ThZeal - The Zeal

aytu20250331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2025

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

For the transition period from __________ to ___________

Commission File Number: 001-38247

AYTU BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware

47-0883144

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7900 East Union Avenue, Suite 920, Denver, Colorado 80237

(720) 437-6580

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		AYTU		The Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of May 1, 2025, the registrant had 6,170,246 of common stock outstanding.

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AYTU BIOPHARMA, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
Cautionary Information Regarding Forward-Looking Statements		3

PART I - FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
	Unaudited Consolidated Balance Sheets	4
	Unaudited Consolidated Statements of Operations	5
	Unaudited Consolidated Statements of Stockholders’ Equity	6
	Unaudited Consolidated Statements of Cash Flows	7
	Notes to the Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II - OTHER INFORMATION		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	42
Item 5.	Other Information	43
Item 6.	Exhibits	44

SIGNATURES		45

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CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Report on Form 10‑Q (“Form 10-Q” or “this report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements other than statements of historical facts contained in this 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,” “potential,” “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: our anticipated future cash position; the planned expanded commercialization of our products and the potential future commercialization of our product candidates; our anticipated future growth rates; anticipated sales increases; anticipated net revenue increases; amounts of certain future expenses and cost of sales; our plans to acquire additional assets or dispose of assets, anticipated increases or decreases to operating expenses, and selling, general, and administrative expenses; and future events under our current and potential future collaborations.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10‑K for the year ended June 30, 2024 (“2024 Form 10-K”), and in the reports we file with the United States Securities and Exchange Commission (“SEC”). These risks are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements should not be relied upon as predictions of future events. We can provide no assurance that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. We assume no obligation to update or supplement forward-looking statements, except as may be required under applicable law.

This Form 10-Q may refer to registered trademarks that we currently own or license, such as Aytu, Aytu BioPharma, Aytu RxConnect, Neos Therapeutics, Adzenys, Adzenys ER, Adzenys XR-ODT, Cotempla, Cotempla XR-ODT, Karbinal, Poly-Vi-Flor and Tri-Vi-Flor, which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. This Form 10-Q also contains trademarks, service marks, copyrights and trade names of other companies, which are the property of their respective owners. Solely for convenience, our trademarks and tradenames referred to in this Form 10-Q 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 tradename.

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PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AYTU BIOPHARMA, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	*March 31,*			*June 30,*
	*2025*			*2024*
ASSETS
Current assets:
Cash and cash equivalents	$	18,173		$	20,006
Accounts receivable, net		35,825			23,526
Inventories		11,058			12,141
Prepaid expenses and other current assets		7,456			5,097
Current assets of discontinued operations		—			1,121
Total current assets		72,512			61,891
Non-current assets:
Property and equipment, net		546			693
Operating lease right-of-use assets		1,111			829
Intangible assets, net		48,711			52,453
Other non-current assets		1,321			2,185
Non-current assets of discontinued operations		—			44
Total non-current assets		51,689			56,204
Total assets	$	124,201		$	118,095

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,041		$	10,314
Accrued liabilities		41,727			38,143
Revolving credit facility		10,028			2,395
Current portion of debt		1,857			1,857
Other current liabilities		5,053			8,962
Current liabilities of discontinued operations		—			557
Total current liabilities		70,706			62,228
Non-current liabilities:
Debt, net of current portion		9,535			10,877
Derivative warrant liabilities		4,125			12,745
Other non-current liabilities		4,937			4,529
Total non-current liabilities		18,597			28,151

Commitments and contingencies (note 13)

Stockholders’ equity:
Preferred stock, par value $.0001; 50,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, par value $.0001; 200,000,000 shares authorized; 6,170,162 and 5,972,638 shares issued and outstanding, respectively		1			1
Additional paid-in capital		348,614			347,688
Accumulated deficit		(313,717	)		(319,973	)
Total stockholders’ equity		34,898			27,716
Total liabilities and stockholders’ equity	$	124,201		$	118,095

The accompanying notes to the unaudited consolidated financial statements are an integral part of this statement.

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AYTU BIOPHARMA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	*Three Months Ended*						*Nine Months Ended*
	*March 31,*						*March 31,*
	*2025*			*2024*			*2025*			*2024*
Net revenue	$	18,452		$	14,025		$	51,247		$	50,590
Cost of sales		5,646			3,664			15,670			12,588
Gross profit		12,806			10,361			35,577			38,002

Operating expenses:
Selling and marketing		5,194			5,352			16,125			16,661
General and administrative		4,109			4,831			13,683			15,926
Research and development		162			611			1,110			1,727
Amortization of intangible assets		920			920			2,762			2,762
Restructuring costs		—			244			2,101			244
Total operating expenses		10,385			11,958			35,781			37,320
Income (loss) from operations		2,421			(1,597	)		(204	)		682
Other income, net		36			70			718			750
Interest expense		(900	)		(1,257	)		(2,973	)		(3,806	)
Derivative warrant liabilities gain (loss)		2,261			1,017			8,157			(5,467	)
Income (loss) from continuing operations before income tax expense		3,818			(1,767	)		5,698			(7,841	)
Income tax benefit (expense)		122			(521	)		—			(1,301	)
Net income (loss) from continuing operations		3,940			(2,288	)		5,698			(9,142	)
Net income (loss) from discontinued operations, net of tax		54			(599	)		558			(2,085	)
Net income (loss)	$	3,994		$	(2,887	)	$	6,256		$	(11,227	)

Basic weighted-average common shares outstanding (note 17)		6,134,634			5,533,555			6,111,550			5,511,089
Diluted weighted-average common shares outstanding (note 17)		8,204,453			5,533,555			8,606,013			5,511,089

Net income (loss) per share (note 17):
Basic - continuing operations	$	0.64		$	(0.41	)	$	0.93		$	(1.66	)
Diluted - continuing operations	$	0.20		$	(0.41	)	$	(0.29	)	$	(1.66	)
Basic - discontinued operations, net of tax	$	0.01		$	(0.11	)	$	0.09		$	(0.38	)
Diluted - discontinued operations, net of tax	$	0.01		$	(0.11	)	$	0.06		$	(0.38	)
Basic - net income (loss)	$	0.65		$	(0.52	)	$	1.02		$	(2.04	)
Diluted - net income (loss)	$	0.21		$	(0.52	)	$	(0.22	)	$	(2.04	)

The accompanying notes to the unaudited consolidated financial statements are an integral part of this statement.

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AYTU BIOPHARMA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

					*Additional*					*Total*
	*Common Stock*				*Paid-in*		*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances, June 30, 2024		5,972,638	$	1	$	347,688	$	(319,973	)	$	27,716
Stock-based compensation expense		564		—		173		—			173
Issuance of common stock from exercise of warrants		176,000		—		463		—			463
Net income		—		—		—		1,474			1,474
Balances, September 30, 2024		6,149,202		1		348,324		(318,499	)		29,826
Stock-based compensation expense		20,479		—		151		—			151
Net income		—		—		—		788			788
Balances, December 31, 2024		6,169,681		1		348,475		(317,711	)		30,765
Stock-based compensation expense		481		—		139		—			139
Net income		—		—		—		3,994			3,994
Balances, March 31, 2025		6,170,162	$	1	$	348,614	$	(313,717	)	$	34,898

					*Additional*					*Total*
	*Common Stock*				*Paid-in*		*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances, June 30, 2023		5,517,174	$	1	$	343,485	$	(304,129	)	$	39,357
Stock-based compensation expense		13,061		—		930		—			930
Net loss		—		—		—		(8,120	)		(8,120	)
Balances, September 30, 2023		5,530,235		1		344,415		(312,249	)		32,167
Stock-based compensation expense		108		—		820		—			820
Issuance of common stock from exercise of warrants		37,004		—		86		—			86
Net loss		—		—		—		(220	)		(220	)
Balances, December 31, 2023		5,567,347		1		345,321		(312,469	)		32,853
Stock-based compensation expense		562		—		811		—			811
Net loss		—		—		—		(2,887	)		(2,887	)
Balances, March 31, 2024		5,567,909	$	1	$	346,132	$	(315,356	)	$	30,777

The accompanying notes to the unaudited consolidated financial statements are an integral part of this statement.

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AYTU BIOPHARMA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	*Nine Months Ended*
	*March 31,*
	*2025*			*2024*
Cash flows from operating activities:
Net income (loss)	$	6,256		$	(11,227	)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation, amortization and accretion		4,083			5,167
Stock-based compensation expense		463			2,131
Derivative warrant liabilities (gain) loss		(8,157	)		5,467
Amortization of debt discount and issuance costs		82			463
Inventory write-down		183			125
Other non-cash adjustments		(530	)		(50	)
Non-cash adjustments from discontinued operations		254			1,942
Changes in operating assets and liabilities:
Accounts receivable, net		(12,299	)		(531	)
Inventories		900			(2,811	)
Prepaid expenses and other current assets		(2,331	)		(194	)
Accounts payable		1,727			(2,210	)
Accrued liabilities		3,948			(3,390	)
Other operating assets and liabilities, net		355			3,846
Changes in operating assets and liabilities from discontinued operations		326			672
Net cash used in operating activities		(4,740	)		(600	)

Cash flows from investing activities:
Cash received from sales of fixed assets		668			—
Cash payments for fixed asset purchases		(211	)		—
Other investing activities		—			(295	)
Net cash provided by (used in) investing activities		457			(295	)

Cash flows from financing activities:
Proceeds from issuance of stock and warrants		—			86
Net proceeds received from revolving credit facility		7,633			18
Payment made to fixed payment arrangements		(3,790	)		(2,204	)
Payment of stock issuance costs		—			(160	)
Payments made to borrowings		(1,393	)		(70	)
Net cash provided by (used in) financing activities		2,450			(2,330	)

Net change in cash and cash equivalents		(1,833	)		(3,225	)
Cash and cash equivalents at beginning of period		20,006			22,985
Cash and cash equivalents at end of period	$	18,173		$	19,760

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,923		$	3,164
Cash paid for income taxes	$	1,419		$	562
Non-cash investing and financing activities:
Other non-cash investing and financing activities	$	483		$	718

The accompanying notes to the unaudited consolidated financial statements are an integral part of this statement.

