncash investing and financing activities
Warrants issued

$

$

$

$

$
$
$
$
$
$
$
$
$

See accompanying Notes to Consolidated Financial Statements

F-7

9,201
12,825
3,574
(4,459)
7,332
608
1,569
(44)
38

1,544
2,786
157
(3,245)
771
(332)
(25,964)

(683)
15,722
(15,520)
(2,341)
40
(2,782)

45,051
(4,903)
—
(6,088)
(54,947)
51,206
(5)
30,314
1,568
48,333
49,901

49,649
252
49,901

1,249

$

$

$

$

1,000
1,058
432
88,700
104,322

$
$
$
$
$
— $
$
— $
$

53,104

1,628

5,714
195
1,079
(10,430)
1,265
405
316
532
46

(3,561)
(8,216)
(6,066)
(1,377)
5,345
—
(28,374)

(203)
391
(5,850)
—
6
(5,656)

65,730
(5,404)
26,992
—
(19,437)
3,188
—
71,069
37,039
11,294
48,333

48,082
251
48,333

1,040

2,000
2,579
—
—
—
1,531
18,365
1,607
—

    
   
  
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
 
 
Table of Contents

AYTU BIOPHARMA, INC. AND SUBSIDIARY
Notes to the Financial Statements

1. Nature of Business and Financial Condition

Aytu BioPharma, Inc. (“Aytu”, the “Company” or “we”), is a commercial-stage specialty pharmaceutical company

focused on commercializing novel therapeutics and consumer healthcare products. The Company currently operates the
Aytu BioPharma business, consisting of the prescription pharmaceutical products (the “Rx Portfolio”), and Aytu consumer
healthcare products business (the “Consumer Health Portfolio”). The Rx Portfolio is focused on commercializing
prescription pharmaceutical products for the treatment of attention deficit hyperactivity disorder ("ADHD"), allergies,
insomnia and various pediatric conditions. The Aytu consumer health business is focused on commercializing consumer
healthcare products. The Company was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado
and was re-incorporated in the state of Delaware on June 8, 2015.

The Rx Portfolio consists of (i) Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets,

Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets and Adzenys ER (amphetamine)
extended-release oral suspension for the treatment of ADHD (ii) Poly-Vi-Flor and Tri-Vi-Flor, two complementary
prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various
formulations for infants and children with fluoride deficiency, (iii) Karbinal ER, an extended-release carbinoxamine
(antihistamine) suspension indicated to treat numerous allergic conditions, (iv) ZolpiMist, the only FDA-approved oral
spray prescription sleep aid, (v) Tuzistra XR, the only FDA-approved 12-hour codeine-based antitussive syrup and (vi) a
generic Tussionex (hydrocodone and chlorpheniramine) (“generic Tussionex”), extended-release oral suspension for the
treatment of cough and upper respiratory symptoms of a cold.

The Consumer Health Portfolio consists of over thirty consumer health products competing in large healthcare

categories, including diabetes management (with a concentration on neuropathy), pain management, digestive health, sexual
and urological health and general wellness for men and women, commercialized through direct-to-consumer marketing
channels utilizing the Company's proprietary Beyond Human marketing and sales platform and on e-commerce platforms.

On April 12, 2021, the Company entered into an asset purchase agreement with Rumpus VEDS, LLC, Rumpus

Therapeutics, LLC, Rumpus Vascular, Christopher Brooke and Nathaniel Massari pursuant to which the Company acquired
certain rights and other assets, including key commercial global licenses, relating primarily to the pediatric-onset rare
disease development asset enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied
for the treatment of vascular Ehlers-Danlos Syndrome (“vEDS”). This asset was acquired for an up-front fee of $1.5 million
in cash and payment of aggregated fees of $0.6 million. Upon the achievement of certain regulatory and commercial
milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of the Company’s common stock,
generally at the Company’s option. AR101 (enzastaurin) is an orally available investigational first-in-class small molecule,
serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways.

On March 31, 2021, the Company and Acerus Pharmaceuticals Corporation (“Acerus”) entered into a termination

and transition agreement (the “Termination Agreement”) to terminate the License and Supply Agreement previously entered
into on July 29, 2019 related to Natesto®. Pursuant to the Termination Agreement, the Company ceased all sales, marketing
and promotion of Natesto, and Acerus agreed to pay the Company an aggregate amount of $7.5 million, payable in equal
monthly installment payments of $250,000 for a period of 30 consecutive months.

On March 19, 2021, the Company acquired Neos Therapeutics, Inc. (“Neos”), a commercial-stage pharmaceutical

company developing and manufacturing central nervous system-focused products (the “Neos Merger”). Neos
commercializes Adzenys XR-ODT, Cotempla XR-ODT and Adzenys-ER in the United States using Neos’ internal
commercial organization. These commercial products are extended-release (“XR”) medications in patient-friendly, orally
disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize Neos' microparticle modified-release drug
delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for these three
products. In addition, Neos manufactures and sells a generic Tussionex.

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Table of Contents

On December 8, 2020, the Company effected a reverse stock split in which each common stockholder received one
share of common stock for every 10 shares held (herein referred to collectively as the “Reverse Stock Split”). All share and
per share amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split.

The Company incurred $4.9 million and $0.7 million merger and acquisitions related restructuring costs during the

years ended June 30, 2021 and 2020, respectively, all of which was paid during the year ended June 30, 2021. These costs
are primarily related to severance payments to employees affected by the change in business structure.

The Company’s strategy is to continue building its portfolio of revenue-generating products, leveraging its

commercial team’s expertise to build leading brands within large therapeutic markets, while also developing a de-risked,
late-stage pipeline focused on pediatric-onset conditions and difficult-to-treat diseases.

As of June 30, 2021, the Company had approximately $49.9 million of cash, cash equivalents and restricted cash.
The Company’s operations have historically consumed cash and are expected to continue to consume cash. The Company
incurred a net loss of approximately $58.3 million and $13.6 million during the years ended June 30, 2021 and 2020,
respectively. The Company had an accumulated deficit of approximately $178.3 million and $120.0 million as of June 30,
2021 and 2020, respectively. Cash used in operations was approximately $26.0 million and $28.4 million during the years
ended June 30, 2021 and 2020, respectively.

Management plans to focus on raising additional capital in order to meet its obligations and execute its business

plan or otherwise reduce its expenses or renegotiate its debt facilities. Management believes that the Company has access to
capital resources through possible public or private equity offerings, debt financings, or other means; however, the Company
cannot provide any assurance that it will be able to raise additional capital or obtain new financing on commercially
acceptable terms. If the Company is unable to secure additional capital, it may be required to curtail its operations or delay
the execution of its business plan.

As of the date of this Report, the Company expects its costs for operations to increase as the Company integrates

the Neos acquisition, invests in new product development, continues to focus on revenue growth through increasing product
sales and additional acquisitions. The Company’s current assets totaling approximately $105.2 million as of June 30, 2021
and the proceeds expected from ongoing product sales will be used to fund existing operations. The Company may continue
to access the capital markets from time-to-time when market conditions are favorable. The timing and amount of capital that
may be raised is dependent on the terms and conditions upon which investors would require to provide such capital. There is
no guarantee that capital will be available on terms favorable to the Company and its stockholders, or at all. Upon closing of
the Neos merger, on March 19, 2021, the Company paid down $15.4 million of Neos' senior secured long-term debt,
including accrued interest and $5.5 million of merger costs incurred by Neos.

Since the Company has sufficient cash on-hand as of June 30, 2021 to cover potential net cash outflows for the

twelve months following the filing date of this Annual Report, the Company reports that there exists no substantial doubt
about its ability to continue as a going concern.

If the Company is unable to raise adequate capital in the future when it is required, the Company's management can

adjust its operating plans to reduce the magnitude of the Company's capital need under its existing operating plan. Some of
the adjustments that could be made include delays of and reductions to commercial programs, reductions in headcount,
narrowing the scope of the Company’s commercial plans or reductions or delays to its research and development programs.
Without sufficient operating capital, the Company could be required to relinquish rights to products or renegotiate to
maintain such rights on less favorable terms than it would otherwise choose. This may lead to impairment or other charges,
which could materially affect the Company’s balance sheet and operating results.

2. Summary of Significant Accounting Policies

Principals of Consolidation. The Company’s consolidated financial statements include the accounts of: Aytu

Therapeutics, LLC, Innovus Pharmaceuticals, Inc. and Neos Therapeutics, Inc. and their respective wholly owned
subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

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Basis of Presentation. The Company’s consolidated financial statements have been prepared in accordance with

generally accepted accounting principles in the United States (“U.S. GAAP”).

Use of estimate. The preparation of financial statements in conformity with U.S. GAAP requires management to

make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting
period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based
compensation, revenue recognition, allowance for doubtful accounts, determination of variable consideration for accruals of
chargebacks, administrative fees and rebates, government rebates, returns and other allowances, allowance for inventory
obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, fair value of long-
lived assets, income tax provision, deferred taxes and valuation allowance, determination of right-of-use assets and lease
liabilities, purchase price allocations, and the depreciable lives of long-lived assets. Because of the uncertainties inherent in
such estimates, actual results may differ from those estimates. Management periodically evaluates estimates used in the
preparation of the financial statements for reasonableness.

Prior Period Reclassification. Certain prior year amounts in the consolidated balance sheets, statements of earnings

and statements of cashflows have been reclassified to conform to the current year presentation, including a reclassification
made in the presentation of FDA fees for commercialized product. This was previously included in general and
administrative expenses and now is recorded as a component of cost of sales on the consolidated statements of earnings.
These reclassifications did not affect operating earnings or other consolidated financial statements for the years ended June
30, 2021 and 2020.

Cash, Cash Equivalents and Restricted Cash. The Company’s primary objectives for investment of available cash

are the preservation of capital and the maintenance of liquidity. The Company invests its available cash balances in bank
deposits and money market funds. The Company considers all highly liquid instruments purchased with an original maturity
of three months or less to be cash equivalents. Restricted cash consists primarily of amounts held in a certificate of deposit
to maintain certain business credit cards. As of June 30, 2021 and 2020, cash, cash equivalents and restricted cash was $49.9
million and $48.3 million, respectively.

Accounts Receivable. Accounts receivables are reported on the consolidated balance sheets at outstanding amounts

due from customers, less an allowance for doubtful accounts, discounts and pricing chargebacks. The Company extends
credit without requiring collateral and typically does not charge interest on past due accounts but reserves the right to do so.
As of June 30, 2021, reserve for discounts and chargebacks were $1.1 million and $1.0 million, respectively, and were $0.3
million and negligible amount as of June 30, 2020.

The Company writes off uncollectible receivables when the likelihood of collection is remote. The Company

evaluates the collectability of accounts receivable on a quarterly basis. An allowance, when needed, is based upon various
factors, including: the financial condition and payment history of customers; an overall review of collections experience on
other accounts; and, economic factors or events expected to affect future collections experience. Allowance for doubtful
accounts was $1.0 million and $0.4 million as of June 30, 2021 and 2020, respectively.

Inventories. Inventories consist of raw materials, work in process and finished goods and are recorded at the lower

of cost or net realizable value, with cost determined on a first-in, first-out basis. Until objective and persuasive evidence
exists that regulatory approval has been received and future economic benefit is probable, pre-launch inventories are
expensed into research and development. Post-FDA approval, manufacturing costs for the production of our products are
capitalized into inventory.

The Company periodically reviews the composition of its inventories in order to identify obsolete, slow-moving,

excess or otherwise unsaleable items. Unsaleable items will be written- down to net realizable value in the period identified.
The reserve for slow moving inventories was $2.5 million and $1.3 million as of June 30, 2021 and 2020, respectively.

Going Concern Determination. The Company periodically performs an evaluation for going concern accounting if

the Company has experienced negative financial trends. The evaluation should be based on relevant

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conditions and events that are known and reasonably knowable within one year after the date that the financial statements
are issued. Recurring operating losses or year over year negative cash flows from operating activities are considered
negative trends.

Property and equipment. Property and equipment are recorded at cost, less accumulated depreciation and

amortization. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. Leasehold
improvements are amortized over the term of the lease agreement or the service lives of the improvements, whichever is
shorter. The Company begins depreciating assets when they placed into service. When property and equipment is disposed,
the associated cost and accumulated depreciation is removed from the consolidated balance sheets and any resulting gain or
loss included in the consolidated statements of operations. Maintenance and repairs are expenses as incurred. Useful lives of
property and equipment by each asset category is summarized below:

Manufacturing equipment
Leasehold improvements
Office equipment, furniture and other
Lab equipment

Estimated
Useful Lives
in years
2 - 7
3
2 - 7
3 - 7

Leases. At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease

based on the unique facts and circumstances present in such arrangement. Lease classification, recognition and measurement
are then determined at the lease commencement date. For arrangements that contain a lease, the Company will (i) identify
lease and non-lease components, (ii) determine the consideration in the contract, (iii) determine whether the lease is an
operating or financing lease, and (iv) recognize lease right-of-use (“ROU”) assets and liabilities. Lease liabilities and their
corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. When
determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that
the Company will exercise that option. The Company uses the implicit interest rate when readily determinable and uses the
Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information
available at the lease commencement date in determining the present value of the lease payments.

Fixed lease payments are recognized over the expected term of the lease using the effective interest method.

Variable lease expenses that are not considered fixed, or in substance fixed, are expensed as incurred. Fixed and variable
lease expense on operating leases are recognized within cost of goods sold and operating expenses in the Company’s
consolidated statements of operations. ROU asset amortization and interest costs on financing leases are recorded within
cost of goods sold and interest expense, respectively, in the Company’s consolidated statements of operations. The Company
has elected the short-term lease exemption and recognizes a short-term lease expense over lease terms of 12 months or less.

Operating leases are included in operating lease ROU assets, current portion of operating lease liabilities and
operating lease liabilities in the Company’s consolidated balance sheets. Financing leases are included in property and
equipment, net, current portion of long-term debt and long-term debt, net of current portion in the Company’s consolidated
balance sheets.

Fair Value of Financial Instruments.

Cash, cash equivalents and restricted cash, accounts receivable and accounts payable. The carrying amounts of
financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts
payable approximate their fair value due to their short maturities.

Contingent consideration. The Company classifies contingent consideration liabilities related to business
acquisitions within Level 3 as factors used to develop the estimated fair value are unobservable inputs that

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are not supported by market activity. The Company estimates the fair value of contingent consideration
liabilities using a Monte Carlo models. Changes in the fair value of contingent liabilities in subsequent periods
are recorded as a loss (gain) in the statements of operations.

Warrants. The Company accounts for liability classified warrants by recording the fair value of each
instrument in its entirety and recording the fair value of the warrant derivative liability. The fair value of
liability classified derivative financial instruments were calculated using a lattice valuation model. Equity
classified warrants are valued using a Black-Scholes model. Changes in the fair value of liability classified
derivative financial instruments in subsequent periods are recorded as derivative income or expense in the
statements of operations.

Contingent value rights. The Company classifies contingent value rights liabilities related to business
acquisitions within Level 3 as factors used to develop the estimated fair value are unobservable inputs that are
not supported by market activity. The Company estimates the fair value of contingent value rights liabilities
using a Monte Carlo model. Changes in the fair value of contingent liabilities in subsequent periods are
recorded as a loss (gain) in the statements of operations.

Fixed Payment Arrangements. Fixed payment arrangements are comprised of minimum product payment
obligations relating to either make whole payments or fixed minimum royalties. The fixed payment
arrangements were recognized at their amortized cost basis using a market appropriate discount rate and are
accreted up to their ultimate face value over time. The liabilities related to fixed payment arrangements are not
remeasured at each reporting period unless there is an occurrence of a modification or extinguishment of these
obligations.

Revenue Recognition. The Company generates revenue from product sales through its prescription pharmaceutical

products segment (“Aytu BioPharma Segment”) and its consumer healthcare products segment (“Aytu Consumer Health
Segment”). The Company recognizes revenue when all of the following criteria are satisfied: (i) identification of the
promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance
obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price,
including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and
(v) as each performance obligation is individually satisfied.

Aytu BioPharma Segment

Net product sales consist of sales of prescription pharmaceutical products under the Rx Portfolio, principally to a

limited number of wholesale distributors and pharmacies in the United States. International sales are made primarily to
specialty distributors, as well as to hospitals, laboratories, and clinics, some of which are government owned or supported
(collectively, its “Customers”). Products are generally shipped “free-on-board” destination when shipped domestically
within the United States, and “free-on-board” shipping point when shipped internationally consistent with the contractual
terms.

The Company makes estimates of the net sales price, including estimates of variable consideration (e.g., savings

offers, prompt payment discounts, product returns, wholesaler (distributor) fees, wholesaler chargebacks and estimated
rebates) to be incurred on the respective product sales, and recognizes the estimated amount as revenue when control of the
product is transferred to its customers (e.g., upon delivery). Variable consideration is determined using either an expected
value or a most likely amount method. The estimate of variable consideration is also subject to a constraint such that some
or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is
probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated
with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint
requires the use of significant management judgment and other market data. The Company provides for prompt payment
discounts, wholesaler fees and wholesaler chargebacks based on customer contractual stipulations. The Company analyzes
recent product return history to determine a reliable return rate. Additionally, management analyzes historical savings offers
and rebate payments based on patient prescriptions and information obtained from third party providers to determine these
respective variable considerations.

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Savings offers

The Company offers savings programs for its patients covered under commercial payor plans in which the cost of a

prescription to such patients is discounted. The amount of redeemed savings offers is recorded based on information from
third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a
gross to net sales adjustment at the time revenue is recognized. Historical trends of estimated savings offers will be regularly
monitored, which may result in adjustments to such estimates in the future.

Prompt payment discounts

Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount

allowance against accounts receivable and as a gross to net sales adjustment at the time revenue is recognized.

Wholesale distribution fees

Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s
products by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is
recognized.

Rebates

The Rx Portfolio products are subject to commercial managed care and government managed Medicare and

Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal
and/or state governments. Calculations related to rebate accruals are estimated based on information from third-party
providers. Estimated rebates are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is
recognized. Historical trends of estimated rebates will be regularly monitored, which may result in adjustments to such
estimates in the future.

Returns

Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product
ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to
recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such
product starting six months prior to expiry date to twelve months post expiry date. Estimated returns are recorded as accrued
expenses and as a gross to net sales adjustments at the time revenue is recognized. The Company analyzed return data
available from sales since inception date to determine a reliable return rate.

Wholesaler chargeback

The Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is
discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the
discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to
the Company. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net
sales adjustment at the time revenue is recognized based on information provided by third parties.

Aytu Consumer Health Segment

The Aytu Consumer Health Portfolio generates its revenue from sales of various consumer health products through

direct-to-consumer marketing channels utilizing the Company's proprietary Beyond Human marketing and sales platform
and on e-commerce platforms. Revenue is generally recognized ”free-on-board” shipping point, as those are the agreed-
upon contractual terms. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific
revenue-producing transaction that are collected by the Company from a customer are excluded from revenue. Shipping and
handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for
as a fulfillment cost and are included in cost of sales.

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Customer Contract Costs. The Company has elected to adopt the practical expedient on expensing the incremental
costs to obtain a contract, given the expectation that any amounts attributable to obtaining such a contract would be satisfied
within one year.

Credit Risk and Customer Concentrations. Financial instruments that potentially subject the Company to credit risk

concentrations consist of cash, cash equivalents and accounts receivable. The counterparties are various corporations,
governmental institutions and financial institutions of high credit standing.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.

The Company periodically monitors the credit quality of the financial institutions with which it invests. Management
believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions
in which those deposits are held.

The Company’s customers, sometimes referred to as partners or customers, are primarily large wholesale
distributors that resell the Company’s products to retailers. As such, the loss of one or more of these large customers could
have a material adverse effect on the Company’s business, operating results or financial condition.

The Company is also subject to credit risk from accounts receivable related to product sales. Historically, the

Company has not experienced significant credit losses on its accounts receivable and does not expect to have write-offs or
adjustments to accounts receivable which would have a material adverse effect on the Company’s financial position,
liquidity or results of operations. The following table presents certain customers that contributed more than 10% of gross
revenue and accounts receivable:

Customer A
Customer B
Customer C
Customer D

Percentage of gross revenue

Percentage of accounts receivable

2021

2020

2021

2020

June 30, 

25 %  
15 %  
14 %  
— %  

16 %
16 %
14 %
— %

35 %  
29 %  
22 %  
— %  

19 %
16 %
14 %
12 %

Costs of Sales. Costs of sales consists primarily of manufactured product cost, products acquired from third-party
manufacturers, freight, production and indirect manufacturing overhead costs, FDA fees for commercialized products and
cost of royalties. In addition, distribution, shipping and handling costs invoiced by the Company's third party logistics
companies are included in cost of sales.

Stock-Based Compensation. The Company accounts for stock-based payments by recognizing compensation
expense based upon the estimated fair value of the awards on the date of grant over the period of service. Stock option
grants are valued on the grant date using the Black-Scholes option pricing model and compensation costs are recognized
ratably over the period of service using the graded method. Restricted stock and restricted stock unit grants are valued based
on the estimated grant date fair value of the Company’s common stock and recognized ratable over the requisite service
period. Forfeitures are adjusted for as they occur.

Research and Development. Research and development costs are expensed as incurred with and include salaries

and benefits, facilities costs, overhead costs, raw materials, laboratory and clinical supplies, clinical trial costs, contract
services, fees paid to regulatory authorities for review and approval of the Company’s product candidates and other related
costs.

Intangible Assets and Goodwill. The Company records intangible assets based on fair value on the date of

acquisition. Intangible assets include licensed asset, product technology rights, developed technology right, distribution
rights, commercial technology, tradename, trademarks and customer lists and in-process research and development
("IPR&D"). The finite-lived intangible assets are recorded at cost and amortized on a straight-line basis over the estimated
lives of the assets. The indefinite-lived intangible assets are not subject to amortization.

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Goodwill is recorded as the difference between the fair value of the purchase consideration and the fair value of the
net identifiable tangible and intangible assets acquired. Goodwill and other intangible assets are reviewed for impairment at
least annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may
not be recoverable. Useful lives of finite-lived intangible assets by each asset category is summarized below:

Licensed asset
Product technology rights
Developed technology
Product distribution rights
Commercial technology
Tradename
Customer list

Estimated
Useful Lives
in years
7
10 - 17
17
5 - 10
2
1
1.5

Impairment of Long-lived Assets. The Company assesses impairment of long-lived assets when events or changes

in circumstances indicates that their carrying value amount may not be recoverable. Long-lived assets consist of property
and equipment, net and goodwill and other intangible assets, net. Circumstances which could trigger a review include, but
are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business
climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of
significantly before the end of its estimated useful life.

If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than

the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

The Company evaluated its long-lived assets for impairment as of June 30, 2021 and 2020 respectively, and

recorded an impairment of $12.8 million for the Natesto and Tuzistra licensed asset and $0.2 million for the MiOXSYS
patent portfolio.