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AYTU BIOPHARMA, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Nature of Business

Aytu BioPharma, Inc. (“Aytu,” the “Company,” “we,” “us,” or “our”), is a pharmaceutical company focused on commercializing novel therapeutics. The Company was originally incorporated as Rosewind Corporation on August 9, 2002, in the state of Colorado and was re-incorporated as Aytu BioScience, Inc. in the state of Delaware on June 8, 2015. Following the acquisition of Neos Therapeutics, Inc. (“Neos”) in March 2021 (the “Neos Acquisition”), the Company changed its name to Aytu BioPharma, Inc.

The Company’s strategy is to become a leading pharmaceutical company that improves the lives of patients. The Company uses a focused approach of in-licensing, acquiring, developing, and commercializing novel prescription therapeutics in order to continue building its portfolio of revenue-generating products and leveraging its commercial team’s expertise to build leading brands within large therapeutic markets. The Company’s primary focus is on commercializing innovative prescription products that address conditions frequently developed or diagnosed in childhood.

The Company’s business from continuing operations is focused on its prescription pharmaceutical products sold primarily through third party wholesalers and pharmacies and which primarily consists of two product portfolios. The first consists of two products for the treatment of attention deficit hyperactivity disorder (“ADHD”): Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets (“Adzenys”) and Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets (“Cotempla” and Adzenys together with Cotempla, the “ADHD Portfolio”). The second consists primarily of Karbinal® ER (carbinoxamine maleate extended-release oral suspension) (“Karbinal”), an extended-release first-generation antihistamine suspension containing carbinoxamine indicated to treat numerous allergic conditions, and 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 (the “Pediatric Portfolio”).

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”). After the previously announced successful wind down and divestiture of the Consumer Health business that occurred during the first quarter of fiscal 2025, the Company determined that its continuing operations now operate in a single operating and reportable segment. The Company’s CODM is its Chief Executive Officer who manages operations and regularly reviews the financial information of the Company’s continuing operations as a single operating segment for the purposes of allocating resources and evaluating its financial performance, and for which discrete financial information is available. The results of the Consumer Health business have been reported as discontinued operations (see Note 20 – Discontinued Operations).

In July 2023, the Company entered into an exclusive collaboration, distribution and supply agreement with Medomie Pharma Ltd (“Medomie”), a privately owned pharmaceutical company, for Medomie to commercialize Adzenys and Cotempla in Israel and the Palestinian Authority. In September 2024, the Company entered into an exclusive collaboration, distribution and supply agreement with Lupin Pharma Canada Ltd (“Lupin”), a subsidiary of global pharmaceutical company Lupin Limited, for Lupin to commercialize Adzenys and Cotempla in Canada. The Company will supply Adzenys and Cotempla to Medomie and Lupin based on forecasts and provide various product commercialization resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for both Adzenys and Cotempla, which is expected to occur over the next 24 months. The agreements with Medomie and Lupin represent the Company’s first and second international commercial agreements for Adzenys and Cotempla, respectively.

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Note 2 - Summary of Significant Accounting Policies

Principals of Consolidation

The Company’s unaudited consolidated financial statements and notes thereto include the accounts of its wholly owned subsidiaries Aytu Therapeutics, LLC and Neos Therapeutics, Inc. and their respective wholly owned subsidiaries, as well as Innovus Pharmaceuticals, Inc. (“Innovus”) and its wholly owned subsidiaries prior to the divestiture of Innovus on July 31, 2024. All significant inter-company balances and transactions have been eliminated in consolidation.

Basis of Presentation

The unaudited consolidated financial statements and notes thereto contained in this Form 10-Q represent the financial statements of the Company and its wholly owned subsidiaries and have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and disclosures normally included in the complete financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2024 Form 10-K, which included all disclosures required by U.S. GAAP. In the opinion of management, these unaudited consolidated financial statements and notes thereto contain all adjustments necessary for the fair statement of the financial position of the Company and the results of operations and cash flows for the interim periods presented. The consolidated balance sheet as of June 30, 2024, was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results of operations for the period ended March 31, 2025, are not necessarily indicative of expected operating results for the full year or any future period.

Use of Estimates

The preparation of financial statements and footnotes requires the use of management estimates, judgments and assumptions. Actual results may differ from estimates. In the accompanying unaudited consolidated financial statements and notes thereto, estimates are used for, but not limited to, stock-based compensation; revenue recognition, determination of variable consideration for accruals of chargebacks, administrative fees and rebates, government rebates, returns and other allowances; allowance for credit losses; inventory impairment; determination of right-of-use (“ROU”) assets and lease liabilities; valuation of financial instruments, warrants and derivative warrant liabilities, intangible assets, and long-lived assets; purchase price allocations and the depreciable lives of long-lived assets; accruals for contingent liabilities; and determination of the income tax provision, deferred taxes and valuation allowance. Because of the uncertainties inherent in such estimates, actual results may differ from those estimates. The Company periodically evaluates estimates used in the preparation of the financial statements for reasonableness.

Prior Period Reclassification

Certain prior year amounts in the Company’s unaudited consolidated financial statements and the notes thereto have been reclassified to conform to the current year presentation. These reclassifications did not impact operating results for the three and nine months ended March 31, 2025, and 2024, or cash flows for the nine months ended March 31, 2025, and 2024, or the Company’s financial position as of March 31, 2025, or June 30, 2024.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Liability and equity classified warrants are valued using a Black-Scholes option pricing model or Monte Carlo simulation model at issuance and for each reporting period when applicable.

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Income Taxes

The Company calculates its quarterly income tax provision based on estimated annual effective tax rates applied to ordinary income (or loss) and other known items computed and recognized when they occur. There have been no changes in tax law affecting the tax provision during the three and nine months ended March 31, 2025.

The Company recorded for income (loss) from continuing operations an income tax benefit of $0.1 million, which represented an effective tax rate of negative 3.2% and income tax expense of $0.5 million, which represented an effective tax rate of negative 29.5%, for the three months ended March 31, 2025, and 2024, respectively. The Company recorded for income (loss) from continuing operations an income tax expense of zero and income tax expense of $1.3 million, which represented an effective tax rate of zero and negative 16.6% for the nine months ended March 31, 2025, and 2024, respectively. These effective tax rates were primarily driven by the limitations on losses as a result of Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”) changes in ownership coupled with existing valuation allowances, the divestiture of the Company’s Consumer Health business that occurred during the first quarter of fiscal 2025 and changes to the Company’s fiscal 2025 projections, which resulted in an income tax benefit for the current quarter that reduced income tax expense for fiscal 2025 to zero.

An ownership change has limited the Company’s ability to offset, post-change, United States federal taxable income. Section 382 of the IRC 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. Previous acquisitions, financing transactions, and equity ownership changes in the past five years have caused a significant limitation on the Company’s ability to use the change in control net operating loss carryovers. The ownership changes result in increased future tax liability and are a driver of the change from a zero percent effective tax rate.

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. A valuation allowance is recorded to reduce the net deferred tax asset when it is more likely than not that some portion or all of its deferred tax asset will not be utilized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained upon an examination. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the unaudited consolidated statements of operations.

Employee Retention Credit

On March 27, 2020, the United States government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable payroll tax credit against the employer share of Social Security tax equal to 70% of the qualified wages paid to employees after December 31, 2020, through September 30, 2021. The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic.

As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”). In accordance with IAS 20, the Company recorded a $3.8 million ERC accrual in other non-current liabilities, which represents the proceeds the Company received from the ERC program during the first quarter of fiscal 2024. Further in accordance with IAS 20, when management determines it has reasonable assurance that the Company has substantially met all eligibility requirements of the ERC and following any adjustments from its regulatory audit or upon further clarifications from the IRC, the ERC accrual shall be recognized as a benefit in other income in the unaudited consolidated statement of operations. The associated vendor fee of $0.4 million was expensed as incurred in the first quarter of fiscal 2024.

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Recently Adopted Accounting Pronouncements

Debt - Debt with Conversion and Other Option

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing major separation models currently required. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The amendments in this update are effective for public entities that are smaller reporting companies, as defined by the SEC, for the fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted through a modified retrospective or full retrospective method. The Company adopted the guidance on July 1, 2024, and the adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Segment Reporting - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance should be applied retrospectively unless it is impracticable to do so. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted, including in an interim period. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s consolidated financial statements and disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 require public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s consolidated financial statements and disclosures.

For a complete set of the Company’s significant accounting policies, refer to the audited consolidated financial statements and notes thereto included in the Company’s 2024 Form 10-K. There have been no significant changes to the Company’s significant accounting policies and there is no other accounting guidance that has been issued and not yet adopted that is applicable to the Company and that would have a material effect on the Company’s unaudited consolidated financial statements and related disclosures as of March 31, 2025, and through the filing of this Form 10-Q.