Advertising Costs. Advertising costs consist of the direct marketing activities related to the Aytu Consumer Health

segment. The Company expenses all advertising costs as incurred. The Company incurred $15.2 million and $4.7 million for
the years ended June 30, 2021 and 2020, respectively.

Income Taxes. The provision for income taxes is determined using the asset and liability approach of accounting for

income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and
net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined
using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable,
based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.

The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on

historical taxable income, projected future taxable income, remaining carryforward periods, applicable tax strategies and the
expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely
than not (likelihood of greater than 50%) that some portion or all of the deferred tax assets will not be realized.

The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may

require periodic adjustments and which may not accurately anticipate actual outcomes. Tax positions are recognized only
when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the positions will be
sustained upon examination. Tax positions that meet the more-likely-than-not threshold are measured using a probability
weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.

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Whether the more-likely-than-not recognition threshold is met for a tax position is a matter of judgment based on the
individual facts and circumstances of that position evaluated in light of all available evidence.

The Company recognizes interest and penalties related to uncertain tax positions in Income tax (provision) benefit

in the consolidated statements of operations.

As of June 30, 2021, the Company had $0.2 million deferred tax liabilities included in other long-term liabilities in

the consolidated balance sheet. There was no such liabilities as of June 30, 2020.

Debt issuance costs, discounts (premium). Debt issuance costs reflect fees paid to lenders as compensation for

services beyond their role as a creditor, and third parties whose costs are directly related to issuing debt and that otherwise
would not be incurred. Amounts paid to the lender as a reduction in the proceeds received are considered a component of
the discount on the issuance and not an issuance cost. Debt issuance costs, discounts (premium) related to term loans are
reported as a direct deduction (increase) to the outstanding debt and amortized over the term of the debt using the effective
interest method as an addition (reduction) to interest expense. Debt issuance costs related to a line of credit facility are
accounted for in accordance with ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs
Associated with Line-of-Credit Arrangements, in which the Company elects to defer and present debt issuance costs as an
asset and are recorded at cost and subsequently amortized over the term of the line of credit as additional interest expense.

As of the Neos merger date of March 19, 2021, the Company recorded a $0.8 million premium on the Deerfield

debt (see Note 18) with a balance remaining of $0.6 million as of June 30, 2021.

Segment information. The Company determines its reportable segments in accordance with ASC 280—Segment

Reporting. The Company’s operating segments engage in business activities from which it may earn revenues and incur
expenses and for which discrete information is available. Operating results for the operating segments are regularly
reviewed by the Company’s chief operating decision maker, who is the Company’s Chief Executive Officer, to make
decisions about resources to be allocated to the segment and to assess performance. Operating segments are aggregated for
reporting purposes when the operating segments are identified as similar in accordance with the basic principles and
aggregation criteria in the accounting standards. The Company’s reporting segments are based primarily on product lines.
The reporting segments have different lines of management responsibility as each business requires different marketing
strategies and management expertise. The Company has two reportable segments: Aytu BioPharma (Rx division) and Aytu
Consumer Health. The Company uses operating income (loss) to compare and evaluate its financial performance (see Note
17).

Paragraph IV litigation costs. Legal costs incurred by the Company in the enforcement of the Company’s

intellectual property rights are charged to expense.

Business Combination and Contingent considerations. The Company recognizes the identifiable tangible and

intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess
of purchase price over the aggregate fair values is recorded as goodwill. The Company calculates the fair value of the
identifiable tangible and intangible assets acquired and liabilities assumed to allocate the purchase price at the acquisition
date.

The consideration for our acquisitions and certain licensing agreements often includes future payments that are
contingent upon the occurrence of a particular event or events. The Company records an obligation for such contingent
payments at fair value on the acquisition date. Management estimates the fair value of contingent consideration obligations
through valuation models that incorporate probability-adjusted assumptions related to the achievement of the milestones and
thus likelihood of making related payments. The Company revalues its contingent consideration obligations each reporting
period using Monte Carlo simulation. Changes in the fair value of contingent consideration obligations are recognized in the
consolidated statements of income.

Net Loss Per Common Share. Basic income (loss) per common share is calculated by dividing the net income (loss)

available to the common shareholders by the weighted average number of common shares outstanding during that

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period. Diluted net loss per share reflects the potential of securities that could share in the net loss of Aytu. For all periods
presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the
Company’s net loss position. Restricted stock is considered legally issued and outstanding on the grant date, while RSUs are
not considered legally issued and outstanding until the RSUs vest. Once the RSUs vest, equivalent common shares will be
issued or issuable to the grantee and therefore the RSUs are not considered for inclusion in total common shares issued and
outstanding until vested.

The following table sets-forth securities that could be potentially dilutive, but as of the years ended June 30, 2021

and 2020 are anti-dilutive, and therefore are excluded from the calculation of diluted earnings per share.

Warrants to purchase common stock - liability classified
Warrant to purchase common stock - equity classified
Employee stock options
Employee unvested restricted stock
Employee unvested restricted stock units

Recent Accounting Pronouncements

    (Note 14)
(Note 14)
(Note 13)
(Note 13)
(Note 13)

June 30, 

2021
24,105     

1,254,952  
109,588  
1,955,426  
78,318  
3,422,389  

2020
24,105
2,288,454
76,594
418,606
—
2,807,759

Fair Value Measurements (“ASU 2018-03”). In August 2018, the FASB issued ASU 2018-13, “Fair Value

Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.”
The amendments in the standard apply to all entities that are required, under existing GAAP, to make disclosures about
recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure
requirements in ASC 820, Fair Value Measurement. The standard is effective for all entities for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement
uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal
year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date.
The Company adopted this as of July 1, 2020, the beginning of the Company’s fiscal year-ended June 30, 2021. The most
relevant component of ASU 2018-13 to the Company’s financial statements relates to the need to disclose the range and
weighted-average of significant unobservable inputs used in Level 3 fair value measurements. However, the Company
discloses on a discrete basis all significant inputs for all Level 3 Fair Value measurements.

Financial Instruments – Credit Losses (“ASU 2016-13”). In June 2016, the FASB issued ASU 2016-13,
“Financial Instruments – Credit Losses” to require the measurement of expected credit losses for financial instruments held
at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this
ASU is to provide financial statement users with more decision-useful information about the expected credit losses on
financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The standard was originally effective for interim and annual reporting periods beginning after December 15, 2019
and early adoption was permitted for interim and annual reporting periods beginning after December 15, 2018. However, in
November 2019, the Financial Accounting Standard Board (FASB) issued ASU 2019-10, Financial Instruments—Credit
Losses, (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) — Effective Dates (“ASU 2019-10”).
ASU 2019-10 deferred the adoption date for (i) public business entities that meet the definition of an SEC filer, excluding
entities eligible to be “smaller reporting companies” as defined by the SEC, for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years, and (2) all other entities for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. As of June 30, 2020, the Company qualified as a
smaller reporting companies as defined by the SEC. The Company is currently assessing the impact that ASU 2016-13 will
have on its consolidated financial statements but does not anticipate there to be a material impact.

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3. Revenues from Contracts with Customers

Contract Balances: Contract assets primarily relate to the Company’s right to consideration in exchange for

products transferred to a customer in which that right to consideration is dependent upon the customer selling these
products. As of June 30, 2021, contract assets of $21,000 was included in other current assets in the consolidated balance
sheet. There was no contract asset as of June 30, 2020. Contract liabilities primarily relate to advances or deposits received
from the Company's customers before revenue is recognized. As of June 30, 2021 and 2020, contract liabilities of $0.2
million and $0.3 million, respectively, were included in accrued liabilities in the consolidated balance sheets.

Revenues by Product Portfolio: Net revenue disaggregated by significant product portfolio for the years ended June

30, 2021 and 2020 were as follows.

Primary care and devices portfolio
Pediatric portfolio
Consumer Health portfolio
Consolidated revenue

Year Ended June 30, 

     June 30, 2021      June 30, 2020

(In thousands)

  $

  $

8,250   $
24,428
32,954
65,632   $

7,957
9,292
10,383
27,632

Revenues by Geographic location. The following table reflects our product revenues by geographic location as

determined by the billing address of our customers:

Year Ended June 30, 
2020

2021

U.S.
International

Total net revenue

4. Acquisitions

Fiscal Year 2020 acquisitions

$

$

(In thousands)
$

60,687
4,945
65,632

$

24,980
2,652
27,632

On October 10, 2019, the Company entered into the Purchase Agreement with Cerecor, Inc. (“Cerecor”) to acquire

a line of prescription pediatric products, (the "Pediatric Portfolio"), which closed on November 1, 2019. At closing, the
Pediatric Portfolio consisted of four prescription products (i) Cefaclor™ for Oral Suspension, (ii) Karbinal® ER, (iii) Poly-
Vi-Flor® and (iv) Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million in cash and
approximately 9.8 million shares of Series G Convertible Preferred Stock.

On February 14, 2020, the Company completed the merger with Innovus Pharmaceuticals, Inc. (“Innovus”) after

approval by the stockholders of both companies on February 13, 2020 (the "Innovus Merger"). Upon the effectiveness of the
Innovus Merger, a subsidiary of the Company merged with and into Innovus, and all outstanding Innovus common stock
was exchanged for approximately 380,000 shares of the Company’s common stock and up to $16.0 million of Contingent
Value Rights (“CVRs”). The outstanding Innovus warrants at the time of merger with 'cash out' rights were exchanged for
approximately 2,000,000 shares of Series H Convertible Preferred stock of the Company over a period of time covering
February 26, 2020 through March 10, 2020. The remaining Innovus warrants outstanding at the time of the merger, those
without ‘cash out’ rights at the time of the Innovus Merger, remain outstanding, and upon exercise, retain the right to the
merger consideration offered to Innovus stockholders, including any remaining claims represented by CVRs at the time of
exercise. Innovus is now a 100% wholly-owned subsidiary of the Company, (“Aytu Consumer Health”).

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Neos Merger

 On March 19, 2021, the Company completed the Neos Merger with Neos Therapeutics, Inc. after approval by the 

stockholders of Neos on March 18, 2021 and the approval of the consideration to be delivered by the Company in 
connection with the merger by the shareholders of Aytu, also on March 18, 2021. Upon the effectiveness of the Neos 
Merger, a subsidiary of the Company merged with and into Neos, and all outstanding Neos common stock was exchanged 
for approximately 5.5 million shares of the Company’s common stock. Neos is now a 100% wholly-owned subsidiary of the
Company. The Company pursued the acquisition of Neos in order to gain scale in the industry, expand its product portfolio
and as an opportunity to potentially accelerate the pathway to breakeven. The Company incurred in relation to the Neos
Merger (i) approximately $2.9 million of acquisition related costs, recognized as part of operating expense, and (ii) $0.1
million of issuance costs, recognized as a component of stockholders’ equity.

 The following table summarized the preliminary fair value of assets acquired and liabilities assumed at the date of 

acquisition. These estimates are preliminary, pending final evaluation of certain assets and liabilities, and therefore, are 
subject to revisions that may result in adjustments to the values presented below;

March 19, 2021

(In thousands, except share and per-share)

Considerations:

Fair Value of Aytu Common Stock

Total shares issued at close
Estimated fair value per share of Aytu common stock
Estimated fair value of equity consideration transferred
Cash
Estimated fair value of replacement equity awards

Total consideration transferred

  $
  $

  $

Total consideration transferred
Recognized amounts of identified assets acquired and liabilities assumed

Cash and cash equivalents
Accounts receivable
Inventory
Prepaid expenses and other current assets
Operating leases right-to-use assets
Property, plant and equipment
Intangible assets
Other long-term assets
Accounts payable and accrued expenses
Short-term line of credit
Long-term debt, including current portion
Operating lease liabilities
Other long-term liabilities

Total identifiable net assets

Goodwill

5,471,804
9.73
53,241
15,383
432
69,056

March 19, 2021
(In thousands)

69,056

15,722
24,696
10,984
2,929
3,515
5,519
56,530
149
(56,718)
(10,707)
(17,678)
(3,515)
(82)
31,344
37,712

  $

  $

  $

The fair values of intangible assets were determined using variations of the cost approach, excess earnings method

and the relief-from-royalties method. The fair value of Neos trade name, in-process R&D and developed product
technology, which is the proprietary technology for the development of Adzenys XR-ODT, Adzenys ER, Cotempla XR-
ODT and generic Tussionex, were determined using the relief from royalty method. The fair value of developed

F-19

    
 
 
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technology right, which is a proprietary modified-release drug delivery technology, was determined using multi-period
excess earnings method. The fair value of RxConnect, which is a developed technology for the Neos-sponsored patient
support program that offers affordable and predictable copays to all commercially insured patients, was determined using
cost to recreate method. The finite-lived intangible assets are being amortized over a range of between 1 to 17 years.

The fair values of the identifiable intangible assets acquired were as follows;

Identified intangible assets acquired:

Developed technology right
Developed products technology
In-process R&D
RxConnect
Trade name

Total intangible assets acquired

March 19, 2021

(In thousands)

$

$

30,200
22,700
2,600
630
400
56,530

Pro Forma Impact due to Business Combinations

The following supplemental unaudited proforma financial information presents the Company’s results as if the

following acquisitions had occurred on July 1, 2019:

● Acquisition of the Pediatric Portfolio, effective November 1, 2019.

● Merger with Innovus effective February 14, 2020.

● Merger with Neos, effective March 19, 2021.

Total revenues, net
Net (loss)

Year ended June 30, 

2021
Pro forma
Unaudited

2020
Pro forma
Unaudited (aa)

(In thousands)

$
$

98,064
(74,710)

$
$

97,561
(35,321)

(aa) Due to the absence of discrete financial information for Innovus, covering the period from February 1, 2020 through February
13, 2020, the Company did not include the impact of that stub-period for the pro forma results for the year ended June 30,
2020.

Since the acquisition of Neos on March 19, 2021, Neos has contributed approximately $11.5 million in net

revenues and $8.0 million to net loss.

Other acquisitions

On April 12, 2021, the Company acquired substantially all the assets of Rumpus Therapeutics, LLC through an
asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with
Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”). This asset was acquired for an up-front fee of $1.5
million in cash and payment of aggregated fees of $0.6 million. Upon the achievement of certain regulatory and commercial
milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the
Company’s option. AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine
kinase inhibitor of the PKC beta, PI3K and AKT pathways.

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Table of Contents

5. Inventories

Inventory balances consist of the following:

Raw materials
Work in process
Finished goods
Inventory, net

June 30, 

2021

2020

(In thousands)
2,269     $
3,346
10,724
16,339

$

397
—
9,602
9,999

  $

$

The Company wrote down $7.3 million and $1.3 million of inventory during the years ended June 30, 2021 and

2020, respectively, primarily as a result of changing market conditions for the Company's COVID-19 test kits.

6. Property and Equipment

Property and equipment, net consist of the following:

Manufacturing equipment
Leasehold improvements
Office equipment, furniture and other
Lab equipment
Assets under construction
Less accumulated depreciation and amortization

Property and equipment, net

June 30, 

2021

2020

(In thousands)

$

3,070      $

959
1,093
832
198
(1,012)
5,140

$

$

112
229
312
90
—
(484)
259

Depreciation expense was $0.6 million and $0.1 million for the years ended June 30, 2021 and 2020, respectively.
During the year ended June 30, 2021, the Company recognized a loss of $0.1 million on sale of equipment primarily due to
termination of leases. There was no such loss during the year ended June 30, 2020.

7. Leases

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. These leases have original lease periods expiring
between 2022 and 2024. Most leases include one or more options to renew and the exercise of a lease renewal option
typically occurs at the discretion of both parties. Certain leases also include options to purchase the leased property. For
purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease
termination until it is reasonably certain that the Company will exercise that option. The Company’s lease agreements
generally do not contain any material residual value guarantees or material restrictive covenants.

Upon the closing of the Neos Merger on March 19, 2021, pursuant to the guidance under ASC 805, Neos
recognized operating lease ROU asset and lease liability of $3.5 million, which represented the present value of the
remaining lease payments as of the acquisition date, for its office space and manufacturing facilities at Grand Prairie, Texas.
As the lease agreement does not provide an implicit rate, Neos used its borrowing rate of 6.7% to determine the present
value of future lease payments. Furthermore, as of the acquisition date, no assets or liabilities of the operating

F-21

 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
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leases that have a remaining lease term of less than twelve months were recognized. The finance leases are related to Neos
equipment finance leases with fixed contract terms and an implicit interest rate of approximately 5.9%.

The components of lease expenses are as follows;

Lease cost:

Operating lease cost
Short-term lease cost
Finance lease cost:

Amortization of leased assets
Interest on lease liabilities
Total net lease cost

Year Ended
June 30, 

2021

2020

     Statement of Operations Classification

(In thousands)

$

$

476
109

21
6
612

$

$

199   Operating expenses
9   Operating expenses

—   Cost of sales
— Other (expense), net
208  

Supplemental balance sheet information related to leases is as follows:

Assets:

Operating lease assets
Finance lease assets
Total leased assets

Liabilities:
Current:
Operating leases
Finance leases

Long-term

Operating leases
Finance leases

Total lease liabilities

June 30, 

2021

2020

(In thousands)

Balance Sheet Classification

$

$

$

$

3,563
329
3,892

940
102

2,624
180
3,846

$

$

$

634   Operating lease right-of-use asset
—   Fixed assets, net
634  

300 Current operating lease liabilities
— Current portion of debt

725 Long-term operating lease liabilities
— Long-term debt

$

1,025

Remaining lease terms and discount rates used are as follows;

Weighted-Average Remaining Lease Term (years)

Operating lease assets
Finance lease assets

Weighted-Average Discount Rate

Operating lease assets
Finance lease assets

F-22

June 30, 

2021

2020

3.42
2.72

6.62 %
6.41 %

2.96
—

10.02 %
—

    
    
 
 
 
 
 
  
    
    
 
 
    
 
 
 
 
 
Table of Contents

Supplemental cash flow information related to leases is as follows:

Cash flow classification of lease payments:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases

As of June 30, 2021, maturities of lease liabilities are as follows:

2022
2023
2024
2025

Total lease payments
Less: Imputed interest

Lease liabilities

Year Ended
June 30, 

2021

2020

(In thousands)

$
$
$

467
5
25

$
$
$

Operating

Finance

(In thousands)

$

$

1,154
1,182
1,117
556
4,009
(445)
3,564

$

$

199
—
—

117
104
88
—
309
(27)
282

8. Goodwill and Other Intangible Assets

During the year ended June 30, 2021, the Company completed the Neos Merger, which resulted in goodwill of

$37.7 million (see Note 4).

As of June 30, 2021, based on forecast models, there was no impairment of the Company’s net asset value.  
However, the Company’s market capitalization has been below the carrying value of its assets, which could be indicative of 
a future impairment of assets. Management will continue to assess those relative valuations.

The change in carrying amount of goodwill by reportable segment is as follows;.

Balance as of June 30, 2019
Goodwill acquired
Balance as of June 30, 2020
Goodwill acquired
Balance as of June 30, 2021

     Aytu BioPharma      Aytu Consumer Health      Consolidated

(In thousands)

$

$

— $

19,453
19,453
37,712
57,165

$

— $

8,637
8,637

—  
$

8,637

—
28,090
28,090
37,712
65,802

The Company currently holds the following intangible asset portfolios as of June 30, 2021: (i) Licensed asset,
which consist of pharmaceutical product assets that were acquired prior to July 1, 2020; (ii) Product technology rights,
acquired from the November 1, 2019 acquisition of the Pediatric Portfolio from Cerecor and the Neos Merger on March 19,
2021, (iii) Proprietary modified-release drug delivery technology right as a result of the Neos Merger, (iv) Acquired product
distribution rights and commercial technology consisting of RxConnect and trade names as a result of the Neos

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Table of Contents

Merger, and patents, trade names and the acquired customer lists from the Innovus Merger, (v) Acquired in-process R&D
from the Neos Merger related to the NT0502 product candidate for sialorrhea.

The following table provides the summary of the Company’s intangible assets as of June 30, 2021 and June 30,

2020, respectively.

Licensed asset
Acquired product technology right
Acquired technology right
Acquired product distribution rights
Acquired in-process R&D
Acquired commercial technology
Acquired trade name
Acquired customer lists
Total

Licensed assets
MiOXSYS Patent
Acquired product technology right
Acquired product distribution rights
Acquired customer lists
Total

June 30, 2021

Gross
Carrying
     Amount

Accumulated Net Carrying

    Amortization     Amount
(In thousands)

Weighted-
Average
Remaining
Life (in
years)

$ 3,246
  45,400
30,200
  11,354
2,600
630
400
390
$ 94,220

$

$

(1,430) $
(4,160)
(501)
(2,073)
—
(178)
(56)
(358)
(8,756) $

1,816
41,240  
29,699
9,281  
2,600
452
344
32  
85,464  

3.92
12.88
16.75
8.57
Indefinite-lived
0.75
1.75
0.01
13.47

June 30, 2020

Gross
Carrying
     Amount

Accumulated

     Net Carrying

    Amortization    Impairment    
(In thousands)

Amount

$ 23,649
380
22,700
11,354
390
$ 58,473

$

$

(7,062) $
(185)
(1,513)
(565)
(98)
(9,423) $

— $

(195)
—
—
—
(195) $

16,587
—
21,187
10,789
292
48,855

Weighted-
Average
Remaining
Life (in
years)

11.88
—
9.34
7.78
1.12
9.11

The following table summarizes the estimated future amortization expense to be recognized over the next years and

periods thereafter:

2022
2023
2024
2025
2026
Thereafter

Total future amortization expense

June 30, 
(In thousands)

8,038
7,489
7,333
7,099
6,331
46,574
82,864

$

$

Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the
asset. The renewal periods range between approximately 1 to 20 years depending on the license, patent or other agreement.
Renewals are accounted for when they are reasonably assured. Intangible assets are amortized using the straight-line method
over the estimated useful lives. Amortization expense of intangible assets was $7.1 million and $4.5 million during the years
ended June 30, 2021 and 2020, respectively.

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Table of Contents

On March 31, 2021, the Company terminated the Acerus agreement previously entered into on July 29, 2019.

Pursuant to the Termination Agreement, the Company ceased all sales, marketing and promotions of Natesto, and Acerus
agreed to pay the Company an aggregate amount of $7.5 million, payable in equal monthly installment payments for a
period of 30 consecutive months. At the March 31, 2021 termination date, the Company determined that none of the $7.5
million future cash payments could be recognized as of that date, and therefore the remaining $4.3 million carrying value of
the licensed intangible asset related to Natesto was impaired. There was no remaining value as of June 30, 2021.

On April 12, 2021, the Company acquired substantially all the assets of Rumpus Therapeutics, LLC through an
asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with
Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”). This in-process research and development (IPR&D)
asset was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million. The Company
determined that the IPR&D asset has no alternative future use at the time of purchase and was recorded as research and
development expense in the statements of operations.

Licensed Assets

ZolpiMist. In June 2018, the Company signed an exclusive license agreement for ZolpiMist™ (zolpidem tartrate

oral spray) from Magna Pharmaceuticals, Inc., (“Magna”). This agreement allows for the Company’s exclusive
commercialization of ZolpiMist in the U.S. and Canada. The ZolpiMist license agreement was valued at $3.2 million and is
being amortized on a straight-line over the life of the license agreement up to seven years.

Tuzistra XR. On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply

Agreement (the “Tuzistra License Agreement”) with Tris Pharma, Inc. (“Tris”). Pursuant to the Tris License Agreement,
Tris granted the Company an exclusive license in the United States to commercialize Tuzistra XR. On June 30, 2021, the
Company recognized an impairment of approximately $8.5 million related to the remaining net carrying value of the
licensed intangible asset related to Tuzistra as a result of the impact of COVID-19 and other factors negatively impacting
product sales.

Product Technology Rights

The acquired Product technology rights are related to the rights to production, supply and distribution agreements

of various products pursuant to the acquisitions of Pediatric Portfolio in November 2019 and the Neos Merger in March
2021. The aggregate acquisition date fair value of the acquired Product Technology Rights was $45.4 million and is being
amortized on a straight-line over the lives of these rights.

Karbinal® ER. The Company acquired and assumed all rights and obligations pursuant to the Supply and
Distribution Agreement, as Amended, with Tris for the exclusive rights to commercialize Karbinal® ER in the United States
(the “Tris Karbinal Agreement”). The Tris Karbinal Agreement’s initial term terminates in August of 2033, with an optional
initial 20-year extension.

Poly-Vi-Flor and Tri-Vi-Flor. The Company acquired and assumed all rights and obligations pursuant to a Supply

and License Agreement and various assignment and release agreements, including a previously agreed to Settlement and
License Agreements (the “Poly-Tri Agreements”) for the exclusive rights to commercialize Poly-Vi-Flor and Tri-Vi-Flor in
the United States.

Cefaclor (cefaclor oral suspension). The Company acquired the License, Supply and Distribution Agreement for
rights to promote and commercialize Cefaclor within the United States, but does not own or license any patents covering
this product.

ADHD Portfolio. As part of the Neos Merger, the Company acquired developed product technology for the

production and sale of Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and generic Tussionex. The formulations for
the ADHD products are protected by patented technology. The estimated economic life of these proprietary technologies is
17 years.

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Table of Contents

Developed Technology Right

TRRP Technology. As part of the Neos Merger, the Company acquired Time Release Resin Particle (“TRRP”)
proprietary technology, which is a proprietary drug delivery technology protected by the Company as a trade secret that
allows the Company to modify the drug release characteristics of each of its respective products. The TRRP technology
underlines each of Neos’ core products and can potentially be used in future product development initiatives as well. The
acquisition date fair value of the Developed Technology Right was $30.2 million and is being amortized on a straight-line
over the estimated useful life of 17 years.

Product distribution rights and customer list

In connection with the Innovus Merger, the Company obtained 35 products with a combination of over 300

registered trademarks and/or patent rights and customer lists. The acquisition date fair values of these trademarks and/or
patent rights was $11.4 million, which is being amortized, on a straight-line, over the estimated life ranging 3 to 10 years.
The acquired customer list had an acquisition date fair value of $0.4 million, which is being amortized on a straight-line
over the estimated useful life of 1.5 years.

In-Process R&D

IPR&D – NT0502. As part of the Neos Merger, the Company acquired in-process research and development

associated with NT0502, a new chemical entity that is being developed by the Company for the treatment of sialorrhea,
which is excessive salivation or drooling. The acquisition date fair value of the In-Process R&D was $2.6 million. As this is
an indefinite-lived intangible asset, it is not subject to amortization at that time. If a product using this technology is
eventually approved for commercial sale, at that time, the IPR&D will begin amortizing on a straight-line over the life of the
product.

Commercial Technology and Tradename

RxConnect. As part of the Neos Merger, the Company acquired a commercial program, which is a Company-

sponsored network of patient support program that offers affordable and predictable copays to all commercially insured 
patients.  The acquisition date fair value was $0.6 million and is being amortized on a straight-line over the estimated useful
life of 1 year. In addition, the Company acquired the Neos tradename with an acquisition date fair value of $0.4 million, and
is being amortized on a straight-line over the estimated useful life of 2 years.

9. Accrued liabilities

Accrued liabilities consist of the following:

Accrued settlement expense
Accrued program liabilities
Accrued product-related fees
Accrued savings offers
Accrued distributor fees
Accrued liabilities for trade partners
Medicaid liabilities
Return reserve
Other accrued liabilities*
Total accrued liabilities

June 30, 

2021

2020

(In thousands)
— $

8,689
2,501
20,148
2,710
6,021
1,714
6,367
3,145
51,295

$

315
959
2,471
—
457
185
1,842
1,329
1,273
8,831

$

$

* Other accrued liabilities consist of credit card liabilities, taxes payable, accounting fee, samples expense and consultants

fee, none of which individually represent greater than five percent of total current liabilities.

F-26

 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents

10. Fair Value Considerations

The Company’s asset and liability classified financial instruments include cash and cash equivalents, restricted
cash, accounts receivable, accounts payable, accrued liabilities, warrant derivative liability and contingent consideration.
The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable,
accounts payable and accrued liabilities approximate their fair value due to their short maturities. The fair value of
acquisition-related contingent consideration is based on a Monte Carlo models. The valuation policies are determined by
management, and the Company’s Board of Directors is informed of any policy change.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a

liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes
the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are
inputs that market participants would use in pricing the asset or liability developed based on market data obtained from
sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what
market participants would use in pricing the asset or liability developed based on the best information available in the
circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Aytu for identical assets or liabilities;

Level 2: Inputs include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the

asset or liability either directly or indirectly; and

Level 3: Unobservable inputs that are supported by little or no market activity.

The Company’s assets and liabilities which are measured at fair value on a recurring basis are classified in their
entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s policy is to
recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused
the transfer. The Company has consistently applied the valuation techniques discussed below in all periods presented.

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Table of Contents

The following table presents Company’s financial liabilities that were accounted for at fair value on a recurring

basis as of June 30, 2021 and 2020, by level within the fair value hierarchy:

Fair Value Measurements at June 30, 2021

Quoted
Priced in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

     Fair Value at June 30,      
2021

  $

$

12,057   $
1,395  
13,452   $

—   $
—  
—   $

—   $
—  
— $

12,057
1,395
13,452

Fair Value Measurements at June 30, 2020

Quoted
Priced in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

     Fair Value at June 30,      
2020

$

$

13,588   $
5,572  
19,160   $

—   $
—  
—   $

—   $
—  
— $

13,588
5,572
19,160

Recurring:

Contingent consideration
CVR liability

Total

Recurring:

Contingent consideration
CVR liability

Total

Contingent Consideration. The Company classifies its contingent consideration liability in connection with the

acquisition of Tuzistra XR, ZolpiMist and Innovus within Level 3 as factors used to develop the estimated fair value are
unobservable inputs that are not supported by market activity.

Tuzistra XR. The contingent consideration related to Tuzistra XR was valued at $8.8 million using a Monte Carlo

simulation as of November 2, 2018. As of June 30, 2021, the contingent consideration was revalued at $11.0 million using a
Scenario-Based model. As of June 30, 2020, the contingent consideration was revalued at $13.2 million using the
Discounted Cash Flow method. The Company’s policy is to value contingent consideration liabilities using a Monte Carlo
model. However, the Monte Carlo model could not be used for the valuation of Tuzistra XR contingent consideration given
management’s revenue forecast for the product; therefore, the Company used a Scenario-Based model instead. The
contingent consideration accretion expense for the years ended June 30, 2021 and June 30, 2020 was $0.2 million, and $0.4
million, respectively. As of June 30, 2021, none of the milestones had been achieved, and therefore, no milestone payment
was made. However, approximately $3.0 million is expected to be paid in November 2021, as this milestone will be
satisfied.

ZolpiMist. The contingent consideration related to the ZolpiMist royalty payments was valued at $2.6 million using

a Monte Carlo simulation, as of June 11, 2018. As of June 30, 2021, the contingent consideration was revalued at $0.7
million using the Monte Carlo model. As of June 30, 2020, the contingent consideration was revalued at $0.2 million using
the Discounted Cash Flow method. The contingent consideration accretion expense for the years ended June 30, 2021 and
June 30, 2020 was $0.1 million, and $0.2 million, respectively As of June 30, 2021, none of the milestones had been
achieved, and therefore, no milestone payment was made.

On February 14, 2020, the Company recognized approximately $0.2 million in product related contingent

consideration as a result of the Innovus Merger. The fair value was based on a discounted value of the future contingent

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payment using a 30% discount rate based on the estimated risk that the milestones would be achieved. As of June 30, 2021
and June 30, 2020, the contingent consideration was $0.3 million and $0.2 million, respectively. The contingent
consideration accretion expense for the year ended June 30, 2021 was $0.1 million and was negligible during the year ended
June 30, 2020.

In June 2017, Innovus entered into Exclusive License Agreement (“the Agreement”) with University of Iowa

Research Foundation (“UIRD”) for the use of patent and technology know-how. Pursuant to the agreement, Innovus will
pay to UIRD a total milestone payment of $50,000 every other year beginning on July 1, 2021 for a total payment of $0.2
million. The fair value was based on a discounted value of the future contingent payment using a 26% discount rate based
on the estimated risk that the milestones would be achieved The discounted value as of June 30, 2021, was approximately
$0.1 million.

Contingent value rights. Contingent value rights (“CVRs”) represent contingent additional consideration of up to
$16.0 million payable to satisfy future performance milestones related to the Innovus Merger. Consideration can be satisfied
in up to 470,000 shares of the Company’s common stock, or cash either upon the option of the Company or in the event
there are insufficient shares available to satisfy such obligations. The fair value of the contingent value rights was based on a
Monte Carlo model which takes into account current interest rates and expected sales potential. On March 31, 2020, the
Company issued to the CVR holders 123,820 shares of the Company’s common stock to satisfy the first $2.0 million
milestone, which related to the Innovus achievement of $24.0 million in revenues during the 2019 calendar year. On March
20, 2021, the Company issued to the CVR holders 103,190 shares of the Company’s common stock to satisfy one of two
$1.0 million 2020 milestones, which relates to the Innovus achievement of $30.0 million in revenues during the 2020
calendar year. The $1.0 million 2020 milestone for achieving profitability was not met. As of June 30, 2021 and June 30,
2020, the CVRs were revalued at $1.4 million and $5.6 million, respectively, using the same Monte Carlo simulation
methodology.

Non-Recurring Fair Value Measurement

Fixed payment arrangements. As part of the Cerecor transaction, the Company assumed obligations due to an
investor including fixed and variable payments. These obligations included fixed monthly payments equal to $0.1 million
from November 2019 through January 2021 plus $15.0 million due in January 2021, of which $15.0 million was paid down
early in June 2020. Monthly variable payments due to the same investor are equal to 15.0% of net revenue generated from a
subset of the Pediatric Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a
one-time payment of $0.2 million was due and paid. The variable payment obligation was to continue until the earlier of: (i)
aggregate variable payments of approximately $9.3 million have been made, or (ii) February 12, 2026. In addition, the
Company assumed fixed, product minimums royalties of approximately $2.1 million per annum through February 2023.

On June 21, 2021, the Company entered into a Waiver, Release and Consent pursuant to which the Company paid

$2.8 million to the investor in early satisfaction of the fixed obligation. The company agreed to pay the remaining fixed
obligation of $3.0 million in six equal quarterly payments of $0.5 million each over the next six quarters, beginning
September 30, 2021. The Company accounted the Waiver, Release and Consent as a debt modification in accordance with
ASC 470. Such a modification to the original terms required us to remeasure the related liabilities as of June 30, 2021 using
discounted cash flow model. As of June 30, 2021, the fair value of the fixed payment arrangements was $9.5 million. The
Company recognized a $1.3 million loss on extinguishment of the fixed obligation for the year ended June 30, 2021.

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The following able represents Company’s financial liabilities that were accounted for at fair value on a non-

recurring basis as of June 30, 2021 and 2020, by level within the fair value hierarchy:

Fair Value Measurements at June 30, 2021

Quoted
Priced in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

Fair Value at June 30, 
2021

$
$

9,458 $
9,458 $

— $
— $

— $
— $

9,458
9,458

Fair Value Measurements at June 30, 2020

Quoted
Priced in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In thousands)

     Fair Value at June 30,      
2020

$
$

13,512   $
13,512   $

—   $
—   $

—   $
— $

13,512
13,512

Non-recurring

Fixed payment arrangements

Non-recurring

Fixed payment arrangements

Total

Summary of Level 3 Input Changes

The following table sets forth a summary of changes to those fair value measures using Level 3 inputs for the year

ended June 30, 2021:

     CVR      Contingent

Fixed Payment
Consideration Arrangements

Liability

Balance as of June 30, 2019

Included in earnings
Purchases, issues, sales and settlements:

Purchases
Issues
Settlements

Balance as of June 30, 2020

Included in earnings
Purchases, issues, sales and settlements:

Settlements

Balance as of June 30, 2021

F-30

(In thousands)

  $ — $

523

23,326 $
(9,741)  

  7,049
—
  (2,000)
5,572
(3,177)

183  
—
(180)  

13,588
(848)

  (1,000)
  $ 1,395

$

(683)  
12,057 $

—
1,452

—
29,838
(17,778)
13,512
2,795

(6,849)
9,458

    
 
    
  
 
   
  
    
    
    
 
 
 
 
 
 
 
 
 
  
 
    
  
 
 
 
 
 
 
 
 
 
Table of Contents

Significant Assumptions

Significant assumptions used in valuing the contingent consideration were as follows:

Tuzistra

Valuation model
Leveraged Beta
Market risk premium
Risk-free interest rate
Discount
Company specific discount

ZolpiMist

Valuation method
Leveraged Beta
Market risk premium
Risk-free interest rate
Discount
Company specific discount

Significant assumptions used in valuing the CVRs were as follows:

Contingent Value Rights

Valuation method
Leveraged Beta
Market risk premium
Risk-free interest rate
Discount
Company specific discount

June 30, 

2021

2020

Scenario-Based

0.68  
6.00 %  
1.90 %  
15.30 %  
15.00 %  

Discounted Cash Flow
0.36
6.00 %
3.00 %
5.20 %
15.00 %

June 30, 

2021

2020

Monte Carlo

1.09  
6.00 %  
0.70 %  
10.30 %  
15.00 %  

Discounted Cash Flow
1.17
6.00 %
3.00 %
5.20 %
5.00 %

June 30, 

2021

2020

Monte Carlo
0.91
6.00 %
0.36 %
13.00 %

5.00 %  

Monte Carlo
0.88
6.17 %
1.15 %
30.00 %
20.00 %

Significant assumptions used in valuing the Fixed Payment Arrangements were as follows:

Fixed Payment Obligations

Valuation method
Discount rate - minimum
Discount rate - maximum

June 30, 

2021

2020

Discounted Cash Flow

Discounted Cash Flow

10.0 %
12.4 % 

1.8 %
12.4 %

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Table of Contents

11. Income Taxes

The provision for income taxes consisted of the following:

Current:
Federal
State

Total current tax expense
Deferred:
Federal
State

Total deferred tax expense
Provision for income taxes

Year Ended June 30, 
2020
2021

(In thousands)

$

$

— $
16
16

200
43
243
259

$

—
—
—

—
—
—
—

Income tax benefit resulting from applying statutory rates in jurisdictions in which the Company is taxed (Federal

and various states) differs from the income tax provision (benefit) in the financial statements. Reconciliation of the U.S.
federal statutory income tax rates to our effective tax rate is as follows.

Year Ended June 30, 

2021

2020

(In thousands)

Tax at statutory rate
State income taxes, net of federal benefit
Stock based compensation
Contingent consideration
162(m) limitation
Transaction costs
Loss on debt extinguishment and interest expense
Change in valuation allowance
Other
Net income tax provision (benefit)

F-32

    $ (12,185)     (21.00)%      $ (2,934)     (21.00)%
(5.71)%
(0.25)%
0.39 %
0.00 %  
0.00 %  
1.20 %
25.02 %
0.35 %
0.00 %

(4.24)%   
(798)
0.07 %   
(35)
(1.15)%   
54
0.40 %  
—
0.28 %  
—
0.00 %   
167
24.96 %   
3,496
50
1.13 %   
0.45 %    $ —

(2,461)
43
(667)
235
160
—
14,483
651
259

  $

    
      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents

Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and

financial reporting purposes. The approximate tax effects of significant temporary differences which comprise the deferred
tax assets and liabilities are as follows for the respective periods:

Deferred tax assets:

Net operating loss carry forward
Accrued Rebates
Share-based compensation
Accrued expenses
R&D credits
Interest
Inventory
Lease liability
Other

Total deferred tax assets

Less: valuation allowance

Deferred tax assets, net of valuation allowance
Deferred tax liabilities:

Intangibles
ROU asset
Fixed assets

Total deferred tax liabilities
Net deferred tax liabilities

Year Ended June 30, 
2020
2021

(In thousands)

$

$

106,712
8,412
2,330
1,507
2,115
2,064
1,704
1,031
1,526
127,401
(116,494)
10,907

(9,396)
(1,009)
(745)
(11,150)
(243)

$

$

37,191
—
1,891
855
9
—
789
261
358
41,354
(39,552)
1,802

(1,578)
(224)
—
(1,802)
—

The Company has recorded a valuation allowance of $116.5 million and $39.6 million at June 30, 2021 and 2020,

respectively, to reserve its net deferred tax assets. The change in valuation allowance is due to the acquisition of Neos,
resulting in a $62.5 million valuation allowance being established at the acquisition date and the remainder of the change is
due to the change in inventory of deferred items exclusive of indefinite lived deferred tax liabilities which can not be fully
offset with existing attributes. In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income, carry back opportunities and tax planning strategies in making the assessment. The Company believes it is more
likely than not it will realize the benefits of these deductible differences, net of the valuation allowance provided.

The Company had federal net operating losses of approximately $466.7 million and $147.0 million as of June 30,

2021 and June 30, 2020, respectively that, subject to limitation, may be available in future tax years to offset taxable
income. Of the available federal net operating losses, approximately $130.4 million can be carried forward indefinitely
while the balance will begin to expire in 2024. As of June 30, 2021, the Company had research and development credits of
$2.7 million, which begin to expire in 2024. The available state net operating losses, if not utilized to offset taxable income
in future periods, will begin to expire in 2025 through 2038. Under the provisions of the Internal Revenue Code, substantial
changes in the Company’s ownership may result in limitations on the amount of NOL carryforwards that can be utilized in
future years. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether
the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the
NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are
utilized. As of June 30, 2021, the Company had various state NOL carryforwards. The determination of the state NOL
carryforwards is dependent on apportionment percentages and state laws that can change from year to year and impact the
amount of such carryforwards.

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The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The

Company has no accrued interest related to its uncertain tax positions as they all relate to timing differences that would
adjust the Company’s net operating loss carryforward, interest expense carryover or research and development credit
carryover and therefore do not require recognition. As a result of these timing differences, at June 30, 2021 and 2020, the
Company had gross unrecognized tax benefits related to uncertain tax positions of $11.5 million and $0, respectively.
Changes in unrecognized benefits in any given year are recorded as a component of deferred tax expense. A tabular
rollforward of the Company’s gross unrecognized tax benefits is below.

Beginning balance
Increase resulting from prior period tax positions
Increase resulting from current period tax positions
Decrease resulting from current period tax positions
Ending balance

June 30, 

2021

2020

$

$

(In thousands)
— $

12,017
2
(482)
11,537

$

—
—
—
—
—

The change in the Company’s gross unrecognized tax benefits relates to the acquisition of Neos, whereby historic

tax positions of Neos were inherited in the acquisition.

Additionally, Neos pre-acquisition tax years are subject to the same general statute of limitations, resulting in its

tax years back to 2004 being subject to examination.

12. Capital Structure

The Company has 200.0 million shares of common stock authorized with a par value of $0.0001 per share and 50.0

million shares of preferred stock authorized with a par value of $0.0001 per share. As of June 30, 2021 and June 30, 2020,
the Company had 27,490,412 and 12,583,736 common shares issued and outstanding, respectively, and zero preferred
shares issued and outstanding.

Included in the common stock outstanding are 1,958,876 shares of restricted stock issued to executives, directors

and employees.

On June 8, 2020, the Company filed a shelf registration statement on Form S-3, which was declared effective by

the SEC on June 17, 2020. This shelf registration statement covered the offering, issuance and sale by the Company of up to
an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2020
Shelf”). The Company simultaneously entered into a sales agreement with Jefferies, LLC, as sales agent, which allows the
Company to sell and issue shares of the Company's common stock from time-to-time in “at-the-market” offerings under the
2020 Shelf (“Jefferies ATM”). Through June 30, 2020, the Company has issued 430,230 shares of common stock under the
Jefferies ATM, with total gross proceeds of $6.8 million before deducting underwriting discounts, commissions and other
offering expenses of $1.9 million, and has issued an additional 352,912 shares of common stock under the Jefferies ATM,
with total gross proceeds of $3.6 million before deducting underwriting discounts, commissions and other offering expenses
of $0.2 million from July 1, 2020 through June 2, 2021, when the Jefferies ATM was effectively terminated by the
Company. On June 4, 2021, the Company entered into a sales agreement with Cantor Fitzgerald & Co., as sales agent, to
provide for the offering, issuance and sale by the Company of up to $30.0 million of its common stock from time to time in
“at-the-market” offerings under the 2020 Shelf (the “Cantor ATM”). During the year ended June 30, 2021, the Company has
issued 2,310,400 shares of common stock under the Cantor ATM, with total gross proceeds of approximately $12.7 million
before deducting underwriting discounts, commissions, and other offering expenses of $0.5 million.

The Company entered into three separate registered direct stock offerings on March 10, 2020, March 12, 2020 and

March 19, 2020 (the “March Offerings”) in which the Company issued a combination of common stock and warrants. In
July 2020, the Company issued 92,302 warrants to purchase 92,302 shares of the Company's common stock

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with a weighted-average exercise price of $15.99 to an investment bank. The warrants have a term of one year from the
issuance date. These warrants had at issuance a fair value of approximately $0.4 million and were valued using a Black-
Scholes model.

On December 8, 2020, the Company effected a reverse stock split in which each common stockholder received one
share of common stock for every 10 shares held (herein referred to collectively as the “Reverse Stock Split”). All share and
per share amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split. On the date of the
Reverse Stock Split, the Company had no preferred shares issued and outstanding, and as such it had no impact on the
Company’s financial statements.

On December 10, 2020, the Company entered into an exchange agreement to exchange the $0.8 million of debt

outstanding for 130,081 shares of the Company's common stock (see Note 18).