Note 3 - Revenue

Net revenue from continuing operations consists of sales of prescription pharmaceutical products from the Company’s ADHD Portfolio and Pediatric Portfolio, principally to a limited number of wholesale distributors and pharmacies in the United States. Net revenue is recognized at the point in time that control of the product transfers to the customer, which typically aligns with shipping terms (i.e., upon delivery), generally “free-on-board” destination when shipped domestically within the United States, consistent with contractual terms.

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Savings offers, rebates, and wholesaler chargebacks reflect the terms of underlying agreements, which may vary. Accordingly, actual amounts will depend on the mix of sales by product and contracting entity. Future returns may not follow historical trends. The Company’s periodic adjustments of its estimates are subject to time delays between the initial product sale, and the ultimate reporting and settlement of deductions. The Company entered into negotiations with a vendor related to certain variable interest accruals that reduce revenue for the Company’s ADHD Portfolio. As a result of these negotiations, the Company and the vendor agreed to a reduction to the liability purportedly owed by the Company of $3.3 million, which resulted in a decrease in the estimated variable consideration accrual, and a related increase in net revenue of $3.3 million in the first quarter of fiscal 2025.

Revenue by Product Portfolio

Net revenue disaggregated by significant product portfolio for the three and nine months ended March 31, 2025, and 2024, were as follows:

	*Three Months Ended*					*Nine Months Ended*
	*March 31,*					*March 31,*
	*2025*		*2024*			*2025*		*2024*
	(in thousands)
ADHD Portfolio	$	15,389	$	12,326		$	44,469	$	44,026
Pediatric Portfolio		3,059		1,729			6,752		6,439
Other		4		(30	)		26		125
Total net revenue	$	18,452	$	14,025		$	51,247	$	50,590

Other includes net revenue from various discontinued or deprioritized products. The Consumer Health business was divested in the first quarter of fiscal 2025 and is reported within discontinued operations (see Note 20 – Discontinued Operations).

Revenue by Geographic Location

The Company’s net revenue is predominately within the United States, with insignificant international sales.

Note 4 - 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. The Company periodically reviews the composition of its inventories to identify obsolete, slow-moving or otherwise unsaleable items. In the event that such items are identified and there are no alternate uses for the inventory, the Company will record a charge to reduce the value of the inventory to net realizable value in the period first recognized. The Company incurred inventory write-downs of $0.1 million and less than $0.1 million for the three months ended March 31, 2025, and 2024, respectively, and $0.2 million and $0.1 million for the nine months ended March 31, 2025, and 2024, respectively.

Inventories consist of the following:

	*March 31,*		*June 30,*
	*2025*		*2024*
	(in thousands)
Raw materials	$	537	$	266
Work in process		2,060		5,725
Finished goods		8,461		6,150
Inventories	$	11,058	$	12,141

Note 5 - Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over the assets’ estimated economic life. Leasehold improvements are amortized over the shorter of the estimated economic life or remaining lease term. Depreciation and amortization expense from property and equipment was less than $0.1 million and $0.2 million for the three months ended March 31, 2025, and 2024, respectively, and $0.2 and $0.8 million for the nine months ended March 31, 2025, and 2024, respectively.

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Property and equipment, net, consist of the following:

	*March 31,*			*June 30,*
	*2025*			*2024*
	(in thousands)
Manufacturing and lab equipment	$	791		$	1,838
Office equipment, furniture and other		281			945
Leasehold improvements		164			35
Property and equipment, gross		1,236			2,818
Less: accumulated depreciation and amortization		(690	)		(2,125	)
Property and equipment, net	$	546		$	693

Note 6 - 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 calendar year 2024 and calendar year 2030. 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 non-real estate leases also include options to purchase the leased property. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. The Company had no remaining finance leases recorded as of June 30, 2024.

In June 2024, the Company entered into a forward-starting operating lease agreement to lease office space in Berwyn, Pennsylvania from the owner of the office space that the Company is currently renting under a sublease arrangement. The Company determined that it is an operating lease, and that lease commencement occurred in July 2024. The initial lease termination date is July 31, 2030, and under the lease agreement the Company has one five-year renewal option to extend the lease through July 2035. Undiscounted minimum monthly rent payments average approximately $13,000 over the initial term of the lease. The Company has elected to utilize the practical expedient to not separate lease and non-lease components upon recognition and variable lease payments will be expensed as incurred. The Company recorded an operating lease ROU asset of $0.5 million and a lease liability of $0.5 million at lease commencement in July 2024. The ROU asset and lease liability will be recorded at present value using an incremental borrowing rate of 12.3%.

In June 2024, as part of the wind down of the Consumer Health business, the Company ceased using its leased Oceanside, California warehouse. As a result, the Company wrote off the remaining related operating lease ROU assets associated with this lease. The lease for the Oceanside, California warehouse was set to expire on December 31, 2026, however, in March 2025, the Company terminated this lease with the landlord and recorded a net gain on lease termination of $0.1 million in general and administrative expense in the unaudited consolidated statement of operations.

The components of lease costs are as follows:

	*Three Months Ended*				*Nine Months Ended*
	*March 31,*				*March 31,*
	*2025*		*2024*		*2025*		*2024*		*Statement of Operations Classification*
	(in thousands)
Lease cost:
Operating lease cost	$	120	$	388	$	385	$	1,129	Operating expenses
Short-term lease cost		3		25		180		69	Operating expenses
Finance lease cost:
Amortization of leased assets		—		14		—		43	Cost of sales
Interest on lease liabilities		—		1		—		3	Interest expense
Total lease cost	$	123	$	428	$	565	$	1,244

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Supplemental balance sheet information related to leases is as follows:

	*March 31,*		*June 30,*
	*2025*		*2024*		*Balance Sheet Classification*
	(in thousands)
Assets:
Non-current: operating leases	$	1,111	$	829	Operating lease right-of-use assets

Liabilities:
Current: operating leases	$	102	$	712	Other current liabilities
Non-current: operating leases		1,001		577	Other non-current liabilities
Total lease liabilities	$	1,103	$	1,289

The remaining weighted-average lease term and discount rate used are as follows:

	*March 31,*			*June 30,*
	*2025*			*2024*
Weighted-average remaining lease term (years):
Operating lease right-of-use assets		4.6			2.7
Weighted-average discount rate:
Operating lease right-of-use assets		11.2	%		10.0	%

Supplemental cash flow information related to leases is as follows:

	*Nine Months Ended*
	*March 31,*
	*2025*		*2024*
	(in thousands)
Cash flow classification of lease payments:
Operating cash flows from operating leases	$	739	$	1,034
Operating cash flows from finance leases	$	—	$	3
Financing cash flows from finance leases	$	—	$	69

As of June 30, 2024, the Company did not have any remaining finance leases. As of March 31, 2025, the Company’s future minimum lease payments were as follows:

	*Operating*
	(in thousands)
2025 (remaining 3 months)	$	17
2026		309
2027		331
2028		386
2029		358
2030		230
Thereafter		19
Total lease payments		1,650
Less: imputed interest		(421	)
Less: tenant improvement allowance		(126	)
Lease liabilities	$	1,103

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Note 7 - Intangible Assets

A summary of the Company’s definite-lived intangible assets as of March 31, 2025, and June 30, 2024, respectively, is as follows:

	*March 31, 2025*
	*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Weighted-Average Remaining Life*
	(in thousands)							(in years)
Acquired product technology rights	$	41,268	$	(15,594	)	$	25,674		10.1
Acquired technology rights		30,200		(7,163	)		23,037		13.0
Total intangible assets	$	71,468	$	(22,757	)	$	48,711		11.5

	*June 30, 2024*
	*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*		*Weighted-Average Remaining Life*
	(in thousands)							(in years)
Acquired product technology rights	$	41,268	$	(13,184	)	$	28,084		10.7
Acquired technology rights		30,200		(5,831	)		24,369		13.8
Total intangible assets	$	71,468	$	(19,015	)	$	52,453		12.0

Carrying amounts are net of any impairment charges from prior periods. An intangible asset with zero net carrying amount at the end of a reporting period is not presented in the table of a future reporting period. Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the asset. The renewal periods range between approximately 1 to 20 years depending on the license, patent or other agreement. Renewals are accounted for when they are reasonably assured. Intangible assets are amortized using the straight-line method over the estimated useful lives. Amortization expense of intangible assets was $1.2 million and $1.6 million for the three months ended March 31, 2025, and 2024, respectively, and $3.7 million and $4.9 million for the nine months ended March 31, 2025, and 2024, respectively.

The following table summarizes the estimated future amortization expense to be recognized over the next five fiscal years and periods thereafter:

	*Estimated Future Amortization Expense*
	(in thousands)
2025 (remaining 3 months)	$	1,248
2026		4,989
2027		4,989
2028		4,989
2029		4,989
2030		2,847
Thereafter		24,660
Total future amortization expense	$	48,711

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Acquired 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 the Pediatric Portfolio in November 2019, and the Neos Acquisition in March 2021.

ADHD Portfolio

As part of the Neos Acquisition, the Company acquired developed product technology for the production and sale of Adzenys and Cotempla. The formulations for the ADHD products are protected by patented technology. The estimated remaining economic life of these proprietary technologies is 14 years.

Karbinal

The Company acquired and assumed all rights and obligations pursuant to the supply and distribution agreement, as amended, with Tris Pharma, Inc. (“Tris”) for the exclusive rights to commercialize Karbinal 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.

Acquired Technology Rights

TRRP Technology

As part of the Neos Acquisition, 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 the ADHD Portfolio core products and can potentially be used in future product development initiatives as well.