On December 10, 2020, the Company entered into an underwriting agreement with H.C. Wainwright & Co., LLC

(“Wainwright”) (as amended and restated, the “Underwriting Agreement”). Pursuant to the Underwriting Agreement, the
Company agreed to sell, in an upsized firm commitment offering, 4,166,667 shares (the “Shares”) of the Company’s
common stock, $0.0001 par value per share (the “Common Stock”), to Wainwright at an offering price to the public of $6.00
per share, less underwriting discounts and commissions. In addition, pursuant to the Underwriting Agreement, the Company
granted Wainwright a 30-day option to purchase up to an additional 625,000 shares of Common Stock at the same offering
price to the public, less underwriting discounts and commissions. Wainwright exercised their over-allotment option in full,
purchasing total common stock of 4,791,667 shares. The Company raised gross proceeds of $28.8 million through this
offering. Offering costs totaled $2.6 million resulting in net cash proceeds of $26.2 million. In connection with the offering,
the Company issued 311,458 underwriter warrants to purchase up to 311,458 shares of common stock. The exercise price
per share of the underwriter warrants is $7.50 (equal to 125% of the public offering price per share for the shares of
common stock sold in the offering) and the underwriter warrants have a term of five years from the date of effectiveness of
the offering. The underwriter warrants are exercisable immediately. These warrants have fair value of approximately $1.3
million and are classified with the stockholders' equity. Effective June 2, 2021, the Company terminated the Underwriting
Agreement with Wainwright; pursuant to such termination, there will be no future sales of the Company’s common stock
under the agreement.

On March 19, 2021, upon closing of the Neos Merger, the Company issued 5,447,000 shares of its common stock
to acquire all the outstanding shares of common stock of Neos. In addition, pursuant to the agreement in the Neos Merger,
the Company issued 24,804 shares of common stock to settle the accelerated restricted stock units of former Neos directors
and officers (see Note 4).

On March 20, 2021, the Company paid the CVR holders 103,190 shares of the Company’s common stock to satisfy

one of two $1.0 million 2020 milestones, which relates to the Innovus achievement of $30.0 million in revenues during the
2020 calendar year.

Year Ended June 30, 2020

The number of shares of the Company’s common stock and warrant discussed below are adjusted to reflect the

December 8, 2020 Reverse Stock Split discussed above in this note. As the preferred stocks were all converted to common
stock prior to December 8, 2020, no adjustment has been made to the preferred stock.

Preferred stocks conversion

In September 2019, investors holding shares of Series C preferred stock exercised their right to convert 443,833
shares of Series C preferred stock into 44,383 shares of common stock. There are no remaining Series C preferred stock
outstanding.

In October 2019, Armistice Capital converted 2,751,148 shares of Series E convertible preferred stock into 275,115

shares of common stock. There are no remaining Series E preferred stock outstanding.

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Table of Contents

In October 2019, the Company issued 10,000 shares of Series F Convertible preferred stock, with a face value of

$1,000 per share, and convertible at a conversion price of $1.00 (the “Current Conversion Price”). The terms of the Series F
Convertible Preferred include a conversion price reset provision in the event a future financing transaction is priced below
the Current Conversion Price.

In November 2019, in connection with the Pediatric Portfolio acquisition, the Company issued 9,805,845 shares of

Series G Convertible Preferred stock, which were converted into 980,585 shares of common stock in April 2020.

In February 2020, in connection with the Innovus Merger, the Company issued (i) 380,971 shares of the
Company’s common stock and (ii) 1,997,902 shares of Series H Convertible Preferred stock, of which, all 1,997,902 shares
of the Series H Convertible Preferred stock were converted into 199,774 shares of common stock in March 2020.

In addition, in March 2020, the following Convertible Preferred Stock issuances were converted into the

Company’s common stock: (i) 400,000 shares of the Series D Convertible Preferred Stock were converted into 40,000
shares of the Company’s common stock, (ii) 10,000 shares of the Series F Convertible Preferred Stock, with a face value of
$1,000 per share, and convertible at a conversion price of $1.00 (the “Current Conversion Price”), were converted into
1,000,000 shares of the Company’s common stock. There are no remaining shares of the Series D Convertible Preferred
Stock and Series F Convertible Preferred Stock outstanding at June 30, 2020.

Cashless warrants

In addition and concurrent with the Series F Convertible preferred stock issuance, the Company issued 1,000,000

warrants, with an exercise price of $12.50 and a term of five years. These warrants feature a contingent cashless exercise
provision. During the three months ended December 31, 2019, the cashless exercise contingency was satisfied, reducing the
strike price of the October 2019 Warrants to $0. During the three months ended March 31, 2020, an investor exercised
500,000 of the warrants using the cashless exercise provision. In April 2020, another investor exercised the remaining
500,000 of the October 2019 warrants using the cashless exercise provision, resulting in no remaining October 2019
warrants.

On March 11, 2020, pursuant to the April 18, 2019 Note exchange agreement between the Company and Armistice,

Armistice exercised the 291,577 warrants, resulting in no remaining April 2019 warrants.

The “March Offerings”

On March 19, 2020, the Company entered into a securities purchase agreement with certain institutional investors

(the “the March 19, 2020 Purchasers”), pursuant to which the Company agreed to sell and issue, in a registered direct
offering, an aggregate of (i) 1,253,920 shares of the Company’s common stock (the “Common Stock”) at a purchase price
per share of $15.95 and (ii) warrants to purchase up to 1,253,920 shares of Common Stock (the “March 19, 2020 Warrants”)
at an exercise price of $14.70 per share, for aggregate gross proceeds to the Company of $20.0 million, before deducting
placement agent fees and other offering expenses payable by the Company. The March 19, 2020 Warrants are exercisable
immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued 81,505
warrants with an exercise price of $19.938 per share to purchase up to 81,505 shares of common stock (the “March 19, 2020
Placement Agent Warrants”). The March 19, 2020 Placement Agent Warrants have a term of five years from the issuance
date.

Since March 19, 2020, a total of 120,000 March 19, 2020 Warrants have been exercised, for total proceeds of $1.7

million. The remaining 1,133,920 March 19, 2020 Warrants expired on March 19, 2021.

On March 12, 2020, the Company entered into a securities purchase agreement with certain institutional investors,
pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 1,600,000 shares
of the Company’s common stock at a purchase price per share of $12.50 and (ii) warrants to purchase up to 1,600,000 shares
of Common Stock (the “March 12, 2020 Warrants”) at an exercise price of $12.50 per share, for aggregate gross proceeds to
the Company of $20.0 million, before deducting placement agent fees and other offering expenses payable by the Company
(the “Registered Offering”). The March 12, 2020 Warrants are exercisable

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Table of Contents

immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued warrants
with an exercise price of $15.625 per share to purchase up to 104,000 shares of common stock (the “March 12, 2020
Placement Agent Warrants”). The March 12, 2020 Placement Agent Warrants have a term of five years from the issuance
date and expires on March 12, 2025.

Since March 12, 2020, a total of 1,300,000 March 12, 2020 Warrants have been exercised, for total proceeds of

approximately $16.3 million. The remaining 300,000 March 12, 2020 Warrants expired on March 11, 2021.

On March 10, 2020, Company entered into a securities purchase agreement with an institutional investor, pursuant

to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 445,000 shares of the
Company’s common stock (the “Common Stock”) at a purchase price per share of $11.50 and (ii) pre-funded warrants to
purchase up to 337,607 shares of Common Stock (the “Pre-Funded Warrants”) at an effective price of $11.50 per share
($11.499 paid to the Company upon the closing of the offering and $0.001 to be paid upon exercise of such Pre- Funded
Warrants), for aggregate gross proceeds to the Company of approximately $9.0 million, before deducting placement agent
fees and other offering expenses payable by the Company (the “Registered Offering”). The Pre-Funded Warrants were
immediately exercised upon close. In addition, the Company issued warrants with an exercise price of $14.375 per share to
purchase up to 50,870 shares of common stock (the “March 10, 2020 Placement Agent Warrants”). The March 10, 2020
Placement Agent Warrants have a term of five years from the issuance date and expires on March 10, 2025.

Since March 10, 2020, a total of 598,200 shares of the Company’s October 2018 $15.0 Warrants (the “October 18

$15.0 Warrants”) were exercised through April 27, 2020, resulting in proceeds of approximately $9.0 million. The
remaining 419,160 October 2018 $15.0 Warrants expires on October 8, 2023.

Innovus Notes conversion

On April 27, 2020, an investor who held four different notes (Innovus Notes) converted the four outstanding note
agreements into 153,370 shares of common stock. In addition, On May 11, 2020, another investor who held two different
notes (Innovus Notes) converted the two outstanding note agreements into 30,835 shares of common stock.

In April 2020, the issued a total of 16,500 shares of the Company’s common stock to three of the former Innovus

board members engaged by the Company as consumer healthcare market advisors.

Other issuance

On March 31, 2020, the Company issued to the CVR holders 123,820 shares of the Company’s common stock to
satisfy the first $2.0 million milestone, which related to the Innovus achievement of $24.0 million in revenues during the
2019 calendar year.

In March 2020 and April 2020, a total of 598,200 shares of the Company’s October 2018 $15.0 Warrants (the
“October 18 $15.0 Warrants”) were exercised for total proceeds of approximately $9.0 million. The remaining 419,160
October 2018 $15.0 Warrants expires on October 8, 2023.

In May 2020, the Company issued 8,967 shares of common stock to Presmar in lieu of the $150,000 cash payment

that was due as part of the November 2019 acquisition of Cerecor.

In June 2020, the Company issued approximately 3,271 shares of common stock to a former employee upon

termination of employment with the Company.

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13. Equity Incentive Plan

Aytu 2015 Plan. On June 1, 2015, the Company’s stockholders approved the 2015 Stock Option and Incentive Plan

(the “2015 Plan”), which, as amended in July 2017, provides for the award of stock options, stock appreciation rights,
restricted stock and other equity awards for up to an aggregate of 3.0 million shares of common stock. The shares of
common stock underlying any awards that are forfeited, canceled, reacquired by Aytu prior to vesting, satisfied without any
issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Plan will be added back to the
shares of common stock available for issuance under the Aytu 2015 Plan. On February 13, 2020, the Company’s
shareholders approved an increase to 5.0 million total shares of common stock in the Aytu 2015 Plan. Stock options granted
under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 3 to 4 years. The
restricted stock awards have a vesting period ranging from 4 to 10 years, whereas the restricted stock units have a vesting
period 4 years. As of June 30, 2021, the Company had 2,937,710 shares that are available for grant under the Aytu 2015
Plan.

Neos 2015 Plan. Pursuant to the Neos Merger, the Company assumed 69,721 stock options and 35,728 restricted
stock units (RSUs) previously granted under Neos plan. Accordingly, on April 19, 2021, the Company registered 105,449
shares of its common stock under the Neos Therapeutics, Inc. 2015 Stock Options and Incentive Plan (the "Neos 2015
Plan") with the SEC. The terms and conditions of the assumed equity securities will stay the same as they were under the
previous Neos plan. In addition to the 105,449 registered shares to cover the assumed awards, the remaining 1,255,310
shares available under the legacy Neos plan was added back to the new Neos 2015 Plan. The Company allocated costs of
the replacement awards attributable to pre- and post-combination service periods. The pre-combination service costs were
included in the considerations transferred. The remaining costs attributable to the post-combination service period are being
recognized as stock-based compensation expense over the remaining terms of the replacement awards. Stock options
granted under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 1 to 4
years. The restricted stock units have a vesting period ranging from 2 to 4 years. As of June 30, 2021, the Company had
1,271,657 shares that are available for grant under the Neos 2015 Plan.

Stock Options

During the year ended June 30, 2021, there was no stock options granted under the Aytu 2015 Plan. The Company

assumed 69,721 stock options previously granted under the Neos 2015 Plan.

The fair value of the options is calculated using the Black-Scholes option pricing model. In order to calculate the

fair value of the options, certain assumptions are made regarding components of the model, including the estimated fair
value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life.
Changes to the assumptions could cause significant adjustments to valuation. The Company estimates the expected term
based on the average of the vesting term and the contractual term of the options. The risk-free interest rate is based on the
U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. The fair value of all options
granted during the year ended June 30, 2021 utilized the following range of assumptions:

Expected volatility
Expected term (years)
Risk-free interest rate
Dividend yield

June 30, 2021

100.0 %
5.00
0.90 %
0.00 %

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Stock option activity is as follows:

Outstanding June 30, 2019

Granted
Exercised
Expired

Outstanding June 30, 2020

Granted
Forfeited/Cancelled
Expired

Outstanding at June 30, 2021

Exercisable at June 30, 2021

Number of
Options
188
76,950
(500)
(24)
76,614
69,721
(33,380)
(3,367)
109,588

Weighted
Average
Exercise Price
$ 3,259.57  
12.42  
9.70  
3,280.00  
19.39  
6.35  
8.61  
14.77  
14.52  

$

$

54,539

$

20.92  

     Weighted
Average
Remaining
Contractual
Life in Years
6.95

9.67

8.07

7.64

The following table details the options outstanding at June 30, 2021 by range of exercise prices:

$
$
$

Range of
Exercise
Prices

6.2 - 9.70  
9.80 - 14.70  
2,800.00 - 4,200.00  

Number of
Options
Outstanding
58,316
51,114
158
109,588

     Weighted     
Average
Remaining
Contractual
Life of
Options
Outstanding
8.33  
8.08  
4.80  
8.21  

Weighted
Average
Exercise
Price

6.41  
$
$
13.75  
$ 3,255.70  
14.52  
$

Number of 
Options
 Exercisable
16,970
37,411
158
54,539

Weighted
Average
  Exercise Price
$
6.51
13.79
$
3,255.70
$
20.92
$

The weighted-average grant date fair value of options granted during the years ended years ended June 30, 2021

and June 30, 2020 was $3.81 and $9.68, respectively. As of June 30, 2021, there was $0.4 million of total unrecognized
compensation costs adjusted for any estimated forfeitures, related to non-vested stock options granted under the Company’s
equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of
4.9 years.

Restricted Stock

On April 16, 2021, the Company granted 1,551,216 shares of restricted stock, with certain accelerated vesting

conditions, to its directors pursuant to the Aytu 2015 Plan, of which 1/3 vest on April 16, 2022 and 1/12 on the first day of each
quarter thereafter, subject to continuing employment with the Company through each vesting date until April 16, 2024. These
restricted stocks grants have a grant date fair value of $6.49 per-share. Furthermore, on April 12, 2021, the Company granted
146,200 shares of restricted stock, with a grant date fair value of $6.84 per-share, to its employees pursuant to the Aytu 2015

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Plan, of which 1/4 vested on the grant date and 1/16 each quarter thereafter on the three-month anniversary of the grant date
thereafter, subject to continuing employment with the Company through each vesting date until April 12, 2024.

Restricted stock activity is as follows:

Unvested at June 30, 2019
Granted
Vested
Forfeited
Unvested at June 30, 2020
Granted
Vested
Unvested at June 30, 2021

Number of
Shares
234,623
195,292
—
(11,461)
418,454
1,697,416
(160,602)
1,955,268

Weighted
Average Grant
Date Fair
Value

$

$

$

18.30
10.60
—
17.90
14.69
6.52
11.75
7.83

As of June 30, 2021, there was $13.4 million of total unrecognized compensation costs adjusted for any estimated

forfeitures, related to non-vested restricted stock granted under the Company’s equity incentive plan. The unrecognized
compensation cost is expected to be recognized over a weighted average period of 3.6 years. The total fair value of the
160,602 restricted stocks vested during the year ended June 30, 2021 was $1.1 million.

The Company previously issued 158 shares of restricted stock outside of the Aytu 2015 Plan, which vest in

July 2026. The unrecognized expense related to these shares was $1.0 million as of June 30, 2021 and is expected to be
recognized over the weighted average period of 5.02 years.

Restricted Stock Units

In addition to the 35,728 RSUs that the Company assumed from the Neos 2015 Plan during the year ended June 30,
2021, on March 31, 2021, the Company granted 55,000 RSUs to a member of its management, of which 1/3 vest on April 1,
2022 and 1/12 on the first day of each quarter thereafter, subject to continuing employment with the Company through each
vesting date until March 31, 2024. The grant date fair value of the RSUs was $7.60 per share. On April 8, 2021, the Company
granted 13,000 RSUs, with certain accelerated vesting conditions, to its directors. The RSUs have a grant date fair value of $7.17
per-share and fully vest one year from the grant date, subject to continuing employment with the Company through April 8, 2022.
The 13,000 RSUs issued to the directors, all of which were unvested, were forfeited upon the resignations of the directors.

Restricted stock units activity is as follows:

Unvested at June 30, 2020
Granted
Vested
Forfeited
Unvested at June 30, 2021

Number of
Shares

Weighted
Average Grant
Date Fair
Value

— $

103,728
(9,962)
(15,448)
78,318

$

—
6.96
4.99
7.00
7.20

As of June 30, 2021, there was $0.5 million of total unrecognized compensation costs adjusted for any estimated

forfeitures, related to non-vested RSUs granted under the Company’s equity incentive plans. The

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unrecognized compensation cost is expected to be recognized over a weighted average period of 2.3 years. The total fair
value of the 9,962 RSUs vested during the year ended June 30, 2021 was $0.1 million.

Stock-based compensation expense related to the fair value of stock options and restricted stock and RSUs was

included in the statements of operations as set forth in the below table:

Cost of sales
Research and development
Selling and marketing
General and Administrative
Total stock-based compensation expense

Year Ended June 30, 

2021

2020

(In thousands)

$

$

16
68
27
3,463
3,574

$

$

—
—
—
1,079
1,079

The stock-based compensation expense included in the table above is attributable to stock options and restricted

stock of $0.4 million and $3.2 million, respectively, for the year ended June 30, 2021. The stock-based compensation
expense included in the table above is attributable to stock options and restricted stock of $0.1 million and $1.0 million,
respectively, for the year ended June 30, 2020. Total recognized tax benefit from stock-based compensation was $1.2
million and $0.4 million during the year ended June 30, 2021 and June 30, 2020.

14. Warrants

In July 2020, the Company issued 92,302 shares of warrants with a weighted average exercise price of $15.99 per share

in connection with the March Offerings. The warrants have a term of one year from the issuance date. These warrants have a fair
value of value of $0.1 million and are classified within stockholders' equity.

On December 15, 2020, the Company issued 311,458 shares of warrants with an exercise price of $7.50 per share
in connection with the December 15, 2020 offering. The warrants have a five-year term from the issuance date and expires
on December 15, 2025. These warrants have a fair value of approximately $1.3 million and are classified within
stockholders' equity.

A summary of equity-based warrants is as follows:

Outstanding June 30, 2019

Warrants issued
Warrants exercised

Outstanding June 30, 2020

Warrants issued
Warrants expired

Outstanding June 30, 2021

Number of
Warrants
1,621,938
4,462,740
(3,796,150)
2,288,528
403,760
(1,437,336)
1,254,952

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Weighted
Average

     Weighted
Average
Remaining
Contractual
Exercise Price Life in Years
4.36
$
—
—
2.00
—
—
2.83

31.50  
12  
—  
30.26  
—  
—  
35.85  

$

$

    
 
 
    
    
 
 
 
 
 
 
 
 
 
 
 
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On March 19, 2021, the remaining 1,133,920 March 19, 2020 Warrants with a weighted-average exercise price of

$14.70 per share expired. There were no remaining March 19, 2020 Warrants outstanding as of June 30, 2021.

On March 11, 2021, the remaining 300,000 March 12, 2020 Warrants with a weighted-average exercise price of

$12.5 per share expired. There were no remaining March 12, 2020 Warrants outstanding as of June 30, 2021.

During the year ended June 30, 2021, an additional 3,416 various other warrants expired.

As of June 30, 2021 and 2020, the Company had 24,105 liability warrants outstanding with a weighted-average

exercise price of $720.0. These warrants are expected to expire on August 25, 2022.

15. Employee Benefit Plan

The Company has a 401(k) plan that allows participants to contribute a portion of their salary, subject to eligibility
requirements and annual IRS limits. The Company matches 50% of the first 6% contributed to the plan by employees. The
Company’s match was approximately $0.3 million and $0.2 million during the years ended June 30, 2021 and 2020,
respectively.

16. Commitments and Contingencies

Commitments and contingencies are described below and summarized by the following table as of June 30, 2021:

Prescription database
Pediatric portfolio fixed payments and product
Milestone
Inventory purchase commitment
CVR liability
Product contingent liability
Product milestone payments
Rumpus earn out payments
Other commitments

Total

Prescription Database

Total

2022

2023

2024

2025

     2026     Thereafter

(In thousands)

$

905

$

905

$ — $ — $ — $ — $ —

  11,575
1,472
  12,000
2,700
3,000
852
685
$ 33,189

4,100
1,472
2,000
50
3,000
580
189
$ 12,296

3,100
—
5,000
—
—
32
212
$ 8,344

2,100
—
5,000
50
—
35
178
$ 7,363

2,100
—
—
—
—
35
106
$ 2,241

175
—
—
550
—
35

—
—
—
2,050
—
135

$ 760

$ 2,185

In May 2016, the Company entered into an agreement with a vendor that provides us with prescription database

information. The Company agreed to pay approximately $1.6 million over three years for access to the database of
prescriptions certain products. In January 2020, the Company amended the agreement and agreed to pay an additional $0.6
million to add access to the database of prescriptions written for the Pediatric Portfolio. The agreement was further amended
to include all prescriptions written for the Rx Portfolio.

Pediatric Portfolio Fixed Payments and Product Milestone

The Company assumed two fixed, periodic payment obligations to an investor (the “Fixed Obligation”). Beginning

November 1, 2019 through January 2021, the Company will pay monthly payments of $86,840, with a balloon payment of
$15.0 million that was to be due in January 2021. A second fixed obligation requires the Company pay a minimum of
$100,000 monthly through February 2026, except for $210,767 paid in January 2020.

On May 29, 2020, the Company entered into an Early Payment Agreement and Escrow Instruction (the “Early

Payment Agreement”) pursuant to which the Company agreed to pay $15.0 million to the investor in early satisfaction of

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the Balloon Payment Obligation. The parties to the Early Payment Agreement acknowledged and agreed that the remaining
fixed payments other than the Balloon Payment Obligation remain due and payable pursuant to the terms of the Agreement,
and that nothing in the Early Payment Agreement alters, amends or waives any provisions or obligations in the Waiver or
the Investor agreement other than as expressly set forth therein.

On June 21, 2021, the Company entered into a Waiver, Release and Consent pursuant to which the Company paid

$2.8 million to the investor in early satisfaction of the second fixed obligation. The company agreed to pay the remaining
fixed obligation of $3.0 million in six equal quarterly payments of $0.5 million over the next six quarters commencing
September 30, 2021. As a result of this, the Company recognized a loss of approximately $1.3 million during the year ended
June 30, 2021.

In addition, the Company acquired a Supply and Distribution Agreement with Tris (the “Karbinal Agreement”),
under which the Company is granted the exclusive right to distribute and sell the product in the United States. The initial
term of the Karbinal Agreement was 20 years. The Company will pay Tris a royalty equal to 23.5% of net sales.

The Karbinal Agreement make-whole payment is capped at $2.1 million each year. The Karbinal Agreement also

contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31,
of 70,000 units annually through 2025. The Company is required to pay Tris a royalty make whole payment of $30 for each
unit under the 70,000-unit annual minimum sales commitment through 2025. The annual payment is due in August of
each year. The Karbinal Agreement also has multiple commercial milestone obligations that aggregate up to $3.0 million
based on cumulative net sales, the first of which is triggered at $40.0 million of net revenues.

Inventory Purchase Commitment

On May 1, 2020, the Company's Innovus subsidiary entered into a Settlement Agreement and Release (the
“Settlement Agreement”) with Hikma Pharmaceuticals USA Inc. (“Hikma”). Pursuant to the settlement agreement, Innovus
has agreed to purchase and Hikma has agreed to manufacture a minimum amount of our branded fluticasone propionate
nasal spray USP, 50 mcg per spray (FlutiCare®), under Hikma’s FDA approved ANDA No. 207957 in the U.S. The
commitment requires Innovus to purchase three batches of product through fiscal year 2022 each of which amount to $1.0
million.

CVR Liability

Upon closing the Innovus Merger, the Company entered into a CVR Agreement (see Note 4). Each CVR entitles its
holder to receive its pro rata share, payable in cash or stock, at the option of the Company, of certain payment amounts if the
targets are met. If any of the payment amounts is earned, they are to be paid by the end of the first quarter of the
calendar year following the year in which they are earned. Multiple revenue milestones can be earned in one year.

On March 31, 2020, the Company issued to CVR holders 123,820 shares of the Company’s common stock to

satisfy the $2.0 million obligation as a result of Innovus achieving the $24.0 million revenue milestone for calendar year
ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3 million during the year
ended June 30, 2020.

On March 20, 2021, the Company issued to the CVR holders approximately 103,190 shares of the Company’s

common stock to satisfy one of two $1.0 million 2020 milestones, which relates to the Innovus achievement of $30.0
million in revenues during the 2020 calendar year. The $1.0 million 2020 milestone for achieving profitability was not met.

Product Contingent Liability

In February 2015, Innovus acquired Novalere, which included the rights associated with distributing FlutiCare. As

part of the Merger, Innovus is obligated to make five additional payments of $0.5 million when certain levels of FlutiCare
sales are achieved. The discounted value as of June 30, 2021, is approximately $0.3 million.

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In June 2017, Innovus entered into Exclusive License Agreement (“the Agreement”) with University of Iowa

Research Foundation (“UIRD”) for the use of patent and technology know-how. Pursuant to the agreement, Innovus will
pay to UIRD a total milestone payment of $50,000 every other year beginning on July 1, 2021 for a total payment of $0.2
million. The discounted value as of June 30, 2021, is approximately $0.1 million.

Product Milestone Payments

In connection with its intangible assets, the Company has certain milestone payments, totaling $3.0 million,

payable at a future date, are not directly tied to future sales, but upon other events certain to happen. These obligations are
included in the valuation of the Company’s contingent consideration (see Note 10).

Rumpus Earn Out Payments

On April 12, 2021, the Company acquired substantially all of the assets of Rumpus, pursuant to which the
Company acquired certain rights and other assets, including key commercial global licenses with Denovo and Johns
Hopkins, relating to AR101, which is a pivotal study-ready therapeutic being studied for the treatment of vEDS. This asset
was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million to Denovo and John
Hopkins. Upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments,
which are payable in cash or shares of common stock, generally at the Company’s option, are payable to Rumpus. Under the
license agreement with Denovo, the Company assumed the responsibility for paying annual maintenance fees of $25,000, a
license option fee of $0.6 million payable in April 2022, and upon the achievement of certain regulatory and commercial
milestones, up to $101.7 million, and escalating royalties based on net product sales ranging in percentage from the low
teens to the high teens. Finally, under the license agreement with Johns Hopkins, the Company assumed the responsibility
for paying minimum annual royalties escalating from $5,000 to $20,000 beginning in calendar year 2022, royalties of 3.0%
of net product sales, and upon the achievement of certain regulatory and commercial milestones, up to $1.6 million.

Other commitments

In May 2021, the Company entered into commercial lease agreement for 6,352 square feet of office in Berwyn,

Pennsylvania that commences on December 1, 2021 and ends on January 31, 2025. The initial monthly base rent was
$14,300 with an approximate 2.5% increase in the base rent amount on an annual basis. On July 19, 2021, the Company and
the lessor entered into an amendment, pursuant to which the parties agreed to amend the commencement date from
December 1, 2021 to September 1, 2021. The Company will capitalize this lease as operating leases under ASC 842 in
September 2021.

17. Segment Information

The Company’s chief operating decision maker, who is the Company’s Chief Executive Officer, allocates resources

and assesses performance based on financial information of the Company. The CODM reviews financial information
presented for each reportable segment for purposes of making operating decisions and assessing financial performance.

Aytu manages the Company and aggregated its operational and financial information in accordance with two

reportable segments: Aytu BioPharma and Aytu Consumer Health. The Aytu BioPharma segment consists of the Company’s
prescription products. The Aytu Consumer Health segment contains the Company’s consumer healthcare products, which
was the result of the Innovus Merger. During the year ended June 30, 2021, the Aytu BioPharma

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segment recognized a total impairment loss of $12.8 million related to divestiture of the Natesto licensed asset and the
write-off of Tuzistra licensed asset (see Note 8).

Select financial information for these segments is as follows:

Consolidated revenue:

Aytu BioPharma
Aytu Consumer Health

Consolidated revenue

Consolidated net loss:
Aytu BioPharma
Aytu Consumer Health

Consolidated net loss

Total assets:

Aytu BioPharma
Aytu Consumer Health

Consolidated assets

18. Debt

Year Ended June 30, 
2020
2021

(In thousands)

32,678
32,954
65,632

(50,529)
(7,760)
(58,289)

$

$

$

$

17,249
10,383
27,632

(10,464)
(3,157)
(13,621)

June 30, 

2021

2020

(In thousands)

236,449
29,219
265,668

$

$

126,724
26,569
153,293

$

$

$

$

$

$

The Aytu BioPharma Note. On February 27, 2020, the Company issued a $0.8 million promissory note (the

“Note”) and received consideration of $0.6 million. The Note had an eight-month term with principal and interest payable
on November 1, 2020 and the recognition of approximately $0.2 million of debt discount related to the issuance of
promissory notes. The discount is amortized over the life of the promissory notes through the fourth quarter of calendar
2020. During the year ended June 30, 2021, and June 30, 2020, the Company recorded approximately $47,000 and $0.1,
respectively, of related amortization. On December 10, 2020, the Company agreed to exchange the Note for 130,081 shares
of the Company's common stock in lieu of $0.8 million in cash that would otherwise have been due to satisfy this obligation
on December 31, 2020. As a result of this exchange, the Company recognized a non-cash loss of approximately $0.3 million
during the year ended June 30, 2021.

The Innovus Notes. On January 9, 2020, prior to the completion of the merger, Innovus Pharmaceuticals, Inc.,

entered into a note agreement upon which it received gross proceeds of $0.4 million with a principal amount of $0.5 million.
The note required twelve equal monthly payments of approximately $45,000, and had $0.2 million outstanding as of June
30, 2020. As of June 30, 2021, the balance of the note has been paid.

The Neos Revolving Loan. On October 2, 2019, Neos entered into a senior secured credit agreement with Encina
Business Credit, LLC (“Encina”) as agent for the lenders (the “Loan Agreement”). Under the Loan Agreement, Encina will
extend up to $25.0 million in secured revolving loans to Neos (the “Revolving Loans”), of which up to $2.5 million may be
available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bear variable
interest through maturity at the one-month London Interbank Offered Rate (“LIBOR”), plus an applicable margin of 4.50%.
In addition, Neos is required to pay an unused line fee of 0.50% of the average unused portion of the maximum revolving
facility amount during the immediately preceding month. Interest is payable monthly in arrears, upon a prepayment of a
loan and on the maturity date. The maturity date under the Loan Agreement is May 11, 2022.

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In the event that, for any reason, all or any portion of the lender's commitment to make revolving loans is
terminated prior to the scheduled maturity date, in addition to the payment of the principal amount and all unpaid accrued
interest and other amounts due thereon, Neos is required to pay to the lender a prepayment fee equal to (i) 1.0% of the
revolving loan commitment if such event occurs on or before October 2, 2021, and (ii) 0.5% of the revolving loan
commitment if such event occurs after October 2, 2021 but before May 11, 2022. Neos may permanently terminate the
revolving loan facility by prepaying all outstanding principal amounts and all unpaid accrued interest and other amounts due
thereon, subject to at least five business days prior notice to the lender and the payment of a prepayment fee as described
above.

The Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in

the Loan Agreement, including covenants and restrictions that, among other things, require Neos to satisfy certain capital
expenditure and other financial covenants, and restrict Neos’ ability to incur liens, incur additional indebtedness, engage in
mergers and acquisitions or make asset sales without the prior written consent of the Lenders. A failure to comply with these
covenants could permit the Lenders to declare Neos’ obligations under the Loan Agreement, together with accrued interest
and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or
termination, as described above. Neos evaluated to determine if the embedded components in the agreement qualified as
derivatives requiring separate recognition.

In connection with the closing of the Neos Merger, Neos and Encina entered into a Consent, Waiver and First

Amendment to the Loan Agreement, dated as of March 19, 2021 (the “Encina Consent, Waiver and Amendment”). Pursuant
to the Consent, Waiver and First Amendment, Encina (i) irrevocably waives the right to impose the default rate of interest
solely to the extent resulting from the inclusion of a "going concern" qualification in the audited financial statements of
Neos on a consolidated basis for the fiscal year ending December 31, 2020 (the “Specified Default), (ii) the right to impose
the Default Rate of interest under Section 3.1 of the Loan Agreement, or to collect interest accruing at such Default Rate
that Lenders had a lawful right to collect or apply with respect to any such Specified Default, and (iii) makes certain other
modifications to the Encina Loan Agreement to reflect the consummation of the Neos Merger and the status of Neos as a
wholly-owned subsidiary of Aytu, in each case subject to the terms and conditions of the Encina Consent, Waiver and
Amendment.

The interest expense was $0.2 million for the period beginning March 20, 2021 and ended June 30, 2021. As of
June 30, 2021, $7.9 million borrowing was outstanding under the Revolving Loan and Neos was in compliance with the
covenants under the Loan Agreement as amended.

The Neos Senior Secured Credit Facility. On May 11, 2016, Neos entered into a $60.0 million senior secured

credit facility (the “Facility”) with Deerfield Private Design Fund III, L.P. (66 2/3% of Facility) and Deerfield Partners, L.P.
(33 1/3% of Facility) (collectively, “Deerfield”). As of March 19, 2021, remaining principal on the Facility was $15.6
million, with $0.6 million due on April 11, 2021 and with a final payment of principal, interest and all other obligations
under the Facility due May 11, 2022. In addition, upon the payment in full of the Obligations (whether voluntarily, in the
connection with a Change of Control or an Event of Default and whether before, at the time of or after the Maturity Date),
the Company shall pay to Deerfield a non-refundable exit fee in the amount of $1.0 million, which shall be due and payable
in cash. Interest is due quarterly beginning in June 2021, at a rate of 12.95% per year. Borrowings under the Facility are
collateralized by substantially all of Neos’ assets, except assets under finance lease. If all or any of the principal are prepaid
or required to be prepaid prior to December 31, 2021, then the Company shall pay, in addition to such prepayment and
accrued interest thereon, a prepayment premium equal to 6.25% of the amount of principal prepaid. The terms of the
Facility requires the Company to maintain cash on deposit of not less than $5.0 million.

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Long-term debt consists of the following;

Neos Senior secured credit facility, due on May 11, 2022
Exit fee
Unamortized premium
Financing leases, maturing through May 2024

Total debt

Less: current portion
Long-term debt

June 30, 2021
(In thousands)
15,000
1,000
566
282
16,848
(16,668)
180

$

$

In connection with the Neos Merger, Neos and Deerfield entered into a Consent, Waiver and Sixth Amendment to

the Facility, dated as of March 19, 2021 (the “Deerfield Consent, Waiver and Amendment”). Pursuant to the Consent,
Waiver and Sixth Amendment, Deerfield (i) consented to certain amendments to the Encina loan documents, (ii) irrevocably
waive the Going Concern Conditions as described in the Deerfield Consent, Waiver and Amendment and their right to
impose the default rate of interest as provided for in the Facility as of May 11, 2016, or to collect interest accruing at such
default rate of interest, that the Lenders had a lawful right to collect or apply with respect to any such Event of Default for
failure to satisfy such Going Concern Condition, (iii) subject the Company and its subsidiaries to certain restrictive
covenants including limitations on the incurrence of debt, granting of liens and transfers of assets of the Company and its
subsidiaries and (iv) makes certain other modifications to the Facility to reflect the consummation of the Neos Merger and
the status of Neos as a wholly-owned subsidiary of the Company. Such modifications also include the prepayment of $15.0
million by the Company of the principal of the loan that was otherwise due on May 11, 2021 plus any accrued interest
thereon through March 19, 2021, plus a make-whole payment equal to the interest that would otherwise have been due on
that $15.0 million for the period beginning March 19, 2021 through May 11, 2021. The Sixth Amendment also eliminated
the right of Deerfield to convert outstanding amounts of the loans into conversion shares and the right of Neos to make
payments to Deerfield in the form of shares of common stock. The Company is a guarantor under the Facility.

Pursuant to the terms of the Facility, as amended, the $15.0 million principal prepayment was paid in cash on

March 19, 2021, and the carrying amount of the remaining outstanding debt was $16.6 million. As the Neos Merger was
accounted for as a business combination under Topic 805, Neos evaluated and determined that the fair value of the
remaining outstanding debt was $17.4 million as of March 20, 2021. Accordingly, Neos recorded a premium of $0.8
million, which is the difference between carrying amount and the fair value of the debt and is being amortized into interest
expense using the effective interest method over the remaining term of the debt. As of June 30, 2021, the Company was in
compliance with the covenants under the Facility as amended. Total interest expense on the Facility, net of premium
amortization, was $0.4 million for the period beginning March 20, 2021 and ended June 30, 2021.

Future principal payments of long-term debt, including financing leases, are as follows;

2022
2023
2024
2025
Thereafter
Future principal payments
Add unamortized premium
Less current portion
Long-term debt

F-47

June 30, 
(In thousands)
16,102
96
84
—
—
16,282
566
(16,668)
180

$

$

    
    
Table of Contents

19. License Agreements

In October 2018, Neos entered into an Exclusive License Agreement (“NeuRx License”) with NeuRx

Pharmaceuticals LLC (“NeuRx”), pursuant to which NeuRx granted Neos an exclusive, worldwide, royalty-bearing license
to research, develop, manufacture, and commercialize certain pharmaceutical products containing NeuRx’s proprietary
compound designated as NRX-101, referred to by Neos as NT0502. NT0502 is a new chemical entity that is being
developed by Neos for the treatment of sialorrhea, which is excessive salivation or drooling. Under the NeuRx License,
Neos made an upfront payment of $0.2 million to NeuRx upon the execution of the agreement. Neos made a payment of
$0.2 million following receipt of notice of allowance of the first Licensed Patent by the United States Patent and Trademark
Office (“USPTO”), as defined in the NeuRx License. Such Licensed Patent subsequently was issued by the USPTO. In
April 2020, Neos met the completion of the first Pilot PK Study milestone, as defined in the NeuRx License, triggering the
cash payment of $0.3 million. Neos may in the future be required to make certain development and milestone payments and
royalties based on annual net sales, as defined in the NeuRx License. Royalties are to be paid on a country-by-country and
licensed product-by-licensed product basis, during the period of time beginning on the first commercial sale of such licensed
product in such country and continuing until the later of: (i) the expiration of the last-to-expire valid claim in any licensed
patent in such country that covers such licensed product in such country; and/or (ii) expiration of regulatory exclusivity of
such licensed product in such country.

On October 31, 2017, Neos received a paragraph IV certification from Teva Pharmaceuticals USA, Inc. (“Teva”)
advising Neos that Teva has filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of
Cotempla XR-ODT, in connection with seeking to market its product prior to the expiration of patents covering Cotempla
XR-ODT. On December 13, 2017, Neos filed a patent infringement lawsuit in federal district court in the District of
Delaware against Teva alleging that Teva infringed Neos’ Cotempla XR-ODT patents. On December 21, 2018, Neos entered
into a Settlement Agreement (the “Teva Settlement Agreement”) and a Licensing Agreement (the “Teva Licensing
Agreement” and collectively with the Teva Settlement Agreement, the “Teva Agreement”) with Teva that resolved all
ongoing litigation involving Neos’ Cotempla XR-ODT patents and Teva’s ANDA. Under the Teva Licensing Agreement,
Neos granted Teva a non-exclusive license to certain patents owned by Neos by which Teva has the right to manufacture and
market its generic version of Cotempla XR-ODT under its ANDA beginning on July 1, 2026, or earlier under certain
circumstances. The Teva Licensing Agreement has been submitted to the applicable governmental agencies.

On July 25, 2016, Neos received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”)

advising Neos that Actavis had filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. On September 1,
2016, Neos filed a patent infringement lawsuit in federal district court against Actavis alleging that Actavis infringed Neos’
Adzenys XR-ODT patents. On October 17, 2017, Neos entered into a Settlement Agreement (the “Actavis Settlement
Agreement”) and a Licensing Agreement (the “Actavis Licensing Agreement” and collectively with the Actavis Settlement
Agreement, the “Actavis Agreement”) with Actavis that resolved all ongoing litigation involving Neos’ Adzenys XR-ODT
patents and Actavis’s ANDA. Under the Actavis Licensing Agreement, Neos granted Actavis a non-exclusive license to
certain patents owned by Neos by which Actavis has the right to manufacture and market its generic version of Adzenys
XR-ODT under its ANDA beginning on September 1, 2025, or earlier under certain circumstances. The Actavis Licensing
Agreement has been submitted to the applicable governmental agencies.

In July 2014, Neos entered into a Settlement Agreement and an associated License Agreement (the “2014 License

Agreement”) with Shire LLC (“Shire”) for a non-exclusive license to certain patents for certain activities with respect to
Neos’ New Drug Application (the “NDA”) No. 204326 for an extended-release orally disintegrating amphetamine polistirex
tablet. In accordance with the terms of the 2014 License Agreement, following the receipt of the approval from the FDA for
Adzenys XR-ODT, Neos paid a lump sum, non-refundable license fee of an amount less than $1.0 million in February 2016.
Neos is paying a single digit royalty on net sales of Adzenys XR-ODT during the life of the patents.

In March 2017, Neos entered into a License Agreement (the “2017 License Agreement”) with Shire, pursuant to

which Shire granted Neos a non-exclusive license to certain patents owned by Shire for certain activities with respect to
Neos’ NDA No. 204325 for an extended-release amphetamine oral suspension. In accordance with the terms of the 2017
License Agreement, following the receipt of the approval from the FDA for Adzenys ER, Neos paid a lump sum, non-

F-48

Table of Contents

refundable license fee of an amount less than $1.0 million in October 2017. Neos is paying a single digit royalty on net sales
of Adzenys ER during the life of the patents.

The royalties are recorded as cost of goods sold in the same period as the net sales upon which they are calculated.

Additionally, each of the 2014 and 2017 License Agreements contains a covenant from Shire not to file a patent
infringement suit against Neos alleging that Adzenys XR-ODT or Adzenys ER, respectively, infringes the Shire patents.

In April 2020, the Company entered into a licensing agreement with Cedars-Sinai Medical Center to secure

worldwide rights to various potential esophageal and nasopharyngeal uses of Healight, an investigational medical device
platform technology. Healight has demonstrated safety and efficacy in a proof-of-concept clinical study in SARS-CoV-2
patients, and the Company plans to advance this technology to further assess its safety and efficacy in additional
randomized, controlled human studies, initially focused on SARS-CoV-2 patients.

The agreement with Cedars-Sinai grants the Company a license to all patent and development related technology

rights for the intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications.
The term of the agreement is on a country-by-country basis and will expire on the latest of the date upon which the last to
expire valid claim shall expire, ten years after the first bona fide commercial sale of such licensed product in a country, or
the expiration of any market exclusivity period granted by a regulatory agency. Pursuant to the terms of the agreement, the
Company paid an initial $0.3 million license fee and approximately $0.1 million in earlier patent prosecution fees.

In April 2021, the Company acquired substantially all the assets of Rumpus. Through this transaction the Company

secured exclusive global rights to AR101 from Denovo in the fields of rare genetic pediatric onset or congenital disorders
outside of oncology. AR101 is a pivotal study-ready therapeutic candidate initially targeting the treatment of vEDS.

Under the terms of the transaction, the Company paid an upfront fee of $1.5 million in cash and payment of

aggregated fees of $0.6 million to Denovo and John Hopkins. Upon the achievement of certain regulatory and commercial
milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the
Company’s option, are payable to Rumpus. In addition, the Company received assignments of third-party licenses from
Denovo and Johns Hopkins and took over royalty obligations and performance-based milestones under these licenses.

20. Related Party Transactions

Tris Pharma, Inc.

On November 2, 2018, the Company entered into a Tris License Agreement. On November 1, 2019, the Company

acquired the rights to Karbinal as a result of the acquisition of the Pediatric Portfolio from Cerecor, Inc. (See Notes 4 and
16). Mr. Ketan Mehta served as a Director on the Board of Directors of the Company, and is also the Chief Executive
Officer of Tris. During the years ended June 30, 2021 and 2020, the Company paid Tris approximately $3.2 million and $1.3
million, respectively for a combination of royalty payments, inventory purchases and other payments as contractually
required. The Company’s liabilities, including accrued royalties, contingent consideration and fixed payment obligations
were $19.7 million and $22.9 million as of June 30, 2021 and 2020, respectively. In October 2020, the Company paid Tris
approximately $1.6 million related to its Karbinal fixed payment obligation. On March 19, 2021, Mr. Ketan Mehta resigned
as a Director on the Board of the Company, and Tris will no longer be considered a related party in the future.

21. Subsequent Events

On July 1, 2021, the Company and Avrio Genetics, LLC (“Avrio Genetics”) mutually agreed to terminate the Avrio

agreement, effective as of June 29, 2021. In connection with the termination of the agreement, the Company

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entered into a termination agreement with Avrio. Pursuant to the terms of this termination agreement, the original Avrio
agreement and its amendments are terminated in their entirety, except for certain provisions that survive the termination as
specified in such agreement.

Subsequent to the Avrio termination, on July 1, 2021, the Company signed an Asset Purchase Agreement (the

“Asset Purchase Agreement”) with UAB “Caerus Biotechnologies” (“UAB”). Pursuant to the terms and conditions of the
agreement, UAB will acquire all existing intellectual property rights, technical information and know-how related to
MiOXSYS as well as all existing inventory and all rights attached and related to the product and manufacturing thereof. As
consideration, UAB agreed to pay the Company approximately $0.5 million and make royalty payments to the Company of
five percent of net global revenue of the products for five years from the closing date of the transactions contemplated in the
Asset Purchase Agreement.