Note 8 - Accrued Liabilities

Accrued liabilities consist of the following:

	*March 31,*		*June 30,*
	*2025*		*2024*
	(in thousands)
Accrued savings offers	$	17,506	$	11,054
Accrued program liabilities		7,116		9,964
Accrued customer and product related fees		4,719		5,395
Return reserve		6,545		4,832
Accrued employee compensation		3,993		4,603
Other accrued liabilities		1,848		2,295
Total accrued liabilities	$	41,727	$	38,143

Accrued savings offers represent programs for the Company’s patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. Accrued program liabilities include government and commercial rebates. Accrued customer and product related fees include accrued expenses and deductions for rebates, wholesaler chargebacks and fees, and other product-related fees and deductions such as royalties for Pediatric Portfolio products, accrued distributor fees, and Medicaid liabilities. The return reserve represents the Company’s accrual for estimated product returns. Accrued employee compensation includes sales commissions, paid time off earned, accrued payroll and accrued bonus. Other accrued liabilities consist of various other accruals, none of which individually or in the aggregate represent greater than five percent of total liabilities.

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Note 9 - Other Liabilities

Other liabilities consist of the following:

	*March 31,*			*June 30,*
	*2025*			*2024*
	(in thousands)
Fixed payment arrangements	$	4,932		$	8,337
Employee retention credit		3,759			3,759
Operating lease liabilities		1,103			1,289
Other		196			106
Total other liabilities		9,990			13,491
Less: current portion of other liabilities		(5,053	)		(8,962	)
Total non-current portion of other liabilities	$	4,937		$	4,529

Fixed Payment Arrangements

Fixed payment arrangements represent obligations to a licensor assumed as part of the acquisition of products from Cerecor, Inc. in 2019, including fixed and variable payments.

In May 2022, the Company entered into an agreement with Tris to terminate the license, development, manufacturing and supply agreement dated November 2, 2018, related to Tuzistra XR (the “Tuzistra License Agreement”). Pursuant to such termination the Company accrued a settlement liability, which as of March 31, 2025, had a remaining balance of $4.3 million accrued in other current liabilities on the consolidated balance sheet payable to Tris, with a provision that allows the Company to pay interest on any principal amounts due but remaining unpaid past July 2024.

The Tris Karbinal Agreement grants the Company the exclusive right to distribute and sell Karbinal in the United States. The initial term of the agreement was 20 years. The Company pays Tris a royalty equal to 23.5% of net revenue from the product. The Tris Karbinal Agreement also contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of 70,000 units annually through 2025. The Company is required to pay Tris a royalty make-whole payment of $30 for each unit under the 70,000-unit annual minimum sales commitment through 2025. The Tris Karbinal Agreement make-whole payment is capped at $2.1 million each year. The final annual make-whole payment is due in August 2025. The Tris Karbinal Agreement also has multiple commercial milestone obligations that aggregate up to $3.0 million based on cumulative net revenue from the product, the first of which is triggered at $40.0 million. As of March 31, 2025, the Tris Karbinal Agreement accrued fixed payment arrangement balance was $0.7 million recorded in other current liabilities on the consolidated balance sheet.

Employee Retention Credit

The $3.8 million ERC accrual in other non-current liabilities as of March 31, 2025, represents the proceeds the Company received from the ERC program during the first quarter of fiscal 2024. Please see Note 2 – Significant Accounting Policies for further detail.

Operating Lease Liabilities

The Company has entered into various operating lease agreements for certain of its offices. Please see Note 6 - Leases for further detail.

Other

Other consists of taxes payable, deferred cost related to the Company’s technology transfer, and various other accruals, none of which individually or in the aggregate represent greater than five percent of total liabilities.

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Note 10 - Revolving Credit Facility

On June 12, 2024, the Company and certain of its subsidiaries entered into consent, joinder and amendment No. 5 (the “Eclipse Amendment No. 5”) to the loan and security agreement dated October 2, 2019, as amended by amendment No. 1, dated March 19, 2021, amendment No. 2, dated January 26, 2022, amendment No. 3, dated June 1, 2022, amendment No. 4 dated March 24, 2023, and the Eclipse Amendment No. 5 (together the “Eclipse Agreement”) with Eclipse Business Capital LLC (“Eclipse”), as agent, and the lenders party thereto (agent and such lenders, collectively, the “Eclipse Lender”). Under the Eclipse Amendment No. 5, which provided for among other things, two loan agreements, a term loan (the “Eclipse Term Loan”) and a revolving credit facility (the “Eclipse Revolving Loan”). The Eclipse Term Loan is described further in Note 11 - Long-Term Debt. The Eclipse Revolving Loan provides for a maximum amount available under the revolving credit facility provided under the Eclipse Agreement of $14.5 million at an interest rate of the secured overnight financing rate as administered by the SOFR Administrator (“SOFR”) plus 4.5%. In addition, the Company is required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of revolving loans under the Eclipse Agreement remains subject to a borrowing base and reserve, and availability blockage requirements. The Eclipse Revolving Loan maturity date, as amended, is June 12, 2028, and the effective interest rate was 8.9% as of March 31, 2025.

In the event that, for any reason, all or any portion of the Eclipse Agreement is terminated prior to the scheduled maturity date, in addition to the payment of all outstanding principal and unpaid accrued interest, the Company is required to pay a fee equal to (i) 2.0% of the Eclipse Revolving Loan commitment if such event occurs on or before June 12, 2025, (ii) 1.0% of the Eclipse Revolving Loan commitment if such event occurs after June 12, 2025, but on or before June 12, 2026, and (iii) 0.5% of the Eclipse Revolving Loan commitment if such event occurs after June 12, 2026, but on or before June 12, 2028. The Company may also be required to pay an early termination fee related to the Eclipse Term Loan as further described in Note 11 - Long-Term Debt. The Company may permanently terminate the Eclipse Agreement upon written notice to Eclipse.

The Eclipse Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the agreement, including covenants and restrictions that, among other things, require the Company to satisfy certain capital expenditure limitations and other financial covenants, and restrict the Company’s ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make asset sales without the prior written consent of Eclipse. A failure to comply with these covenants could permit Eclipse to declare the Company’s obligations under the Eclipse Agreement, together with accrued interest and fees, to be immediately due and payable, plus any additional applicable amounts relating to a prepayment or termination, as described above. As of March 31, 2025, the Company was in compliance with the covenants under the Eclipse Agreement. The Company’s obligations under the Eclipse Agreement are secured by substantially all of the Company’s assets, as defined further in the Eclipse Agreement.

Total interest expense on the Eclipse Revolving Loan, including amortization of deferred financing costs, was less than $0.1 million for both of the three months ended March 31, 2025, and 2024, and was $0.1 million for both of the nine months ended March 31, 2025, and 2024. The amounts drawn on the Eclipse Revolving Loan were $10.0 million and $2.4 million as of March 31, 2025, and June 30, 2024, respectively. The unused revolving credit facility amount as of March 31, 2025, was less than $0.1 million.

Note 11 - Long-Term Debt

Avenue Capital Loan

On January 26, 2022 (“Closing Date”), the Company entered into a loan and security agreement (the “Avenue Capital Agreement”) with Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund II, L.P. as lenders (the “Avenue Capital Lenders”), and Avenue Capital Management II, L.P. as administrative agent (the “Avenue Capital Agent”), collectively (“Avenue Capital”), pursuant to which the Avenue Capital Lenders provided the Company and certain of its subsidiaries with a secured $15.0 million loan. The interest rate on the loan was the greater of the prime rate or 3.25%, plus 7.4%, payable monthly in arrears. The maturity date of the loan was January 26, 2025. The proceeds from the Avenue Capital Agreement were used towards the repayment of the term loans.

Pursuant to the Avenue Capital Agreement, the Company was required to make interest only payments for the first 18 months following the Closing Date (the “Interest-only Period”). The Interest-only Period could be extended automatically without any action by any party for six months provided as of the last day of the Interest-only Period then in effect, the Company received, prior to June 15, 2023, a specified amount of net proceeds from the sale and issuance of its equity securities (“Interest-only Milestone 1”). The Interest-only Period was able to be further extended automatically without any action by any party for an additional six months provided, the Company had achieved, prior to December 31, 2023, (i) Interest-only Milestone 1 and (ii) a specified amount of trailing 12 months revenue as of the date of determination.

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On January 26, 2022 (“Issuance Date”), as consideration for entering into the Avenue Capital Agreement, the Company issued warrants to the Avenue Capital Lenders to purchase shares of common stock at an exercise price equal to $24.20 per share (the “Avenue Capital Warrants”). The Avenue Capital Warrants provided that in the event the Company were to engage in an equity offering at a price lower than $24.20 prior to June 30, 2022, the exercise price would be adjusted to the effective price of such equity offering and the number of shares of common stock to be issued under the Avenue Capital Warrants would be adjusted as set forth in the agreement. The Avenue Capital Warrants were immediately exercisable and expire on January 31, 2027. At inception, the Company accounted for the Avenue Capital Warrants as a derivative warrant liability as the number of warrants was not fixed at the Issuance Date. The fair value of the Avenue Capital Warrants at issuance was approximately $0.6 million.

On March 7, 2022, the Company closed on an equity offering of shares of common stock and warrants at an offering price of $25.00 per share. As this offering precluded the Company from pursuing any equity financing prior to July 7, 2022, and the effective price of the March 7, 2022, offering was more than the exercise price of the Avenue Capital Warrants, the shares of common stock issuable upon exercise of the Avenue Capital Warrants were set at an exercise price of $24.20.

On October 25, 2022, the Company entered into an agreement with Avenue Venture Opportunities Fund, L.P (“Avenue”) to extend the interest-only period of its existing senior secure loan facility held with Avenue. The amendment to the original loan agreement, which was executed in January 2022, extended the interest-only period to January 2024. In exchange for this extension of the interest-only period, the Company and Avenue agreed to reset the exercise price of the warrants issued in conjunction with the original loan agreement to $8.60, corresponding to the warrant exercise price associated with the Company’s August 2022 equity financing.

On June 13, 2023, in conjunction with the Securities Purchase Agreement described in Note 16 - Warrants, the interest-only period of the Avenue Capital Agreement was extended further upon the achievement of both the revenue-based milestone and equity raise-based milestone stipulated in the Avenue Capital Agreement. As a result, the interest-only period was extended to January 26, 2025.

In addition to the debt discount discussed above, the Company also incurred $0.4 million loan origination, legal and other fees. The debt discount and issuance costs were being amortized over the term of the loan, using the effective interest method resulting in an effective rate of 16.6%. Total interest expense on the Avenue Capital loan, including debt discount amortization, was $0.7 million and $2.2 million for the three and nine months ended March 31, 2024, respectively.

On June 12, 2024, the Company used proceeds from the Eclipse Term Loan and a portion of the proceeds from the exercise of warrants to repay the Avenue Capital loan in full. Upon early repayment of the Avenue Capital loan, the Company was required to pay Avenue Capital a fee equal to 1.0% of the loan or $0.2 million. In addition, upon the payment in full of the obligations, the Company was required to pay Avenue Capital a fee in the amount of $0.6 million (“Final Payment”). At inception, the Company accounted for the Final Payment as additional obligations on the debt, with the corresponding charge being recorded as debt discount. At retirement, the early termination fee, the Final Payment fee, and the write-off of all remaining related debt discount and deferred financing costs were included in the calculation of loss on extinguishment of debt. The Company recorded a loss on extinguishment of debt of $0.6 million related to the retirement of the Avenue Capital loan in the fourth quarter of fiscal 2024.

Eclipse Term Loan

On June 12, 2024, the Company and certain of its subsidiaries entered into Eclipse Amendment No. 5, which provided for among other things, the Eclipse Term Loan and the Eclipse Revolving Loan described further in Note 10 - Revolving Credit Facility. The Eclipse Term Loan consists of a principal amount of $13.0 million, at an interest rate of SOFR plus 7.0%, with a four-year term maturing on June 12, 2028, and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on June 12, 2028, the maturity date. The Company used the proceeds of the Eclipse Term Loan and a portion of the proceeds from warrant exercises described below to repay in full the Avenue Capital loan. The effective interest rate on the Eclipse Term Loan was 11.4% as of March 31, 2025.

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In the event that, for any reason, all or any portion of the Eclipse Agreement is terminated prior to the scheduled maturity date, in addition to the payment of all outstanding principal and unpaid accrued interest, the Company is required to pay a fee equal to (i) 3.0% of the Eclipse Term Loan if such event occurs on or before June 12, 2025, (ii) 2.0% of the Eclipse Term Loan if such event occurs after June 12, 2025, but on or before June 12, 2026, (iii) 1.0% of the Eclipse Term Loan if such event occurs after June 12, 2026, but on or before June 12, 2027, and (iv) 0.5% of the Eclipse Term Loan if such event occurs after June 12, 2026, but on or before June 12, 2028. The Company may also be required to pay an early termination fee related to the Eclipse Revolving Loan as further described in Note 10 - Revolving Credit Facility. The Company may permanently terminate the Eclipse Agreement upon written notice to Eclipse. The Company’s obligations under the Eclipse Agreement are secured by substantially all of the Company’s assets, as further defined in the Eclipse Agreement.

The Eclipse Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the agreement, including covenants and restrictions that, among other things, require the Company to satisfy certain capital expenditure limitations and other financial covenants, and restricts the Company’s ability to incur liens, incur additional indebtedness, make certain dividends and distributions with respect to equity securities, engage in mergers and acquisitions or make certain asset sales without the prior written consent of the Eclipse Lender. A failure to comply with these covenants could permit the Eclipse Lender to declare the Company’s obligations under the agreement, together with accrued interest and fees, to be immediately due and payable, plus any additional applicable amounts relating to a prepayment or termination, as described above. As of March 31, 2025, the Company was in compliance with the covenants under the Eclipse Agreement. The Company incurred interest expense on the Eclipse Term Loan, including debt discount and issuance costs amortization, of $0.4 million and $1.2 million for the three and nine months ended March 31, 2025, respectively.

Long-term debt consists of the following:

	*March 31,*			*June 30,*
	*2025*			*2024*
	(in thousands)
Term loan principal amount	$	11,607		$	13,000
Unamortized debt discount and issuance costs		(215	)		(266	)
Total debt		11,392			12,734
Less: current portion of debt		(1,857	)		(1,857	)
Total debt, net of current portion	$	9,535		$	10,877

Future principal payments of the Eclipse Term Loan are as follows:

	*Future Principal Payments*
	(in thousands)
2025 (remaining 3 months)	$	464
2026		1,857
2027		1,857
2028		7,429
Total future principal payments		11,607
Less: unamortized debt discount and issuance costs		(215	)
Less: current portion of debt		(1,857	)
Total debt, net of current portion	$	9,535

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Note 12 - Fair Value Considerations

The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to determine fair value as follows:

●

Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Aytu for identical assets or liabilities;

●

Level 2: Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and

●

Level 3: Unobservable inputs that are supported by little or no market activity.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative warrant liabilities, contingent consideration liabilities, fixed payment arrangements, and current and non-current debt. The carrying amounts of certain short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. Current and non-current debt are reported at their amortized costs on the Company’s consolidated balance sheets. The remaining financial instruments are reported on the Company’s consolidated balance sheets at amounts that approximate current fair values. The Company’s carrying value of its consolidated amounts of cash and cash equivalents approximate their fair value as of March 31, 2025, and June 30, 2024, and are categorized within level 1 of the U.S. GAAP fair value hierarchy. 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. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

Recurring Fair Value Measurements

The Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2025, and June 30, 2024, by level within the fair value hierarchy as follows:

	*Fair Value at March 31,*		*Fair Value Measurements at March 31, 2025*
	*2025*		*(Level 1)*		*(Level 2)*		*(Level 3)*
	(in thousands)
Liabilities:
Derivative warrant liabilities	$	4,125	$	—	$	—	$	4,125
Total	$	4,125	$	—	$	—	$	4,125

		*Fair Value at June 30,*	*Fair Value Measurements at June 30, 2024*
	*2024*		*(Level 1)*		*(Level 2)*		*(Level 3)*
	(in thousands)
Liabilities:
Derivative warrant liabilities	$	12,745	$	—	$	—	$	12,745
Total	$	12,745	$	—	$	—	$	12,745

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Summary of Level 3 Input Changes

A summary of changes to those fair value measures using Level 3 inputs is as follows:

	*Derivative*
	*Warrant Liabilities*
	(in thousands)
Balance as of June 30, 2024	$	12,745
Settlements ⁽¹⁾		(463	)
Included in earnings		(8,157	)
Balance as of March 31, 2025	$	4,125

⁽¹⁾	Relates to the exercise of 176,000 of the Tranche B Pre-Funded Warrants during the first quarter of fiscal 2025, which were liability classified and exercised at a price of $0.0001 per share.

Significant Assumptions

The valuation methodologies and key assumptions used for the mark to market fair value measurements of derivative warrant liabilities as of March 31, 2025, are as follows:

	*June 2023 Warrants*	*Warrants*
	*Tranche A*	Other ⁽¹⁾
	Monte Carlo	Black-Scholes
Aytu closing stock price	$ 1.20	$ 1.20
Equivalent term (years)	3.2	1.8-2.4
Expected volatility	81.8%	69.7%-78.3%
Risk-free rate	3.9%	3.9%
Dividend yield	0.0%	0.0%

⁽¹⁾	Includes August 2022 Warrants, March 2022 Warrants, Avenue Capital Warrants and Tranche B Pre-Funded Warrants. See Note 16 - Warrants for definitions of these terms and further information.

Note 13 - Commitments and Contingencies

Pediatric Portfolio Fixed Payments and Product Milestone

The Tris Karbinal Agreement also contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of 70,000 units annually through 2025. The Company is required to pay Tris a royalty make-whole payment of $30 for each unit under the 70,000‑unit annual minimum sales commitment through 2025. The Tris Karbinal Agreement make-whole payment is capped at $2.1 million each year. The final annual make-whole payment is due in August 2025. The Tris Karbinal Agreement also has multiple commercial milestone obligations that aggregate up to $3.0 million based on cumulative net revenue from the product, the first of which is triggered at $40.0 million.

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Legal Matters

Granules PIV

On October 31, 2024, the Company received a Paragraph IV Certification Notice Letter (“Notice Letter”) from Granules Pharmaceuticals, Inc. (“Granules”), stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ New Drug Application (“NDA”) for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. On December 11, 2024, the Company filed a patent infringement lawsuit against Granules which triggered a stay precluding the United States Food and Drug Administration (“FDA”) from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. The Company plans to vigorously enforce its intellectual property rights related to Adzenys.