F-50

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

Exhibit 10.79

ASSET PURCHASE AGREEMENT

between

AYTU BIOPHARMA, INC.

and

UAB “Caerus Biotechnologies”

regarding purchase of

MiOXSYS Analyzer, MiOXSYS Sensors as well as all IP, know-how, copyrights, technical information and
similar rights pertaining to MiOXSYS Analyzer and or MiOXSYS Sensors

1 July 2020

1/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

TABLE OF CONTENTS

DEFINITIONS AND INTERPRETATIONS

SUBJECT MATTER OF THE AGREEMENT AND CONDITIONS PRECEDENT

PURCHASE PRICE AND TERMS OF PAYMENT

DUE DILIGENCE

CLOSING

NON ASSUMPTION OF EMPLOYEES

POST-CLOSING ACTIONS

SELLER’S WARRANTIES

PARTIES’ WARRANTIES

1.

2.

3.

4.

5.

6.

7.

8.

9.

10. LIABILITY

11. TERMINATION

12. OTHER MATTERS

Appendix 1 - Technical information sheet on MiOXSYS Sensors and MiOXSYS Analyzers

Appendix 2 – List of Patents

Appendix 3 – List of Trademarks

Appendix 4 – List of Technical Information

Appendix 5 – List of Documentation

Appendix 6 – Form of Ancillary Agreements

Appendix 7 – List of Assets with Prices

Appendix 8 – Business plan (commercial targets)

Appendix 9 – List of Registrable Assets

Appendix 10 – List of Patent Renewals

Appendix 11 – List of Contracts Related to the Assets

3

10

12

13

13

14

14

16

19

20

22

23

26

27

32

33

34

35

36

37

38

39

40

2/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

AGREEMENT ON ASSIGNMENT OF RIGHTS AND SALE OF GOODS

This Agreement on Assignment of Rights and Sale of Goods (“Agreement”) is made and entered into as of the 1st
day of July, 2021 (“Signing Date”) by and between:

AYTU  BIOPHARMA,  INC.,  incorporated  and  existing  under  the  laws  of  the  State  of  Delaware,  reporting  file
number 001-38247, registered business address 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112,
USA (“Seller”), and

UAB  “Caerus  Biotechnologies”,  incorporated  and  existing  under  the  laws  of  Lithuania,  code  305806105,
registered office address Mėnulio g. 11-101, Vilnius LT-04326, Lithuania (“Buyer”),

hereafter may individually be referred to as a “Party”, or collectively as the “Parties”.

PREAMBLE

(A)

(B)

(C)

The Seller has exclusive rights (intellectual property rights, technical information, know-how and etc.) for
production, manufacturing, marketing and selling of MiOXSYS Analyzer and MiOXSYS Sensors as shown
in the Appendix 1 (“Products”);

Buyer is interested in acquiring and assuming the existing intellectual property rights (patents, trademarks,
designs etc.), technical information and know-how related to the Products as well as existing inventory of
the manufactured Products;

Under the terms and conditions stipulated in this Agreement, the Seller is willing to sell and transfer to the
Buyer and the Buyer is willing to purchase and take over from the Seller all rights attached and related to
the Products and manufacturing thereof;

NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein  contained,  the  Parties  intending  to  be
legally bound agree as follows:

1.

DEFINITIONS AND INTERPRETATIONS

1.1.

In addition to terms defined elsewhere in this Agreement, the following definitions shall apply throughout
this Agreement, unless the context requires otherwise:

1.1.1.  Affiliate

1.1.2.  Ancillary Agreements
1.1.3.  Assets

to  any 

means,  with  respect 
individual,  corporation,  general
partnership,  limited  partnership,  limited  liability  company,  trust,
association,  firm,  organization,  company,  business,  entity  (Person),
any other Person that as of the Signing Date or as of any subsequent
date,  directly  or  indirectly,  through  one  or  more  intermediaries,
controls,  is  controlled  by  or  is  under  common  control  with  such
specified Person.
has the meaning given to it under Clause 2.2.6 of this Agreement.
means the Patents, Trademarks, Technical Information, Other Assets
and Existing Inventory and all pecuniary and

3/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

1.1.4.  Confidential Information

1.1.5.  Conditions Precedent
1.1.6.  Closing

1.1.7.  Closing Date

1.1.8.  Damages

1.1.9.  Documentation

1.1.10.  Dispute

1.1.11.  Due Diligence

1.1.12.  Due Diligence Date

1.1.13.  Encumbrance

non-pecuniary rights attached to them, including any IP Rights arising
from or related to any such Assets.
means  all  information  of  any  kind  or  nature  whatsoever,  whether
written  or  oral  or  whatsoever  form,  including,  without  limitation,
financial information, trade secrets, customer lists, Appendixes to this
Agreements  and  Ancillary  Agreement,  all  information  and  documents
related to the negotiations of the Agreement and Ancillary Agreements
between the Parties and their Affiliates and other information regarding
the Assets and IP Rights attached to them, which is not known to the
general public.
has the meaning given to it under Clause 2.2 of this Agreement.
means occurrence of the transactions stipulated under Clause 5.1 of this
Agreement.
means  the  actual  date  when  the  Closing  occurs,  i.e.  all  conditions
stipulated under Clause 5.1 are fulfilled.
means  losses  and  damages  (excluding  punitive  and  special  damages,
except  where  payable  to  a  third  party),  complaints,  claims,  demands,
deficiencies,  penalties,  fines,  costs,  amounts  paid  in  settlement,
liabilities, obligations, taxes, liens, expenses or fees, including costs of
investigation and attorneys’ fees; provided, however, that for purposes
of  computing  the  amount  of  Damages  incurred  by  any  Person,  there
will  be  deducted  an  amount  equal  to  the  amount  of  any  insurance
proceeds, 
indemnification  payments,  contribution  payments  or
reimbursements  actually  received  by  such  Person  or  any  of  such
Person’s  Affiliates 
the
circumstances giving rise thereto.
means all documentation and information pertaining to the Assets listed
in  the  Appendix  5,  including,  but  not  limited  to,  ownership  (title)
documents (certificates etc.).
means any claim, demand, dispute, action, suit, arbitration, proceeding,
investigation or other similar matter.
means  a  legal,  technical,  financial  and  tax  investigation  of  the  Assets
and  IP  Rights,  Technical  Information  and  Know-How  which  has
commenced  before  the  Signing  Date  by  the  Buyer  and  which  shall
conclude on the Due Diligence Date.
means  a  day  on  which  the  Due  Diligence  will  be  considered  as
completed:  either the 23rd day of July 2021 or the day of receipt by the
Seller the Notice of Withdrawal, whichever is earlier.
means  any  pledge,  mortgage,  lien,  option,  pre-emptive  right,  lease,
commercial lease or any other right or

in  connection  with  such  Damages  or 

4/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

1.1.14.  Existing Inventory

1.1.15.  Good Condition

1.1.16.  IP Rights

encumbrance  or  restriction  to  the  benefit  of  the  Seller,  its  Affiliate
and/or any third person.
means all inventory of existing manufactured Products owned or to be
owned by the Seller on the Closing Date, in any case (i) [REDACTED]
MiOXSYS  Analysers,  (ii)  [REDACTED]  MiOXSYS  Sensors  (iii)
[REDACTED]  MiOXSYS  CVK,  (iii)  [REDACTED]  MiOXSYS
Socket Module Analyzer Replacement Component.
with respect to the Assets, where and when applicable, means that they
are  approved  (valid)  or  pending  submitted  in  the  Territory  (unless
disclosed  by  the  Seller  prior  to  Signing  Date  that  they  are  denied  or
expired).
means  all  intellectual  property  and  proprietary  rights  of  any  kind,
including any and all of the following in any country or region:

(i)

rights), 

including  all 
reproduction, 

copyrights  -  all  copyrights,  whether  marked  as  such  or  not,
and  copyrightable  works  (including  databases  and  other
compilations  of  information,  mask  works  and  semiconductor
rights  of  authorship,  use,
chip 
publication, 
performance,
distribution, 
transformation,  moral  rights  and  rights  of  ownership  of
copyrightable  works,  and  all  registrations  and  rights  to
register  and  obtain  renewals  and  extensions  of  registrations,
together  with  all  other  interests  accruing  by  reason  of
international copyright;
(ii)
Patent Rights;
(iii) Trademark Rights; and
(iv) Trade Secrets.

1.1.17.  Knowledge of the Seller

1.1.18.  Long Stop Date
1.1.19.  Material Adverse Effect

IP Rights includes all rights (whether at law, in equity, by contract or
otherwise) to enforce, enjoy or otherwise exploit any of the foregoing,
including  the  rights  to  sue  for  and  remedies  against  past,  present  and
future  infringements  or  misappropriations  of  any  or  all  of  the
foregoing,  and  rights  of  priority  and  protection  of  interests  therein
under the laws of any jurisdiction worldwide.
shall  mean  the  actual  knowledge  of  the  Seller  and/or  its  management
and  any  knowledge  that  would  or  could  have  been  acquired  by  the
Seller  and/or 
inquiry  and
investigation.
means the 30 September 2021.
means  (i)  the  occurrence  after  the  Due  Diligence  Date  of  the  events,
circumstance,  fact,  change,  development,  condition,  or  effect  that
caused or are reasonably likely to cause an adverse effect on the Assets
with individual or

its  management  upon 

reasonable 

5/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

1.1.20.  MA Manufacturer

1.1.21.  MS Manufacturer

1.1.22.  Net Sales

aggregate (i.e. the total effect of all of the events and groups of events
mentioned  above)  financial  effect  of  at  least  [REDACTED]  (fifteen
thousand  US  dollars)  compared  to  the  respective  standing  before  the
occurrence  of  the  Material  Adverse  Effect  event;  and/or  (ii)  any
changes in the Good Condition of the Assets.
means  the  contract  manufacturing  organization  (CMO)  for  the
MiOXSYS Analyzers:  [REDACTED].
means  the  contract  manufacturing  organization  (CMO)  for  the
MiOXSYS Sensors:  [REDACTED].
means  the  gross  amounts  invoiced  and  received  by  the  Buyer  or  its
Affiliates  for  any  and  all  sales  or  transfers  of  any  Product,  less  the
following amounts to the extent actually incurred or paid by the Buyer
or its Affiliates with respect to such sales or transfers:

(i)

(ii)

(iii)

(iv)

(v)

trade,  cash  and  quantity  discounts,  charge  backs,  or  rebates
actually  allowed  or  taken,  including  discounts  or  rebates  to
governmental  agencies/entities;  wholesalers  and  other
distributors;  pharmacies  and  other  retailers;  buying  groups;
health care insurance carriers; pharmacy benefit management
companies;  regulatory  authorities;  third  parties  associated
with  patient  assistance  programs;  or  managed  care
organizations;
credits or allowances actually given or made for rejection of,
or return of previously sold Products;
any  charges  for  insurance,  freight,  and  other  transportation
costs  directly  related  to  the  delivery  of  Product  to  the  extent
included in the gross invoiced price;
any  tax,  tariff,  duty,  or  governmental  charge  levied  on  the
sales,  transfer,  transportation  or  delivery  of  the  Product
(including  any  tax  such  as  a  value  added  or  similar  tax  or
government  charge)  borne  by  the  seller  thereof,  other  than
franchise or income tax of any kind whatsoever; and
any  import  or  export  duties  or  their  equivalent  borne  by  the
seller;

All  aforementioned  deductions  shall  be  determined,  on  a  country-by-
country basis, as incurred in the ordinary course of business in type and
amount consistent with the Buyer’s or the Affiliate’s (as the case may
be) business practices consistently applied across its product lines and

6/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

accounting  standards  and  verifiable  based  on  conventional  industry
practices.    All  such  discounts,  allowances,  credits,  rebates,  and  other
deductions shall be fairly and equitably allocated to Product and other
products  of  the  Buyer  and  its  Affiliates  and  sublicensees  such  that  a
Product  does  not  bear  a  disproportionate  portion  of  such  deductions.
  The  transfer  of  the  Product  between  or  among  the  Buyer  and  its
Affiliates will not be considered a sale, provided, that in the event an
Affiliate  is  the  end-user  of  Product,  the  transfer  of  Product  to  such
Affiliate shall be included in the calculation of Net Sales at the average
selling price charged in an arm’s length sale to a third party who is not
an  Affiliate  in  the  relevant  period.    Net  Sales  includes  the  cash
consideration  received  on  a  sale  and  the  fair  market  value  of  all  non-
cash consideration.  Disposition of Product for, or use of the Product in,
clinical  trials  or  other  scientific  testing,  as  free  samples,  or  under
compassionate  use,  named  patient  sales,  patient  assistance,  or  test
marketing  programs  or  other  similar  programs  or  studies  where  the
Product  is  supplied  without  charge  shall  not  result  in  any  Net  Sales,
however if the Buyer or any of its Affiliates charges for such Product,
the amount billed will be included in the calculation of Net Sales.
has the meaning given to it under Clause 4.2 of the Agreement.
means, in connection with the Products:

1.1.23.  Notice of Withdrawal
1.1.24.  Other Assets

(i)

(ii)
(iii)

(iv)

any  IP  Rights  and  applications  for  the  foregoing,  in  any
country, supra-national organization or territory of the world;
any marketing material;
any domains owned by the Seller associated with the Products
and/or oxidative stress, oxidative-reductive potential etc;
any  other 
lawful  production,
manufacturing,  marketing,  distributing,  and  selling  of
Products in the Territory.

assets  necessary 

for 

1.1.25.  Patents

1.1.26.  Patent Rights

means  all  patents  (approved,  pending,  submitted)  in  connection  with
the  Products  as  shown  in  the  Appendix  2,  including  the  patents
registered in the name of a third party rather than the Seller.
means  (A)  all  national,  regional  and  international  issued  patents  and
patent  applications  (including  provisional  patent  applications);  (B)  all
patent  applications  filed  either  from  the  foregoing  patents,  patent
applications or provisional applications or from an application claiming
priority from or the benefit of either of these (including,

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

1.1.27.  Products
1.1.28.  Purchase Price
1.1.29.  Registrable Assets

1.1.30.  Seller’s Account

1.1.31.  Technical Information

reissue  and 

additions, continuations, continuations-in-part, divisional, substitutions,
converted  provisionals,  continued  prosecution, 
re-
examination applications); (C) any and all patents that have issued or in
the  future  issue  from  the  foregoing  patent  applications  described  in
clauses  (A)  and  (B),  including  utility,  utility  model,  plant  and  design
patents,  and  certificates  of  invention;  and  (D)  patent  revalidations,
patent registrations, applications for patent registrations and any patent
term extension or other action by a competent authority which provides
rights  beyond  the  original  expiration  date  of  a  patent  (including  any
supplementary  protection  certificates  and  the  like),  in  each  case  with
respect  to  the  foregoing  patents  or  patent  applications  described  in
clauses (A), (B) and (C).
has the meaning given to it under Preamble (A) of the Agreement.
has the meaning given to it under Clause 3.1 of this Agreement.
means the items, marked in Appendix 9 as registrable Assets, that will
be  transferred  from  the  Seller  to  the  Buyer  prior  to  the  Closing,  to
ensure occurrence of the Condition Precedent specified in Clause 2.2.2
below.
means  the  Seller’s  bank  account,  account  number  Aytu  BioPharma,
Bank Name and address:  [REDACTED] or other account indicated by
the Seller.
any  and  all  know-how,  inventions,  discoveries,  unpatented  and
proprietary ideas, Trade Secrets, specifications, instructions, processes,
formulae, materials, methods, protocols, expertise and other technology
applicable  to  the  MiOXSYS®  commercial  system  or  its  manufacture
(included but not limited to all documentation that collectively defines
the manufacturing methods, test methods, specifications, materials, and
other  procedures,  directions  and  controls  associated  with 
the
manufacture  and 
testing  of  MiOXSYS®  commercial  system),
registration,  use  or  marketing  or  to  methods  of  testing  components  of
the  MiOXSYS®  commercial  system  or  processes 
their
manufacture,  and  including  all  biological,  chemical,  pharmacological,
biochemical,  toxicological,  pharmaceutical,  physical  and  analytical,
safety,  quality  control,  manufacturing,  preclinical  and  clinical  data,
instructions, processes, formula, and expertise relating thereto.

for 

Technical Information also includes, but is not limited to:

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

(i)

(ii)

(iv)

(iii)

Design  History  file  (including  covenants  related  to  Product
development, manufacturing and post-marketing, information
on  complaints  and  other  important  issues),  in  the  scope  and
content that are customary for such type of the Products and
their use and would ensure that the quality and requirements
for manufacturing of the Product are met in full;
Full  set  of  relevant  commercial  and  quality  conditions
required  for  the  entry  into  the  MS  Agreement  and  MA
Agreement on the terms, beneficial for the Buyer;
all  protocols,  process  and  results  of  in-house  and  other
validation studies;
all  available  to  the  Seller  protocols  of  published,  ongoing,
completed  or  not  started  clinical  and  other  studies  (all
important  information  associated  with  these  studies,  all
outstanding  obligations  by  the  Seller  in  relations  to  these
studies;
all  regulatory  submission  information  as  list  of  submissions
(submission dates, approval dates, certificates); list of rejected
submission  (dated)  with  the  information  by  regulator  on  the
reason for rejection);
all  regulatory  files  and  dossiers  submitted  (by  country  and
territory),  copies  of  key/important  items  of  correspondence
with  regulators,  including,  but  not  limited  to  the  lists  of
Patents  and  other  Registrable  Assets  that  refer  to  the  latest
date and amount of payment of applicable fees or levies, the
period it covers and the next date and amount of payment;
(vii) quality  management  documentation,  SOPs  ISO  and  other
quality  related  information  (such  as  KAPAs  etc),  the  list  of
registered complaints and records of action taken;

(vi)

(v)

1.1.32.  Territory

1.1.33.  Trademarks

(viii) important contacts information, in the scope acceptable to the

Buyer.

Technical Information is shown in the Appendix 4.
means  the  entire  world,  i.e.,  all  and  any  countries,  states,  and
jurisdictions.
means  all  non-registered  (including  well-known)  and  registered
trademarks  (approved,  pending,  submitted)  in  connection  with  the
Products as shown in the Appendix 3.

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

1.1.34.  Trademark Rights

1.1.35.  Trade Secrets

trademarks,  registered 

trademarks,  applications  for
means  all 
registration  of  trademarks,  service  marks,  registered  service  marks,
applications for registration of service marks, trade names, registered
trade names and applications for registration of trade names, service
names,  brand  names,  trade  dress  rights,  logos,  taglines,  slogans,
Internet  domain  names  and  Internet  domain  name  registrations  and
web addresses, together with the goodwill associated with any of the
foregoing; and including all intent to use any of the foregoing if not
registered or subject to a pending application.
means  any  trade  secrets,  or  any  confidential  inventions  (whether
patentable  or  unpatentable,  whether  or  not  reduced  to  practice,
whether  or  not  in  an  invention  disclosure  and  whether  or  not  in
writing), processes, formulae, developments, discoveries, technology,
cell  lines,  biological  materials,  compounds,  probes,  sequences,
information  and  data,  software,  methods,  biological
technical 
materials,  bioassays,  clones,  molecules,  protocols, 
reagents,
experiments, lab results, tests, know-how, concepts, ideas, processes,
research  and  development  information  and  results,  customer  lists,
supplier  lists,  pricing  and  cost  information,  business  and  marketing
plans, strategies or other confidential information or materials which
in the reasonable business judgment of the owner thereof have value
or  confer  a  competitive  advantage  to  such  owner  due  to  being  not
generally known or not publicly disseminated.

2.

SUBJECT MATTER OF THE AGREEMENT AND CONDITIONS PRECEDENT

2.1.

2.2.

Upon the terms and subject to the conditions set forth in this Agreement, at Closing the Seller shall sell,
assign, and transfer and the Buyer shall buy, assume and acquire the Assets for the Purchase Price.

The  obligation  of  each  of  the  Parties  to  perform  the  Closing  are  subject  to  the  following  conditions
precedent (the Conditions Precedent) being satisfied in accordance with this Clause 2.2:

2.2.1. The results of the Due Diligence reveal no material findings, and are reasonably acceptable to the
Buyer;  this  Condition  Precedent  is  deemed  to  have  occurred  if  until  the  Due  Diligence  Date,  the
Seller did not receive the Notice of Withdrawal from the Buyer, as specified in Clause 4.2 below;

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

2.2.2. The Seller and the Buyer have concluded the transfer-acceptance deed on the transfer of title to the
Registrable Assets, as required for the Seller’s performance of the Condition Precedent specified in
Clause 2.2.4 below;

2.2.3.

the Seller has transferred (or has caused to transfer) to the Buyer all original Documentation, any
documented  know-how  pertaining  to  the  Products,  all  working  process  descriptions,  technical
drawings, blueprints, technical know-how, etc.;

2.2.4. The  Seller  has  caused  that  all  regulatory  filings,  registrations  and  entries  are  made  with  the
respective  authorities,  institutions,  and  databases  in  the  Territory  as  a  result  of  which  the  Buyer’s
title  to  the  Registrable  Assets  and  all  required  regulatory  permits  to  produce  the  Products,  when
applicable, are registered, at the Seller’s cost, and in the manner reasonably acceptable to the Buyer;
this Condition Precedent shall include:

2.2.4.1.the Seller’s obligation to ensure payment of all fees, annuities, maintenance fees and other
costs,  fees  and  expenses  related  to  maintenance  and  renewal  of  the  validity  and  legal
protection of Patents and Trademarks and any other Assets, to the extent it is applicable, and
that they are duly covered, paid-up by the Seller for the period until the Closing Date or, in
respect of the Patents and Trademarks, until 31 May 2022;

2.2.4.2.the Seller’s obligation to ensure payment of all fees mentioned in Clause 2.2.4.1 also for all
fees  after  the  Closing  Date  until  31  May  2022,  in  order  to  ensure  uninterrupted  legal
protection of Assets.  Appendix 10 is a general estimate of the annuity fees to be paid, actual
amount owned may be more or less, and shall not be re-charged to Buyer;

2.2.4.3.the  Buyer’s  obligation  to  issue  required  powers  of  attorney  or  other  similar  supporting
documentation for the Seller, in order to enable his performance of this Condition Precedent;

2.2.5. The Seller has caused that by the Closing Date the volumes of the Existing Inventory correspond to

the numbers specified in Clause 1.1.14 above;

2.2.6. The Seller caused that the former engineers who worked on the Products with MA Manufacturer as
well  as  former  or  current  employees  of  MA  Manufacturer  liaise  with  the  Buyer  in  relation  to
technology transfer;

2.2.7. The Seller has caused that no later than by the Long Stop Date the MS Manufacturer, the current
producers  of  the  Products,  enter  with  the  Buyer  into  the  commercial  agreements  in  the  form
attached as Appendix 6 (“Ancillary Agreements”), free of any Buyer’s obligations or liability for
the performance of the Seller’s obligations towards these producers, and on the terms and conditions
acceptable  to  the  Buyer,  in  any  case  not  worse  than  equivalent  commercial  agreements,  currently
concluded by the Seller.