Revive Investing

The Company had been named as a nominal plaintiff in a lawsuit by two shareholders against Armistice Capital Master Fund, Ltd, entitled Revive Investing, LLC. et al v. Armistice Master Fund, Ltd. et al, Case 1:20-cv-02849-CMA-TPO, in the United States District Court for the District of Colorado, contending that Armistice was liable for short swing trading profits in violation of Section 16(b) of the Exchange Act for certain trades it made in Company stock in 2019 and 2020 and must disgorge those profits to the Company. That matter proceeded to trial before a jury, which on January 29, 2025, returned a verdict finding no liability. On March 6, 2025, the plaintiffs filed an appeal in the United States Court of Appeals for the Tenth Circuit. As with the original case, regardless of the outcome, this case will not have a materially adverse effect upon the Company’s financial condition, results of operations, or cash flows.

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Note 14 - Stockholders’ Equity

The Company has 200 million shares of common stock authorized with a par value of $0.0001 per share and 50 million shares of preferred stock authorized with a par value of $0.0001 per share. As of March 31, 2025, included in common stock outstanding are 34,532 shares of unvested restricted stock issued to executives, directors and employees.

On September 28, 2021, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 7, 2021. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”). The 2021 Shelf expired in October 2024.

On August 11, 2022, the Company closed on an underwritten public offering (the “August 2022 Offering”) utilizing the 2021 Shelf, pursuant to which it sold an aggregate of (i) 1,075,290 shares of its common stock; (ii) in lieu of common stock to certain investors that so chose, pre-funded warrants to purchase 87,500 shares of its common stock; and (iii) accompanying warrants to purchase 1,265,547 shares of its common stock. The shares of common stock and the pre-funded warrants were each sold in combination with corresponding common warrants, with one common warrant to purchase one share of common stock for each share of common stock or each pre-funded warrant sold. The combined public offering price for each share of common stock and accompanying common warrant was $8.60, and the combined offering price for each pre-funded warrant and accompanying common warrant was $8.58, which equated to the public offering price per share of the common stock and accompanying common warrant, less the $0.02 per share exercise price of each pre-funded warrant. The pre-funded warrants were exercised in full in August 2022. The common warrants have an exercise price of $8.60 per share of common stock and are exercisable for a period of five years from issuance. The Company raised $10.0 million in gross proceeds through the August 2022 Offering before underwriting fees and other expenses of $0.9 million. The pre-funded and common warrants had a combined fair value of approximately $6.0 million at issuance and are classified as derivative warrant liabilities, with the offset in additional paid in capital in stockholders’ equity in the Company’s consolidated financial statements (see Note 16 - Warrants).

On June 8, 2023, using a placement agent, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued and sold an aggregate of (i) 1,743,695 shares of the Company’s common stock; (ii) pre-funded warrants in lieu of shares to purchase 430,217 shares of common stock (the “June 2023 Pre-Funded Warrants”); (iii) accompanying tranche A warrants to purchase 2,173,912 shares of common stock (the “Tranche A Warrants”); and (iv) accompanying tranche B warrants to purchase 2,173,912 shares of common stock in a best-efforts offering (the “Tranche B Warrants” and the Tranche A Warrants together with the Tranche B Warrants, the “Common Warrants”). The Common Warrants may be exercised for either shares of common stock or pre-funded warrants to purchase common stock in the same form as the June 2023 Pre-Funded Warrants (the “Exchange Warrants”). Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share. The pre-funded warrants are immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. The Common Warrants are immediately exercisable at a price of $1.59 per share (or $1.5899 per Exchange Warrant). The Tranche A Warrants will expire upon the earlier of (i) five years after the date of issuance or (ii) 30 days following the closing price of the Company’s common stock equaling 200% of the exercise price ($3.18 per share) for at least 40 consecutive trading days. The Tranche B Warrants were exercised in June 2024, as further described below. The June 2023 Pre-Funded Warrants do not have an expiration date. The warrants had a combined fair value of approximately $5.0 million at issuance and are classified as derivative warrant liabilities. The resulting offset is recorded in derivative warrant liabilities (loss) gain along with the issuance costs of $0.6 million in the unaudited consolidated financial statement of operations (see Note 16 - Warrants).

On June 14, 2024, the Tranche B Warrants were exercised, generating proceeds of $3.5 million. The Tranche B Warrants were converted into 367,478 shares of common stock and 1,806,434 pre-funded warrants to purchase shares of common stock with an exercise price of $0.0001 per share (the “Tranche B Pre-Funded Warrants”). The Tranche B Pre-Funded Warrants had a fair value of approximately $5.1 million at issuance and are classified as derivative warrant liabilities, with the offset in additional paid in capital in stockholders’ equity in the Company’s consolidated financial statements. The Company used a portion of the proceeds from the Tranche B Warrants exercise as part of the Avenue Capital loan repayment described further in Note 11 - Long-Term Debt.

On September 26, 2024, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. This shelf registration statement covers 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 “2024 Shelf”). Through the filing date of this Form 10-Q, $100.0 million remains available under the 2024 Shelf. This availability is subject to the SEC’s “baby shelf” limitation as set forth in SEC Instruction I.B.6 limitation to the Form S-3.

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Note 15 - Equity Incentive Plans

2023 Equity Incentive Plan

On May 18, 2023, the Company’s stockholders approved the Aytu BioPharma, Inc. 2023 Equity Incentive Plan (the “2023 Equity Incentive Plan”). Prior to the Company’s adoption of the 2023 Equity Incentive Plan, the Company awarded equity incentive grants to its directors and employees under the Aytu BioScience, Inc. 2015 Stock Option and Incentive Plan (the “Aytu 2015 Plan”) and the Neos Therapeutics, Inc. 2015 Stock Options and Incentive Plan (the “Neos 2015 Plan”, and collectively with the Aytu 2015 Plan, the “2015 Plans”). For the 2023 Equity Incentive Plan, the stockholders approved (i) 200,000 new shares; (ii) 87,129 shares available for grant under the 2015 Plans be “rolled over” to the 2023 Equity Incentive Plan; and (iii) any shares that are returned to the Company under the 2015 Plans be added to the 2023 Equity Incentive Plan. With the approval of the 2023 Equity Incentive Plan, no additional awards will be granted under the 2015 Plans. All outstanding awards previously granted under previous stock incentive plans will remain outstanding and subject to the terms of the plans. Stock options granted under the 2023 Equity Incentive Plan have contractual terms of 10 years or less from the grant date and a vesting period ranging from 3 to 4 years. The restricted stock awards and restricted stock units have a vesting period of 3 to 4 years. As of March 31, 2025, the Company had 89,784 shares that are available for grant under the 2023 Equity Incentive Plan.

Aytu 2015 Plan

On June 1, 2015, the Company’s stockholders approved the Aytu 2015 Plan, which, as amended in July 2017, provides for the award of stock options, stock appreciation rights, restricted stock, and other equity awards. On February 13, 2020, the Company’s stockholders approved an increase to 250,000 total shares of common stock in the Aytu 2015 Plan. 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 Aytu 2015 Plan will be added back to the shares of common stock available for issuance under the 2023 Equity Incentive 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, and the restricted stock units have a vesting period of 4 years.

Neos 2015 Plan

Pursuant to the Neos Acquisition, the Company assumed 3,486 stock options and 1,786 restricted stock units previously granted under the Neos 2015 Plan. Accordingly, on April 19, 2021, the Company registered 5,272 shares of its common stock under the Neos 2015 Plan with the SEC. The terms and conditions of the assumed equity securities remained the same as they were previously under the Neos 2015 Plan. The Company allocated costs of the replacement awards attributable to pre-combination and post-combination service periods. The pre-combination service costs were included in the consideration 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.

Stock Options

Stock option activity is as follows:

						*Weighted*
						*Average*
				*Weighted*		*Remaining*
	*Number of*			*Average*		*Contractual*
	*Options*			*Exercise Price*		*Life in Years*
Outstanding at June 30, 2024		146,539		$	6.18		8.8
Granted		87,500		$	1.83		9.6
Forfeited/cancelled		(11,906	)	$	1.84		—
Expired		(2,889	)	$	17.21		—
Outstanding at March 31, 2025		219,244		$	4.53		8.3

Exercisable at March 31, 2025		93,425		$	8.05		8.0

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During the nine months ended March 31, 2025, the Company granted 87,500 stock options with a weighted average exercise price per option of $1.83. As of March 31, 2025, there was $0.2 million total unrecognized compensation costs related to non-vested stock options granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.2 years.

Restricted Stock

Restricted stock activity is as follows:

				*Weighted*
				*Average Grant*
	*Number of*			*Date Fair*
	*Shares*			*Value*
Unvested at June 30, 2024		24,105		$	100.34
Granted		20,000		$	1.79
Vested		(9,577	)	$	15.97
Unvested at March 31, 2025		34,528		$	66.66

During the nine months ended March 31, 2025, the Company granted 20,000 shares of restricted stock under the Company’s 2023 Equity Incentive Plan with a weighted average grant date fair value of $1.79 per share. As of March 31, 2025, there was $0.8 million total unrecognized compensation costs related to non-vested restricted stock granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.1 years.

During the nine months ended March 31, 2025, no restricted stock was granted outside of the Company’s equity incentive plan. As of March 31, 2025, there was $0.1 million total unrecognized compensation costs related to non-vested restricted stock issued outside of the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.3 years. As of March 31, 2025, 4 shares of restricted stock remain unvested that were granted outside of the Company’s equity incentive plan.

Restricted Stock Units

Restricted stock units (“RSU” or “RSUs”) activity is as follows:

				*Weighted*
				*Average Grant*
	*Number of*			*Date Fair*
	*Shares*			*Value*
Unvested at June 30, 2024		1,775		$	24.14
Vested		(1,524	)	$	24.47
Forfeited		(167	)	$	26.20
Unvested at March 31, 2025		84		$	21.20

During the nine months ended March 31, 2025, no RSUs were granted. As of March 31, 2025, there was less than $0.1 million of unrecognized compensation costs related to non-vested RSUs granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be fully recognized during the fourth quarter of fiscal 2025.