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

2.3.

No Material Adverse Effect has occurred prior to the Closing Date.

3.

PURCHASE PRICE AND TERMS OF PAYMENT

3.1.

The purchase price for the Assets shall be paid by the Buyer to the Seller by transferring respective funds to
the Seller’s Account via a bank transfer and shall consist of three parts (referred to in total as the “Purchase
Price”):

3.1.1.

fixed part (“Fixed Part”) shall amount to [REDACTED].  The split of the Fixed Part per each item
of  Assets,  excluding  Existing  Inventory,  is  provided  in  the  Appendix  7,  and  shall  be  paid  in
accordance with the payment schedule as specified in Clause 3.2 below;

3.1.2. variable part – royalties (“Variable Part”),  shall  amount  to  [REDACTED]  of  net  global  revenue,
equal to Net Sales of the Products per year for [REDACTED]from the Closing date, and shall be
paid as specified in Clause 3.3 below;

3.1.3.

[REDACTED]  margin, 

fixed part for the Existing Inventory (“Existing Inventory Part”) shall be calculated by multiplying
the number of produced MiOXSYS Sensor items [REDACTED] per cost of [REDACTED] per item
plus 
[REDACTED]  MiOXSYS  Analyzer  per  average  cost  of
[REDACTED]per  item,  [REDACTED]  MiOXSYS  CVK  per  average  cost  of  [REDACTED]  per
item, and [REDACTED]MiOXSYS Socket Module Analyzer Replacement Component per average
cost  of  [REDACTED]  shall  be  paid  in  accordance  with  the  payment  schedule  as  specified  in
Clause 3.4 below.

3.2.

The Fixed Part shall be paid according to the following payment schedule:

3.2.1.

[REDACTED] payable at the Signing Date;

3.2.2.

[REDACTED] payable at the Closing Date;

3.2.3. 10 (ten) equal instalments amounting to [REDACTED] each, payable yearly, first instalment to be

paid within 30 days following the first anniversary of the Closing Date;

3.2.4.

[REDACTED] payable on the earlier of (a) the expiration of the 36 (thirty six) months’ period after
the Closing Date, or (b) written confirmation by the Buyer that the transfer of manufacturing of each
of (i) MiOXSYS Analyzer and (i) MiOXSYS Sensors to another or additional manufacturer(s) (as
the case may be) based in the European Union has been completed.

3.3.

The Variable Part shall be calculated by the Buyer and paid annually within 90 days after the end of each
financial year of the Buyer, ending on 31 December.  Upon the Seller’s request and within reasonable terms
the Buyer shall provide the supporting documents of calculations of the Variable Part.  The Variable Part
shall be based on the annual Net Sales of Products received during the financial year of the Buyer and its
Affiliates.  For the year

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

when the Closing occurs and for the fifth year the annual revenue shall be prorated according to the number
of full months that fall within the prescribed period established under Clause 3.1.2.

3.4.

The  Existing  Inventory  Part  shall  be  calculated  by  the  Closing  Date  and  shall  be  payable  quarterly  in  4
(four) equal instalments each over a period of 12 months, first instalment payable within 90 days after the
delivery of the Existing Inventory Part to the Buyer.

3.5.

The Purchase Price is final and includes value added tax, if applicable, and all other taxes, fees and charges
pertaining to the sale of the Assets.

4.

DUE DILIGENCE

4.1.

4.2.

The  Seller  acknowledges  that  the  Buyer  shall  be  entitled  to  perform  the  Due  Diligence  until  the  Due
Diligence  Date  and  shall  provide  all  information  and  documents  reasonably  requested  by  the  Buyer  in
connection  with  the  Due  Diligence.    For  the  avoidance  of  doubt,  the  Seller’s  obligation  to  provide
information  and  documents  shall  include,  but  not  be  limited  to,  provision  of  the  Documents  and  detailed
description of Assets, including Patents and Technical Information.

If the Buyer identifies until the Due Diligence Date that any Assets are not of Good Condition and, due to
that,  at  the  Buyer’s  sole  discretion  it  deems  that  the  Buyer  no  longer  has  any  interest  in  purchasing  the
Assets and rights attached to them, or if the Seller fails to provide the Buyer with the necessary information
and documents required for the Due Diligence, the Buyer shall serve the Seller with a 10 (ten) days’ notice
of withdrawal on or before the Due Diligence Date (“Notice of Withdrawal”) and upon maturity of which
the Agreement shall be terminated, in accordance with Clause 11.1 of this Agreement.

5.

CLOSING

5.1.

The Parties shall take or cause to be taken all other actions which are necessary or appropriate in order to
fully effect the sale of the Assets to the Buyer and for completion of this Agreement in all other respects not
later than until the Long Stop Date.  At the Closing the Parties shall carry out the actions listed below:

5.1.1.

the Parties shall confirm that all Conditions Precedent specified in Clause 2.2 above have occurred
and that the Buyer has paid the part of the Fixed Part, specified under Clause 3.2.1;

5.1.2.

the Seller shall transfer to the Buyer the title to all Assets, excluding Registrable Assets, that have
been already transferred to the Buyer prior to the Closing;

5.1.3.

the Seller shall present to the Buyer (i) the invoice for the Fixed Part specifying the Price for each
part of the Assets as provided in Appendix 7 and (ii) the invoice for the Existing Inventory Part;

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

5.1.4.

the Buyer shall pay to the Seller the part of the Fixed Part, specified under Clause 3.2.2;

5.1.5.

the  Seller  and  the  Buyer  shall  sign  the  Closing  Certificate  confirming  that  the  Closing  actions
stipulated in this Clause 5.1 have occurred.

5.2.

The Closing shall not be deemed to have occurred until all Closing actions above have been completed or
waived by the respective Party.

6.

NON ASSUMPTION OF EMPLOYEES

6.1.

6.2.

The Seller warrants that under this Agreement and the transactions contemplated herein, as of the Signing
Date  and  the  Closing  Date  there  are  no  employment  contracts  with  the  Seller  which  must  be  or  will  be
transferred to the Buyer as a result or which must be or will be transferred by virtue of the applicable law.

If after the Closing Date it appears that the Seller’s representation provided in this section 6 is not true, and
under the applicable law employment contracts must be transferred from the Seller to the Buyer, the Seller
unconditionally undertakes to indemnify the Buyer in full and compensate all the Buyer’s reasonable costs
incurred and associated with any such transfers.

7.

POST-CLOSING ACTIONS

7.1.

As  soon  as  practically  possible  but  no  later  than  within  a  36  (thirty  six)  months  period  after  the  Closing
Date  (or,  for  the  obligations  specified  in  Clause  7.1.2.8  -  7.1.2.11  below  –  within  a  5  (five)  years  period
after the Closing Date):

7.1.1.

the  Buyer  shall  take  all  necessary  actions  in  order  to  transfer  all  the  rights  and  responsibilities  in
terms  of  manufacturing  of  each  of  (i)  the  MiOXSYS  Analyzer  and  (ii)  the  MiOXSYS  Sensor  to
another  or  additional  (as  the  case  may  be)  contract  manufacturing  organization  chosen  at  the
Buyer’s discretion, i.e., to perform the technology transfer.

7.1.2. The  Seller  shall  take  all  necessary  actions  and  provide  all  necessary  technical  information  and
know-how support to make a prompt and efficient transfer of manufacturing of MiOXSYS Analyzer
as established herein, including, but not limited to:

7.1.2.1.provide  all  reasonable  support  requested  by  the  Buyer  in  searching  and  finding  potential
contract manufacturing organisations (CMO) for the Products in the European Union, which
are  able  to  manufacture  the  Products  and  have  all  appropriate  necessary  credentials,
resources, authorizations and licences;

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

7.1.2.2.     assist, provide information and consultancy in preparing the requests for proposal (RfP)
for potential CMOs, establishing requirements and criteria for potential CMOs;

7.1.2.3.    assist and consult the Buyer in all matters related to assessing potential CMOs and their
proposals,  including  without  limitation,  all  stages  of  due  diligence;  technical  evaluation
of CMOs proposals, provide all necessary related information and consultancy thereof;

7.1.2.4.    provide all necessary support in choosing the CMOs for the Products, including, but not
limited to, assistance in establishing the requirements and designs for test products for the
purpose of choosing the CMOs as well as assessing and evaluating the results of the trial
runs, i.e. assessing and evaluating the quality of the test products produced;

7.1.2.5.          provide  all  reasonable  assistance  in  negotiation  with  the  potential  CMOs  regarding

manufacturing of the Products;

7.1.2.6.        provide  full  information  and  technical  support  on  the  first  manufacturing  cycle  of  the
Products by the Buyer, to ensure quality equivalent to the quality of the current Products,
and the quantity not less then 400 and release of the Products under the MS Agreement;

7.1.2.7.          support  and  assist  in  any  other  matters  not  mentioned  above,  which  are  related  to

transferring the manufacturing of the Products;

7.1.2.8.   ensure that the Seller’s employees or agents will be available on a reasonable basis, for
questions and trouble-shooting support to effect the successful transfer of manufacturing
of the Products;

7.1.2.9.          inform  the  Buyer  within  a  reasonable  period  of  time  of  any  circumstances  it  becomes
aware  of  which  may  have  a  material  influence  on  the  manufacture  or  safety  of  the
Products;

7.1.2.10.      provide  technical  guidance  to  the  Buyer  on  how  to  achieve  a  smooth  transition  in  the
course  of  technology  transfer  and  how  to  improve  the  manufacture  technology  and
quality standards of the products;

7.1.2.11.   assist the Buyer in establishing and maintaining Products quality testing and management

procedures and processes.

7.2. Within a 5 (five) years period as of the Closing Date, at no further cost to the Buyer, the Seller shall:

7.2.1. provide all necessary support and assistance to the Buyer, instruct and train the Buyer’s personnel as

may be required for the proper performance of the Ancillary Agreements;

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

7.2.2. provide  the  Buyer  with  all  information  of  which  it  has  knowledge  regarding  legal  and  regulatory
requirements applicable to the manufacturing, marketing and selling of the Products in the Territory,

7.2.3.

instruct and assist the Buyer with regard to all legal and regulatory requirements including, but not
limited  to  applicable  laws,  regulations,  ordinances,  regulatory  guidelines  and  guidance  which  are
necessary for and relate to the manufacture, marketing and selling of Products in the Territory;

7.2.4. support  the  Buyer,  if  required:    with  all  matters  related  to  re-certification,  re-submission  of
applications for registration of any Patents and/or Trademarks in the Territory; with handling all IP
Rights related to the Products, including preparing, filing out and filing any applications or forms
regarding any changes as well as assisting with any other related regulatory filings in the Territory.

7.2.5.

instruct and train the Buyer’s personnel as may be required to ensure a fast and smooth transfer of
the technology and know-how in connection with the Products to the Buyer as well as provide all
other  necessary  requirements  and  information  about  current  practices  at  the  Seller  in  order  to
maintain the Products regulatory fit in the Territory.

7.3.

The  Seller  shall  provide  to  the  Buyer  the  warranty  for  the  Existing  Inventory,  valid  for  the  period  of  1
(one) year as of the Closing Date.  During this period, the Buyer will have the option to require the Seller to
replace any part of the Existing Inventory, or claim for the refund of the respective amount.

8.

SELLER’S WARRANTIES

8.1.

The Seller hereby warrants to the Buyer that as at the Signing Date and the Closing Date (unless a warranty
is explicitly given as of another date) the following warranties are true:

8.1.1. Title to Assets, no Encumbrances.  The Seller holds valid title to the Assets, where applicable, and
transfers the sold Assets and respective IP Rights to them, where applicable, free and clear of any
Encumbrances and any rights of third parties (other than Encumbrances).

8.1.2. Unrestricted right to dispose.  The Seller is fully authorized to dispose of the Assets and has the
absolute and unrestricted right and authority to execute and deliver this agreement on assignment of
rights and sale of goods and to perform its obligations herein.

8.1.3. Authorizations and approvals.  All permits, authorizations, approvals and consents necessary for
conclusion,  performance  of  this  Agreement  and  transfer  of  title  to  Assets  for  the  benefit  of  the
Buyer were duly received and obtained.

8.1.4. Charges and fees.  All fees, annuities, maintenance fees and other costs, fees and expenses related

to maintenance and renewal of the Patents and Trademarks and

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

any other Assets, to the extent it is applicable, are paid-up by the Seller up to the Closing Date and
in respect of the Patents and Trademarks shall be paid up until 31 May 2022.

8.1.5. Documentation.    Documentation  includes:    all  original  documents  pertaining  to  the  Assets,
including  without  limitation,  all  working  process  descriptions,  technical  drawings,  blueprints,
formulae, protocols etc. marketing material of the Products in possession of the Seller; all customer
data  that  the  Seller  has  available  (including  placements)  for  regulatory  and  quality  assurance  and
device  vigilance  in  connection  with  the  Products  together  with  copies  of  contracts  with  the
customers; and any other documents or information which is necessary for the Seller to conduct the
business  of  designing,  manufacturing,  distributing  and  selling  of  the  Products  in  the  Territory  as
currently is conducted by the Seller.  The Seller did not omit any documents that may be important
or  required  by  the  Buyer  from  submitting  them  to  the  Buyer.    In  case  after  the  Signing  Date  the
Seller has any documents or information that would have needed to be transferred to the Buyer it
will do so immediately after finding of such facts.

8.1.6. Sufficiency of the Assets.  Assets:  (i) constitute all of the material properties, interests, assets and
rights of the Seller and any of its Affiliates used or held for use exclusively in business of designing,
manufacturing,  distributing  and  selling  of  the  Products  in  the  Territory;  (ii)  are  sufficient  for  the
Seller  to  continue  immediately  following  the  Closing  to  conduct  the  business  of  designing,
manufacturing, distributing and selling of the Products in the Territory as currently is conducted by
the  Seller;  and  (iii)  includes  all  authorizations  that  are  sufficient  for  the  Buyer  to  continue
immediately following the Closing to manufacture and market the Products in all material respects
in the Territory as and to the extent the Products are currently being manufactured and marketed by
Seller.

Buyer  understands  and  acknowledges  Seller  is  required  to  renew  their  ISO  Certification  on
31st  October  2021  Buyer  further  understands  and  acknowledges  that  Seller  will  not  take  steps  to
renew their ISO Certification, which may have an impact on the sufficiency of the assets.  It being
understood,  however,  that  ISO  Certification  will  be  valid  until  all  Existing  Inventory  is
manufactured and transferred from the Seller to the Buyer.  Seller shall not be responsible for any
costs, damages, or liability subject to this Section 8.1.6, as a result of not taking steps to renew their
ISO Certification.

8.1.7. Registered IP Rights.  Appendixes 2 and 3 sets forth a true, complete and accurate list of all the
Patents (and Patent Rights), Trademarks (and Trademark Rights), owned by the Seller that concerns
the  Products,  setting  forth  in  each  case  the  jurisdictions  in  which  Patents  have  been  issued  and
Patent  applications  have  been  filed  and  Trademarks  have  been  registered  and  Trademark
applications have been filed, along with the current owner, the respective application, registration or
filing number.

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

8.1.8. Technical Information.   Appendix  4  sets  forth  a  true,  complete  and  accurate  list  of  all  Technical
Information  with  respect  to  the  Products  that  are  owned  by  the  Seller  and  that  are  material  to
conduct  the  business  of  designing,  manufacturing,  distributing  and  selling  of  the  Products  in  the
Territory as currently is conducted by the Seller.

8.1.9. Inbound licenses and rights.  There are no agreements in effect under which any third party has
licensed  or  sublicensed  (exclusively  or  non-exclusively),  granted  or  conveyed  to  the  Seller  any
right,  title  or  interest  in  or  to  any  IP  Rights  that  are  necessary  for  the  development,  manufacture,
sale,  marketing,  distribution  or  use  of  any  of  the  Products,  or  are  otherwise  material  to  the
manufacture,  marketing  or  sale  of  the  Products  as  being  conducted  as  of  the  Signing  Date  (In-
Licensed Rights).

8.1.10. Out-licensed  rights.    The  Seller  has  not  licensed,  sublicensed,  granted  or  conveyed  to  any  third
party  any  right,  title  or  interest  in  or  to  any  IP  Rights  with  respect  to  the  Assets  (Out-Licensed
Rights).

8.1.11. No outstanding orders.  To the Knowledge of the Seller, the IP Rights with respect to the Assets, to
the extent applicable under legal requirements of applicable jurisdiction of the Territory are valid,
subsisting  and  enforceable  and  are  not  subject  to  any  outstanding  writ,  judgement,  decree,
injunction,  settlement,  or  similar  order  of  or  approval  by  any  competent  authority  (in  each  case,
whether preliminary or final).

8.1.12. No infringement of third-party IP Rights.  To the Knowledge of the Seller, the Products and the
business of manufacturing, marketing and selling of the Products do not infringe, misappropriate or
violate any valid and enforceable IP Rights of any other third parties.  The Seller has not received
any written charge, complaint, claim, demand, notice or other written communication from any third
party  alleging  that  it  is  interfering  with,  infringing  upon,  misappropriating,  violating  or  otherwise
coming into conflict with any IP Rights of such third party in connection with any of the Products or
the conduct of the respective business of manufacturing, marketing and selling of the Products.

8.1.13. Legal Proceedings.  To the Knowledge of the Seller, there is no lawsuit or other legal proceeding
(including arbitration) pending or, to the Knowledge of Seller, being threatened against the Seller, or
in  the  case  of  any  such  proceedings  first  arising  after  the  date  of  this  Agreement  that  would
reasonably be expected to result in a Material Adverse Effect, and in each case that (a) involves the
Assets and IP Rights attached to them; or (b) challenges, or that may have the effect of preventing,
delaying,  making  illegal  or  otherwise  interfering  with,  the  sale  of  the  Assets  and  assignment  of
respective IP Rights or any of the transactions contemplated by this Agreement.

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

8.1.14. No royalties.  The Seller does not have any obligations to pay any third parties any royalties, fees,

commissions or other amounts for the use by the Seller of any Assets.

8.1.15. Existing Inventory.   The  Existing  Inventory  is  merchantable  and  fit  for  the  purpose  for  which  it
was  procured  or  manufactured,  and  with  respect  to  such  inventory  that  is  trade  finished  product
inventory,  and  was  manufactured  in  conformity  with  the  specifications  for  the  Products  good
manufacturing practices and legal requirements.

8.2.

8.3.

The  Buyer  does  not  assume  any  rights  and  obligations  of  the  Seller  under  any  contract  belonging  to  the
Assets.    List  of  the  contracts  related  to  the  Assets  is  provided  as  Appendix  11.   To  the  extent  a  contract
should be transferred by operation of law, the Seller shall indemnify the Buyer.

The Buyer does not assume any liability of the Seller.  In the event of a transfer of a liability by operation of
law, Seller shall indemnify and hold harmless Buyer from and against all claims of third parties relating to
the liability and reimburse Buyer for all reasonable costs and expenses incurred in connection therewith to
the extent such liability was incurred prior to the Closing Date.

9.

PARTIES’ WARRANTIES

9.1.

Each Party warrants to each other that each warranty, set forth in this Clause, is true, correct, accurate and
not misleading in any material respect on the Signing Date and the Closing Date:

9.1.1.

the  Party  is  a  company  duly  incorporated  and  legally  existing  under  the  applicable  laws  and  has
been in continuous existence since its incorporation;

9.1.2.

the Party is not subject to any reorganization (and does not take part in any reorganization of any
third entity), restructuring, spin-off, transformation, insolvency, bankruptcy or liquidation;

9.1.3.

the Party has the full capacity, right, power and authority (including required decisions and consents
from  its  bodies,  creditors  and  authorities)  and  has  taken  all  actions  necessary  to  execute  and  to
exercise  its  rights  and  perform  its  obligations  under  this  Agreement  and  each  document  to  be
executed at or before the Closing;

9.1.4. unless explicitly otherwise set forth in this Agreement, the Party has obtained all permits that may
be required to ensure validity, enforceability, due authorization, execution and performance of the
Agreement and the transaction contemplated under the Agreement, which have not been annulled or
revoked;

9.1.5.

the  Agreement  and  the  performance  by  the  Party  of  its  obligations  under  the  Agreement  and  any
other document or instrument executed in connection with the

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

Agreement will, when executed, constitute valid and binding obligations of the Party, enforceable in
accordance with the respective terms;

9.1.6.

there  is  no  claim,  action,  suit,  proceeding,  arbitration,  investigation  or  hearing,  pending  or
threatened, by or before any authority or dispute resolution body against the Party that prevent the
Party from performing its obligations under this Agreement.

10.

LIABILITY

10.1. General provisions:

10.1.1. Subject  to  the  terms  and  conditions  of  this  Agreement,  a  Party  shall  be  liable  for  and  shall

compensate in full amount the direct loss suffered by the aggrieved Party.

10.1.2. For the purposes of this Agreement, a liability which is contingent shall not constitute a loss unless
and  until  such  contingent  liability  becomes  an  actual  liability  and  is  due  and  payable  by  the
aggrieved Party.

10.1.3. In the event of a claim by the aggrieved Party for the loss, the breaching Party shall have the right,
exercisable  upon  10  business  days  written  notice  to  the  aggrieved  Party,  to  attempt  to  cure  the
breach in question during a period of 60 business days (in case the breach constitutes the failure to
execute Closing – during a period of 10 business days) following the date of notice of the claim.

10.2. Liability for failure to execute Closing.  If:

10.2.1. the Conditions Precedent are fulfilled, but the Closing does not occur until the Long Stop Date due
to  fault,  or  negligence  of  the  Party  or  its’  Affiliate  (for  the  avoidance  of  doubt,  if  the  Notice  of
Withdrawal  is  served  by  the  Buyer,  it  shall  be  deemed  that  the  Condition  Precedent  set  out  in
Clause 2.2.1 is not fulfilled due to the Seller’s fault, only if the Notice of Withdrawal was served
due to the Seller’s failure to provide required information, and due to the Buyer’s fault – only if the
Notice of Withdrawal was served without reasonable ground for that); or

10.2.2. the  Condition  Precedent  set  out  in  Clause  2.2.3-  2.2.8  above  is  not  fulfilled  until  the  Long  Stop
Date, it shall be deemed that the Condition Precedent is not fulfilled due to the Seller’s fault;

a  Party  in  breach  shall  pay  a  penalty  equal  to  5%  of  the  Purchase  Price  (which  by  the  agreement  of  the
Parties is deemed just, fair, reasonable and non-questionable (undisputable) compensation of losses of the
aggrieved Party) and compensate other direct losses of the aggrieved Party incurred due to the failure of the
first Party to complete the transaction exceeding the aforementioned penalty.

10.3. Seller’s liability for the breach of warranties.  The aggregate liability of the Seller under this Agreement

shall be limited by the amount of the Purchase Price.  The limitation period

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

for making claims for the breach of the Seller’s warranties under this Agreement shall be 36 months from
the Closing Date.

10.4.

If the Buyer receives notice or otherwise obtains knowledge of any dispute or any threatened dispute that
may  reasonably  be  expected  to  give  rise  to  a  claim  against  the  Buyer,  then  the  Buyer  will  deliver  to  the
Seller  a  written  notice  describing  such  dispute  in  reasonable  detail  as  soon  as  reasonably  practicable;
provided, however, that the failure to so notify the Seller shall not relieve the Seller from any liability that it
may  have  to  the  Buyer,  except  to  the  extent  that  such  failure  materially  prejudices  the  Seller’s  ability  to
defend the related dispute.  The Seller will have the right, exercisable by written notice to the Buyer, at its
election and at its sole expense, to assume the defence of any such Dispute with its own counsel, reasonably
acceptable to the Buyer.  If the Seller elects to assume the defence of any such Dispute, then:

10.4.1. the Seller will not be required to pay or otherwise indemnify the Buyer against any attorneys’ fees
or  other  expenses  incurred  on  behalf  of  the  Buyer  in  connection  with  such  Dispute  following  the
Seller’s  election  to  assume  the  defence  of  such  Dispute  other  than  the  reasonable  costs  of
investigation and of assistance as contemplated by this Section 10.4.1; provided, however, that if, in
the  opinion  of  outside  counsel  to  the  Buyer,  it  is  advisable  for  the  Buyer  to  be  represented  by
separate  counsel  due  to  actual  or  potential  conflicts  of  interest,  the  Buyer  shall  have  the  right  to
employ counsel to represent it and in that event the fees and expenses of such separate counsel shall
be paid by the Seller;

10.4.2. the  Buyer  and  the  Seller  will  each  make  available  to  the  other  all  books,  records  and  other
documents  and  materials  that  are  under  the  control  of  such  Party,  its  Affiliates,  advisors  and
representatives  that  may  be  reasonably  considered  necessary  or  desirable  for  the  defence  of  such
Dispute;

10.4.3. the  Buyer  and  the  Seller  will  execute  such  documents  and  take  such  other  actions  as  may  be
reasonably requested by the other for the purpose of facilitating the defence of, or any settlement,
compromise or adjustment relating to, such Dispute;

10.4.4. the Buyer will otherwise fully cooperate as reasonably requested by the Seller in the defence of such
Dispute; provided, however, that such actions and cooperation by the Buyer will not unduly disrupt
the  operations  of  the  Buyer’s  business  or  cause  the  Buyer  to  waive  any  statutory  or  common  law
privileges,  breach  any  confidentiality  obligations  owed  to  third  parties  or  otherwise  cause  any
confidential information of the Buyer to become public;

10.4.5. the Buyer will not admit any liability with respect to such Dispute without the Seller’s prior written

consent (such consent not to be unreasonably withheld, conditioned or delayed); and

10.4.6. the Seller will have the exclusive right to settle, adjust or compromise such Dispute on behalf of the

Buyer on terms that:  (A) the Seller may consider appropriate with

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

the consent of the Buyer (which consent may not be unreasonably withheld or delayed); or (B) meet
all of the following conditions:  (i) can be resolved by money damages alone; (ii) obligate the Seller
to pay the full amount of any Damages in connection with such Dispute; and (iii) completely and
unconditionally release the Buyer in connection with such Dispute.

10.5.

If (i) the Seller elects not to assume the defence of such Dispute; (ii) after electing to assume the defence of
a Dispute, the Seller does not timely assume and conduct the defence of such Dispute; or (iii) the Buyer
reasonably  determines  that  the  Seller  is  not  adequately  representing  or,  because  of  a  conflict  of  interest,
may not adequately represent the interests of the Buyer, then the Buyer will be entitled to conduct its own
defence of such Dispute at the Seller’s cost and expense:  provided, however, that the Buyer may not settle,
adjust  or  compromise  such  Dispute  without  the  Seller’s  consent  (such  consent  not  to  be  unreasonably
withheld or delayed).

10.6. Seller’s  liability  for  post-closing  obligations.    If  the  Seller  fails  to  perform  any  obligation  specified  in
Section  7,  the  Buyer  shall  be  entitled  to  suspend  its  payment  obligations  until  proper  discharge  of  the
Seller’s  obligations.    If  the  Seller’s  breach  of  any  obligation  specified  in  Section  7  lasts  for  more  than
30 days, the Buyer shall be entitled to claim a penalty in the amount of [REDACTED] per each case of the
Seller’s breach (in case of continuous breach – one case of the Seller’s breach shall be deemed as a Seller’s
failure to perform a specific required action during 30 days, and the new period(s) of 30 days or the Seller’s
failure to perform another type of action during 30 days shall constitute a new breach).  The Buyer will be
entitled  to  set-off  the  penalty  applied  under  this  clause  against  any  upcoming  payment  obligation  by  the
Buyer.

11.

TERMINATION

11.1. Termination  before  Closing.    Either  Party  may  unilaterally  without  applying  to  the  respective  dispute
resolving institution terminate this Agreement by a prior 10 business days’ written notice to the other Party,
if  until  the  Long  Stop  Date  the  Closing  has  not  occurred.    In  this  case,  the  consequences  specified  in
Clause 10.1-10.2 and Clause 11.2 shall apply.

11.2. Consequences of termination before Closing.  In case of termination of the Agreement prior to Closing,
the  Parties  will  return  everything  they  have  received  from  each  other,  i.e.  the  Buyer  shall  return  to  the
Seller title to all Registrable Assets, whereas the Seller shall refund the Buyer of any amounts paid by the
Buyer until that day.  The Parties shall take up all actions and sign any deeds, additional agreements and
any other documents necessary to implement the restitution established herein.  All costs associated with
such restitution shall be borne by the defaulting Party (for the sake of clarity, it will always be considered
that the Party initiating the termination in the manner established herein is not the defaulting Party).

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

11.3. Termination  after  Closing.    The  Agreement  may  be  terminated  unilaterally  without  applying  to  the
respective dispute resolving institution by a prior 10 business days’ written notice to the other Party:

11.3.1. by the Buyer:

(a)

(b)

(c)

within  a  time  period  of  5  (five)  years  as  of  the  Closing  Date  in  case  of  failure  of
commercialization  of  the  Products,  i.e.  if  the  business  targets  set  out  in  the  business  plan
attached under the Appendix 8 are not reached, by serving a written notice to the Seller;

if  technology  transfer  to  the  Buyer  with  respect  to  MiOXSYS  Analysers  fails  or  becomes
commercially unreasonable for the Buyer; or

if  technology  transfer  to  the  Buyer  or  additional  CMO  with  respect  to  MiOXSYS  Sensors
fails  or  becomes  commercially  unreasonable  for  the  Buyer  under  the  respective  Ancillary
Agreement.

11.3.2. by the Seller, if the payment obligations of the Buyer under this Agreement are overdue for more

than 60 days.

11.4.

In the cases specified in Clause 11.3, the consequences specified in Clause 10.1 and Clause 11.5 shall apply.

11.5. Consequences  of  termination  after  Closing.   With  respect  to  Clauses  11.3.1  (a)  and  (b),  any  payments
under  this  Agreement  made  by  the  Buyer  to  the  Seller  up  to  the  date  of  termination  shall  stay  with  the
Seller (i.e. they will not have to be refunded) and, upon request of the Seller, the Assets can be transferred
by the Buyer to the Seller “as is” at the moment of the termination.

12.

OTHER MATTERS

12.1. Confidentiality.    Each  Party  undertakes  to  keep  confidential  the  terms  and  conditions  of  the  Agreement
and all Ancillary Agreements and not to use or disclose any Confidential Information unless (i) required to
do so by law or pursuant to any order of court or other competent authority or tribunal (ii) required to do so
by  any  applicable  stock  exchange  regulations  or  the  regulations  of  any  other  recognised  market  place
(iii)  such  disclosure  has  been  consented  to  by  the  other  Party  in  writing  (such  consent  not  to  be
unreasonably  withheld)  or  (iv)  to  its  professional  advisers  (who  are  bound  to  such  Party  by  a  duty  of
confidentiality).    If  a  Party  becomes  required,  in  circumstances  described  above,  to  disclose  any
information, the disclosing Party shall use its reasonable efforts to consult with the other Party prior to any
such disclosure.

12.2. Notices.    Any  notice  or  other  communication  under  this  Agreement  must  be  in  English  and  in  writing
(which, for the purposes of this Clause, includes e-mail, but not fax) and must be addressed as set out below
or to such other address (contact details) of the Party as may

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

be notified in writing (if the Party fails to inform about the change of its address, dispatch of the notice to the last
known address shall be considered sufficient):

If to the Buyer:
Attn:
Address:
E-mail:

If to the Seller:
Attn:
Address:

E-mail:

w/ copy to:
Attn:
Address:

E-mail:

Valdemaras Rodzko
Mėnulio g. 11-101, LT-04326 Vilnius, Lithuania
[REDACTED]

Joshua Disbrow
373 Inverness Parkway, Suite 206, Englewood, Colorado 80112,
USA
[REDACTED]

Legal Department
373 Inverness Parkway, Suite 206, Englewood, Colorado 80112,
USA
[REDACTED]

All  notices  and  other  communications  under  the  Agreement  shall  be  deemed  to  have  been  received  by  a
Party:    (a)  if  delivered  by  hand  (in  person)  or  registered  post  or  courier  –  on  the  date  of  actual  delivery;
(b) when sent by e-mail, on the day the receiving Party confirms its receipt (the confirmation to be provided
by e-mail).

12.3. Entire  Agreement.    The  Agreement  contains  the  entire  understanding  between  the  Parties  hereto  and
supersedes  any  arrangements,  understandings,  promises  or  agreements  made  or  existing  between  the
Parties prior to the Agreement regarding the Agreement’s subject matter.

12.4. Assignment.  The Agreement may not be assigned by any Party without the prior written consent of the
other  Party,  except  that  the  Buyer  may  assign  the  Agreement  without  the  Seller’s  consent  to  any  of  its
Affiliates provided the Buyer remains jointly liable with such Affiliate for the undertakings assumed herein.

12.5. Severability.  If any provision of the Agreement or the application of it shall be declared or deemed void,
invalid or unenforceable in whole or in part for any reason, the Parties shall amend the Agreement to give
effect to the spirit of the Agreement, so far as is possible.  If the Parties fail to amend the Agreement, the
provision(s) which is void, invalid or unenforceable, shall be deemed deleted and the remaining provisions
of the Agreement will remain in full force and effect.

12.6. Governing law and settlement of disputes.  This Agreement shall be governed, construed and interpreted
in accordance with the substantive laws of the Switzerland.  All disputes arising out of connection or in
connection  with  the  present  Agreement,  including  disputes  on  its  conclusion,  binding  effect,  amendment
and termination, shall be resolved, to the

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determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

exclusion  of  the  ordinary  courts  by  an  Arbitral  Tribunal  in  accordance  with  the  International  Arbitration
Rules of the Zurich Chamber of Commerce.

12.7. Good  faith  to  implement.    The  Parties  shall  cooperate  in  good  faith  and  put  best  efforts  and  sign  all
necessary  documents  and  take  all  necessary  actions  in  order  to  achieve  that  all  transactions  provided  for
under the Agreement are implemented timely, properly and fully.

12.8. Appendixes.    The  appendixes  and  any  attachments  and  exhibits  thereto  form  an  integral  part  of  the
Agreement and shall be construed and shall have the same full force and effect as if expressly set forth in
the body of the Agreement:

Appendix 1 – Technical information sheet on MiOXSYS Sensors and MiOXSYS Analyzers;
Appendix 2 – List of Patents;
Appendix 3 – List of Trademarks;
Appendix 4 – List of Technical Information;
Appendix 5 – List of Documentation;
Appendix 6 – Form of Ancillary Agreements;
Appendix 7 – List of Assets with Prices;
Appendix 8 – Business plan (commercial targets);
Appendix 9 – List of Registrable Assets;
Appendix 10 – List of Patent Renewals;
Appendix 11 – List of Contracts related to the Assets.

The Appendices may be supplemented or amended based on the findings of the Due Diligence by
Agreement of the Parties.

IN  WITNESS  WHEREOF,  the  duly  authorised  representatives  of  the  Parties  have  executed  this
Agreement in 2 (two) identical counterparts in English language, each deemed to be of equal legal
power and effect.  Each Party shall retain 1 (one) original counterpart of the agreement.

On behalf of the Buyer:

On behalf of the Seller:

Full name

Title

Signature

Full name

Title

Signature

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Appendix 1 - Technical information sheet on MiOXSYS Sensors and MiOXSYS Analyzers

MiOXSYS Technical Document

Document Number

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[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

[REDACTED]
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[REDACTED]
[REDACTED]
[REDACTED]

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Appendix 2 – List of Patents

Ctry
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Patent #
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5753‐16‐PEA

Title

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Multiple Layer Gel

Ctry
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EA

Serial #

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201491808

Filed Date
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4/19/2013

Patent #
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Ctry
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Patent #
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Ctry
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Patent #
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Ctry
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Appendix 3 – List of Trademarks

Mark
Name

Status

Jurisdiction

Serial
Number

Class(es) Application

Date

Registration
Date

Owner

Registration
Number

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[REDACTED]

[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

Renewal
Fee Due
Date
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

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[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

Appendix 4 – List of Technical Information

Document Title

Document Number

[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

33/40

Appendix 5 – List of Documentation

Title
Health Canada Medical Device
Australian Register of Therapeutic Goods
(sensors and controls)
Australian Register of Therapeutic Goods
(analyzer)
Declaration of Conformity
60601 Engineering Report
UL Report

Company
Health Canada
ARTG

ARTG

Aytu BioPharma
Atlas Compliance
UL

Category
Regulatory
Regulatory

Regulatory

Regulatory
Engineering
Engineering

34/40

Appendix 6 – Form of Ancillary Agreements

Title
Quality Agreement

Company
LasX Micro Med Solutions Manufacturing

Category

35/40

Appendix 7 – List of Assets with Prices

The Parties agree that the Fix Price for the Assets shall be broke down as follows:

No.
1.
2.
3.

Asset
Patents
Trademarks
Technical Information and Other Assets

Price
[REDACTED]
[REDACTED]
[REDACTED]

36/40

Appendix 8 – Business plan (commercial targets)

Year
2021
2022
2023
2024
2025

Number of MiOXSYS Sensors sold
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

Average Net Sales per 1 MiOXSYS Sensor
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

37/40

Appendix 9 – List of Registrable Assets

The Registrable Assets comprise from Patents (Appendix 2) and Trademarks (Appendix 3).

38/40

Appendix 10 – List of Patent Renewals

Country Name Entity Size

Serial #

Patents
Reference #
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]

[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]

Deadlines

Cost
Estimates

Assignee
Name
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]
[REDACTED] [REDACTED] [REDACTED]

39/40

Appendix 11 – List of Contracts Related to the Assets

No.
1.
2.

3.
4.

5.

6.

7.

8.
9.

Contract details
1 January 2016, TECOmedical AG
29 September 2016, ATL R&D. Reproductive
Biology & Genetics
5 January 2018, AK&KBA
17 October 2016, NAKA International
Corporation
1 October 2018, LogixX Pharma Solutions Ltd.

October 2018, Beijing Dahua Sanxin
Technology Development Co., Ltd.
15 January 2019, Seeder Medical LLC

15 January 2020, F-G-4S
1 March 2020, UAB Grynumber Healrh

Territory
[REDACTED]
[REDACTED]

[REDACTED]
[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]
[REDACTED]

Contact details
Attn:  CEO +41619858100
Attn:  Scientific Director 
+33130480178

Attn:  President and CFO 
+81425299313
Attn:  Michael Close (CEO) 
+44(0)1189011747

Attn:  Managing Director 
+47444349191
SPD Scientific (M) Sdn Bhd

40/40

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

Exhibit 10.80

TERMINATION AGREEMENT

On January 20, 2021, Aytu BioScience, Inc., now Aytu BioPharma, Inc., a Delaware corporation with offices at
373 Inverness Pkwy, Suite 206, Englewood, CO 80112 (“AYTU”), and Avrio Genetics, LLC, a Commonwealth of
Pennsylvania  limited  liability  corporation  with  offices  at  3467  Trexler  Blvd,  Allentown,  PA  18104  (“Licensee”)
entered into an Exclusive License Agreement (“Agreement”) relating to the Patent Rights, Trademark Rights and
Technical Information, as defined therein.

On February 4, 2021, Aytu and Licensee agreed to amend the Agreement by entering into a First Amendment to
Exclusive License Agreement. On March 4, 2021, Aytu and Licensee agreed to further amend the Agreement by
entering into a Second Amendment to Exclusive License Agreement.

AYTU and Licensee now wish to terminate the Agreement.

By  mutual  agreement,  evidenced  by  this  signed  Termination  Agreement,  AYTU  and  Licensee  terminate  the
Agreement pursuant to the terms of Section 7.2(f). The date of termination shall be: June 29, 2021.

Pursuant to the terms of the Agreement, Licensee shall pay the royalties, cost for inventory, original shipping fees,
and patent fees as described in Appendix A.

Aytu shall arrange for a courier to pick up the inventory as described in Appendix B, on July 2, 2021.

Licensee  acknowledges  that  Aytu  shall  assume  responsibility  for  inventory  produced  by  LasX,  approximately
[REDACTED]  sensors,  and  Aytu  acknowledges  that  Licensee  may  sell  any  other  currently  held,  or  returned
inventory, in accordance with Section 7.3.

Both AYTU and Licensee acknowledge and agree that the terms of Sections 7.3, 7.5, 7.6 and 7.7 of the Agreement
shall survive termination.

Acknowledged and agreed, effective as of the date written above:

LICENSEE:
Avrio Genetics, LLC

By:
Name: Brandon Hensinger
Title: CEO

AYTU:
Aytu BioPharma, Inc.

By:
Name: Joshua Disbrow
Title: Chief Executive Officer

2

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

APPENDIX A
FEES DUE

AYTU BioPharma, Inc.
373 Inverness Parkway
Suite 206
Englewood, CO 80112
Phone:  (720) 437-6580
Fax:

BILL TO:
Avrio Genetics
[REDACTED]

SHIP TO:
Avrio Genetics
[REDACTED]

Invoice No.
Date
Order No.
Shipper ID
Order Type
Customer ID

INVOICE
06292021
06/29/2021

Invoice
AVRIOGENET

PAGE 1

F.O.B. POINT

SHIP VIA

ORDERED BY

CUSTOMER P.O. NO.

ORDER DATE
6/29/021

TERMS

[REDACTED]

SALES PERSON

SITE
HOMEOFFICE
Home Office - Englewood

PART NUMBER

QTY ORDERED

UNITS

QTY SHIPPED

QTY BO

PRICE

DISC %

EXT. PRICE

00001

-
-
-
-
-

[REDACTED] for royalties
[REDACTED] for sold inventory
[REDACTED]  for patent fees
[REDACTED] shipping fees
[REDACTED] Sensors
Total due: [REDACTED]

Payment schedule: Twelve (12) equal installment payments in the amount of [REDACTED]  due by the 1st of each month, starting August 1, 2021.  [REDACTED] 
late fee for any payment not received by the 3rd day of each month.

Please remit payment to:
Wells Fargo Bank N.A.
ACH Payments:
Routing: [REDACTED]
Account: [REDACTED]
Wire Payments:
Routing: [REDACTED]
Account: [REDACTED]
SWIFT/BIC Code for USD payments: [REDACTED]

Sales Total

[REDACTED]

Shipping & Handling
Misc. Charges
Tax Total

Less Paid Amount

[REDACTED]
[REDACTED]
[REDACTED]
[REDACTED]

TOTAL

[REDACTED]

[REDACTED] = Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has
determined that certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i)
not material and (ii) would be competitively harmful if publicly disclosed.

APPENDIX B
INVENTORY TO BE REPOSSESSED

[REDACTED]

SUBSIDIARIES OF AYTU BIOPHARMA, INC.

Exhibit 21.1

Name of Subsidiary

Aytu Therapeutics, LLC
Innovus Pharmaceuticals, Inc.
Semprae Laboratories, Inc
Novalare, Inc
Supplement Hunt, Inc.
Delta Prime Savings Club, Inc
Neos Therapeutics, Inc.
Neos Therapeutics Commercial, LLC
Neos Therapeutics Brands, LLC
Neos Therapeutics, LP
PharmaFab Texas, LLC

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

State Jurisdiction

Delaware
Nevada
Nevada
Nevada
Nevada
Nevada
Delaware
Delaware
Delaware
Texas
Texas

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Aytu BioPharma, Inc. and Subsidiaries’ Registration Statements on Form S-8 (File No.
333-255325,333-205462 and 333-236598), Form S-3 (File No. 333-235548, 333-236599 and 333-239010), Form S-4 (File No. 333-
252450, 333-235695 and 333-239011) and Form S-1 (File Nos. 333-207421, 333-205414, 333-209874, 333-210144, 333-212100, 333-
213738, 333-213489, 333-220351, 333-222994, 333-223385, 333-227243 and 333-227706) of our report dated September 28, 2021,
relating to the fiscal year 2021 consolidated financial statements that appear in this Annual Report on Form 10-K.

Exhibit 23.1

/s/ Plante & Moran, PLLC

Denver, Colorado
September 28, 2021

AYTU BIOPHARMA, INC.
Certification by Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.1

I, Joshua R. Disbrow, certify that:

1.

2.

3.

4.

I have reviewed this report on Form 10-K for the year ended June 30, 2021 of Aytu BioPharma, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

a)

b)

c)

d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant is made known to us by others within those
entities particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):

a)

b)

All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.

Date: September 28, 2021

By:

/s/ Joshua R. Disbrow
Joshua R. Disbrow
Chief Executive Officer (Principal Executive Officer)

AYTU BIOPHARMA, INC.
Certification by Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

I, Richard Eisenstadt, certify that:

1.

2.

3.

4.

I have reviewed this report on Form 10-K for the year ended June 30, 2021 of Aytu BioPharma, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

a)

b)

c)

d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant is made known to us by others within those
entities particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):

a)

b)

All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.

Date: September 28, 2021

By:

/s/ Richard Eisenstadt
Richard Eisenstadt
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

I Joshua R. Disbrow, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002,
that, to my knowledge, the Annual Report on Form 10‑K of Aytu BioPharma, Inc. for the fiscal year ended June 30, 2021 fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual
Report on Form 10‑K fairly presents, in all material respects, the financial condition and results of operations of Aytu BioPharma, Inc.

Date: September 28, 2021

By:

/s/ Joshua R. Disbrow
Joshua R. Disbrow
Chief Executive Officer (Principal Executive Officer)

I Richard Eisenstadt, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002,
that, to my knowledge, the Annual Report on Form 10‑K of Aytu BioPharma, Inc. for the fiscal year ended June 30, 2021 fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual
Report on Form 10‑K fairly presents, in all material respects, the financial condition and results of operations of Aytu BioPharma, Inc.

Date: September 28, 2021

By:

/s/ Richard Eisenstadt
Richard Eisenstadt
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)