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Stock-based compensation expense related to the fair value of stock options, restricted stock, and RSUs was included in the consolidated statements of operations as set forth in the below table:

	*Three Months Ended*				*Nine Months Ended*
	*March 31,*				*March 31,*
	*2025*		*2024*		*2025*		*2024*
	(in thousands)
Cost of sales	$	—	$	—	$	1	$	1
Research and development		8		2		11		5
Selling and marketing		11		—		57		—
General and administrative		120		697		394		2,125
Net income (loss) from discontinued operations, net of tax		—		112		—		430
Total stock-based compensation expense	$	139	$	811	$	463	$	2,561

Note 16 - Warrants

Liability Classified Warrants

The Company accounts for liability classified warrants by recording the fair value of each instrument in its entirety and recording the fair value of the warrant derivative liability. The fair value of liability classified derivative financial instruments was calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model and is revalued every quarter. Changes in the fair value of liability classified derivative financial instruments in subsequent periods are recorded as unrealized derivative gain or loss in the consolidated statements of operations (see Note 12 – Fair Value Considerations).

On June 8, 2023, using a placement agent, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued and sold an aggregate of (i) 1,743,695 shares of the Company’s common stock; (ii) June 2023 Pre-Funded Warrants in lieu of shares to purchase 430,217 shares of common stock; (iii) accompanying Tranche A Warrants to purchase 2,173,912 shares of common stock; and (iv) accompanying Tranche B Warrants to purchase 2,173,912 shares of common stock in a best-efforts offering (the Tranche A Warrants together with the Tranche B Warrants, the “Common Warrants”). The Common Warrants may be exercised for either shares of common stock or pre-funded warrants to purchase common stock at a future exercise price of $0.0001 per share in the same form as the June 2023 Pre-Funded Warrants (the “Exchange Warrants”). Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share. The pre-funded warrants are immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. The Common Warrants are immediately exercisable at a price of $1.59 per share (or $1.5899 per Exchange Warrant). The Tranche A Warrants will expire upon the earlier of (i) five years after the date of issuance or (ii) 30 days following the closing price of the Company’s common stock equaling 200% of the exercise price ($3.18 per share) for at least 40 consecutive trading days. The Tranche B Warrants were exercised in June 2024, as further described below. The Company raised $4.0 million in gross proceeds and net proceeds were $3.4 million after deducting offering expenses. The June 2023 Pre-Funded Warrants do not have an expiration date. The warrants had a combined fair value of approximately $5.0 million at issuance and are classified as derivative warrant liabilities. The resulting offset is recorded in derivative warrant liabilities gain (loss) along with the issuance costs of $0.6 million in the unaudited consolidated financial statement of operations (see Note 14 - Stockholders’ Equity).

On June 14, 2024, the Tranche B Warrants were exercised, generating proceeds of $3.5 million. The Tranche B Warrants were converted into 367,478 shares of common stock and 1,806,434 Tranche B Pre-Funded Warrants to purchase shares of common stock with an exercise price of $0.0001 per share. The Tranche B Pre-Funded Warrants, which do not have an expiration date, had a fair value of approximately $5.1 million at issuance and are classified as derivative warrant liabilities, with the offset in additional paid in capital in stockholders’ equity in the Company’s consolidated financial statements. The Company used a portion of the proceeds from the Tranche B Warrants exercise as part of the Avenue Capital loan repayment described further in Note 11 - Long-Term Debt.

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On August 11, 2022, the Company closed an offering (the “August 2022 Offering”), pursuant to which, the Company issued pre-funded warrants to purchase 87,500 shares of its common stock and common warrants to purchase 1,265,547 shares of its common stock. The shares of common stock and the pre-funded warrants were each sold in combination with corresponding common warrants, which one common warrant to purchase one share of common stock for each share of common stock or each pre-funded warrant was sold. The pre-funded warrants had an exercise price of $0.02 per share of common stock and were exercised in full in August 2022. The common warrants have an exercise price of $8.60 per share of common stock and are exercisable for a period of five years from issuance. The common warrants provide that if there occurs any stock split, stock dividend stock recapitalization, or similar event (a “Stock Combination Event”), then the warrant exercise price will be adjusted to the greater of the quotient determined by dividing the sum of the VWAP of the common stock for each of the five lowest trading days during the 20 consecutive trading day period ending immediately preceding the 16th trading day after such Stock Combination Event, divided by five; or $2.32, and the number of shares of common stock to be issued would be adjusted proportionately as set forth in the agreement limited to a maximum of 2,325,581 shares. The common warrants also provide that in the event the Company were to engage in an equity offering at a common stock price lower than the warrant exercise price prior to the second anniversary of a Stock Combination Event, the exercise price would be adjusted to the greater of the effective price of such equity offering or $2.32 (see Note 14 – Capital Structure).

In November 2022, and throughout the quarter ended December 31, 2022, the Company sold shares through its ATM Sales Agreement. Per the warrant agreement in the August 2022 Offering, these sales qualified as an equity offering, and the sales price was less than the current exercise price of $8.60. As a result, the common warrants exercise price was adjusted to $3.30. On January 6, 2023, the Company consummated a 20 to 1 reverse stock split. Pursuant to the warrant agreement described above, the Company triggered a Stock Combination Event, and the warrant exercise price and number to be issued was adjusted based on the average of each of the lowest five trading days during the twenty-day consecutive trading day period beginning on December 30, 2022. Subsequently, as a result of the Securities Purchase Agreement in June 2023, the common warrants from the August 2022 Offering had an adjusted exercise price of $2.32.

A summary of warrants is as follows:

						*Weighted*
						*Average*
				*Weighted*		*Remaining*
	*Number of*			*Average*		*Contractual*
	*Warrants*			*Exercise Price*		Life in Years ⁽⁴⁾
Outstanding June 30, 2024 ⁽¹⁾		6,075,880		$	3.71		3.6
Warrants exercised ⁽²⁾		(176,000	)	$	0.0001		—
Warrants expired		(2,543	)		N/A		N/A
Outstanding March 31, 2025 ⁽³⁾		5,897,337		$	3.10		1.8

⁽¹⁾	The number of warrants outstanding as of June 30, 2024, is comprised of 3,821,115 liability classified warrants, 430,217 liability classified June 2023 Pre-Funded Warrants, 1,806,434 liability classified Tranche B Pre-Funded Warrants and 18,114 equity classified warrants.

⁽²⁾	Warrants exercised during the first quarter of fiscal 2025 were 176,000 of the Tranche B Warrants, which were exercised at a price of $0.0001 per share.

⁽³⁾	The number of warrants outstanding as of March 31, 2025, is comprised of 3,821,115 liability classified warrants, 430,217 liability classified June 2023 Pre-Funded Warrants, 1,630,434 liability classified Tranche B Pre-Funded Warrants and 15,571 equity classified warrants.

⁽⁴⁾	As pre-funded warrants do not have an expiration date, they have been excluded from the calculation of the weighted average remaining contractual life in years.

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Note 17 - Earnings Per Share

Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. Diluted net income or loss per common share is calculated by dividing adjusted net income or loss by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist of warrants to purchase common stock that are either liability classified or equity classified (see Note 16 – Warrants); employee stock options (see Note 15 – Equity Incentive Plans); employee unvested restricted stock (see Note 15 – Equity Incentive Plans); and employee unvested restricted stock units (see Note 15 – Equity Incentive Plans). For the three and nine months ended March 31, 2025, and 2024, if the Company incurred a net loss from continuing operations; a net loss from discontinued operations, net of tax; or a net loss then the Company did not include common equivalent shares in the computation of diluted net loss from continuing operations per share; diluted net loss from discontinued operations, net of tax; or diluted net loss per share because the effect would have been anti-dilutive.

The following is a reconciliation of the numerator and the denominator used in the basic per share calculations:

	*Three Months Ended*					*Nine Months Ended*
	*March 31,*					*March 31,*
	*2025*		*2024*			*2025*		*2024*
	(in thousands, except share and per share data)
BASIC
Numerators:
Net income (loss) from continuing operations	$	3,940	$	(2,288	)	$	5,698	$	(9,142	)
Net income (loss) from discontinued operations, net of tax		54		(599	)		558		(2,085	)
Net income (loss)	$	3,994	$	(2,887	)	$	6,256	$	(11,227	)
Denominator:
Basic weighted-average common shares outstanding		6,134,634		5,533,555			6,111,550		5,511,089
Per share calculations:
Net income (loss) per share from continuing operations	$	0.64	$	(0.41	)	$	0.93	$	(1.66	)
Net income (loss) per share from discontinued operations, net of tax	$	0.01	$	(0.11	)	$	0.09	$	(0.38	)
Net income (loss) per share	$	0.65	$	(0.52	)	$	1.02	$	(2.04	)

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The following is a reconciliation of the numerator and the denominator used in the diluted per share calculations:

	*Three Months Ended*						*Nine Months Ended*
	*March 31,*						*March 31,*
	*2025*			*2024*			*2025*			*2024*
	(in thousands, except share and per share data)
DILUTED: CONTINUING OPERATIONS
Numerator:
Net income (loss) from continuing operations	$	3,940		$	(2,288	)	$	5,698		$	(9,142	)
Adjustment for change in fair value of warrant liabilities		(2,261	)		—			(8,157	)		—
Adjusted numerator - net income (loss) from continuing operations	$	1,679		$	(2,288	)	$	(2,459	)	$	(9,142	)
Denominator:
Basic weighted-average common shares outstanding		6,134,634			5,533,555			6,111,550			5,511,089
Dilutive effect of warrants to purchase common stock		2,060,510			—			2,482,368			—
Dilutive effect of unvested restricted stock		9,309			—			12,095			—
Diluted weighted-average common shares outstanding		8,204,453			5,533,555			8,606,013			5,511,089
Per share calculation:
Net income (loss) per share from continuing operations	$	0.20		$	(0.41	)	$	(0.29	)	$	(1.66	)

DILUTED: DISCONTINUED OPERATIONS
Numerator:
Net income (loss) from discontinued operations, net of tax	$	54		$	(599	)	$	558		$	(2,085	)
Denominator:
Basic weighted-average common shares outstanding		6,134,634			5,533,555			6,111,550			5,511,089
Dilutive effect of warrants to purchase common stock		2,060,510			—			2,482,368			—
Dilutive effect of unvested restricted stock		9,309			—			12,095			—
Diluted weighted-average common shares outstanding		8,204,453			5,533,555			8,606,013			5,511,089
Per share calculation:
Net income (loss) per share from discontinued operations, net of tax	$	0.01		$	(0.11	)	$	0.06		$	(0.38	)

DILUTED: NET INCOME (LOSS)
Numerator:
Net income (loss)	$	3,994		$	(2,887	)	$	6,256		$	(11,227	)
Adjustment for change in fair value of warrant liabilities		(2,261	)		—			(8,157	)		—
Adjusted numerator - net income (loss)	$	1,733		$	(2,887	)	$	(1,901	)	$	(11,227	)
Denominator:
Basic weighted-average common shares outstanding		6,134,634			5,533,555			6,111,550			5,511,089
Dilutive effect of warrants to purchase common stock		2,060,510			—			2,482,368			—
Dilutive effect of unvested restricted stock		9,309			—			12,095			—
Diluted weighted-average common shares outstanding		8,204,453			5,533,555			8,606,013			5,511,089
Per share calculation:
Net income (loss) per share	$	0.21		$	(0.52	)	$	(0.22	)	$	(2.04	)

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The following table sets forth securities that could be considered anti-dilutive, and therefore are excluded from the calculation of diluted weighted-average common shares outstanding and related per share calculations:

	*Three Months Ended*				*Nine Months Ended*
	*March 31,*				*March 31,*
	*2025*		*2024*		*2025*		*2024*
Warrants to purchase common stock - liability classified (note 16)		3,821,256		6,461,976		3,399,398		6,461,976
Warrants to purchase common stock - equity classified (note 16)		15,571		18,114		15,571		18,114
Employee unvested restricted stock (note 15)		25,223		31,897		22,437		31,897
Employee unvested restricted stock units (note 15)		84		2,336		84		2,336
Employee stock options (note 15)		219,244		146,701		219,244		146,701
Total anti-dilutive securities		4,081,378		6,661,024		3,656,734		6,661,024

Note 18 - License Agreements

Actavis

On October 17, 2017, the Company entered into an agreement granting Actavis Laboratories FL, Inc. (“Actavis”) (acquired by Teva Pharmaceutical Industries) a non-exclusive license to certain patents owned by the Company by which Actavis has the right to manufacture and market its generic version of Adzenys under its ANDA beginning on September 1, 2025, or earlier under certain circumstances. The ANDA was approved by the FDA on June 22, 2023.

Teva

On December 21, 2018, the Company and Teva Pharmaceuticals USA, Inc. (“Teva”) entered into an agreement granting 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 under an abbreviated new drug application (“ANDA”) filed by Teva beginning on July 1, 2026, or earlier under certain circumstances. The ANDA was approved by the FDA on June 19, 2020.

Note 19 - Restructuring Costs

As part of the Company’s previously announced restructuring activities related to the wind down and divestiture of the Consumer Health business and the closure of the Grand Prairie, Texas manufacturing site, the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs as well as other direct separation benefit costs, right of use asset impairment charges, fixed asset and other asset impairment charges, accelerated depreciation of fixed assets, contract termination costs, and inventory write-downs. Severance and employee benefit costs primarily relate to cash severance. Restructuring costs associated with the Consumer Health business are recorded within the net income (loss) from discontinued operations, net of tax in the unaudited consolidated financial statement of operations (see Note 20 – Discontinued Operations).

The expense associated with the closure of the Grand Prairie, Texas manufacturing site such as severance and employee benefits and exit and disposal activities are included in restructuring costs in the consolidated statements of operations. There have been no inventory write-downs associated with this closure. During the three months ended March 31, 2025, and 2024, the Company incurred zero and $0.2 million, respectively, and during the nine months ended March 31, 2025, and 2024, the Company incurred $2.1 million and $0.2 million, respectively, of costs associated with exit and disposal activities related to its previously announced operational realignment and related costs. The Company does not expect to incur additional significant restructuring costs.

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Note 20 - Discontinued Operations

On July 31, 2024, after the wind down of operations, the Company entered into a definitive agreement to divest its Consumer Health business to a private, e-commerce focused company. The divested business encompasses the established e-commerce platform, certain inventory and associated consumer brands, intellectual property, external workforce and contracts, and provides for the Company to receive contingent consideration payments on certain future sales of former Consumer Health business products.

The accounting requirements for reporting the Consumer Health business as discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, the accompanying unaudited consolidated financial statements for all periods presented reflect this business as a discontinued operation and certain assets and liabilities of discontinued operations have been reclassified to the current assets of discontinued operations; non-current assets of discontinued operations; and current liabilities of discontinued operations financial statement line items on the accompanying unaudited consolidated balance sheet as of June 30, 2024. The Company elected to record the contingent consideration portion of the arrangement when the consideration is determined to be realizable and, therefore, the Company did not record a contingent consideration asset at the transaction date and any subsequent proceeds will not be recognized until the contingent consideration asset is realizable, at which point the Company recognizes it to income (loss) from discontinued operations.

The key components of net income (loss) from discontinued operations, net of tax for the three and nine months ended March 31, 2025, and 2024, were as follows:

	*Three Months Ended*					*Nine Months Ended*
	*March 31,*					*March 31,*
	*2025*		*2024*			*2025*			*2024*
	(in thousands)
Net revenue	$	—	$	3,968		$	717		$	12,436
Cost of sales		—		(2,636	)		(359	)		(7,758	)
Selling and marketing		—		(1,197	)		(155	)		(3,886	)
General and administrative		—		(619	)		(2	)		(1,931	)
Amortization of intangible assets		—		(383	)		—			(1,147	)
Non-operating other expense, net		—		(8	)		(4	)		(27	)
Recognized contingent consideration		28		—			615			—
Loss on divestiture		—		—			(254	)		—
Income (loss) from discontinued operations before income taxes		28		(875	)		558			(2,313	)
Income tax benefit		26		276			—			228
Net income (loss) from discontinued operations, net of tax	$	54	$	(599	)	$	558		$	(2,085	)

The key components of assets and liabilities of discontinued operations as of June 30, 2024, were as follows:

	*June 30,*
	*2024*
	(in thousands)
ASSETS
Current assets of discontinued operations:
Accounts receivable, net	$	91
Inventories		492
Prepaid expenses and other current assets		538
Total current assets of discontinued operations		1,121
Non-current assets of discontinued operations:
Other non-current assets		44
Total current and non-current assets of discontinued operations	$	1,165

LIABILITIES
Current liabilities of discontinued operations:
Accounts payable	$	126
Accrued liabilities		431
Total current liabilities of discontinued operations	$	557

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the Company’s 2024 Form 10-K. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the risk factors included in the Company’s 2024 Form 10-K, and in Part II, Item 1A of this Form 10-Q.

Objective

The purpose of the Management’s 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 for the three and nine months ended March 31, 2025, our cash flows for the nine months ended March 31, 2025, and our financial condition as of March 31, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and notes thereto.

Overview

We are a pharmaceutical company focused on commercializing novel therapeutics. Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing, and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team’s expertise to build leading brands within large therapeutic markets. Our primary focus is on commercializing innovative prescription products that address conditions frequently developed or diagnosed in childhood, including ADHD. We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations.

In July 2024, we completed the wind down and divestiture of our Consumer Health business (see Part I, Item 1, Note 20 – Discontinued Operations in this Form 10-Q for further detail) and now operate our business as a single operating and reporting segment, which is focused on our prescription pharmaceutical products sold primarily through third party wholesalers and pharmacies and which primarily consists of two product portfolios, the ADHD Portfolio and the Pediatric Portfolio. The ADHD Portfolio consists of products for the treatment of ADHD, primarily Adzenys (amphetamine), an extended-release orally disintegrating tablet and Cotempla (methylphenidate), an extended-release orally disintegrating tablet. The Pediatric Portfolio consists primarily of Karbinal (carbinoxamine maleate extended-release oral suspension), an extended-release first-generation antihistamine suspension containing carbinoxamine indicated to treat numerous allergic conditions, and 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. During the fourth quarter of fiscal 2024, we successfully completed the transition of all manufacturing of our ADHD products to a United States-based third-party contract manufacturer to improve the profitability of these products.

In July 2023, we entered into an exclusive collaboration, distribution and supply agreement with Medomie, a privately owned pharmaceutical company, for Medomie to commercialize Adzenys and Cotempla in Israel and the Palestinian Authority. In September 2024, we entered into an exclusive collaboration, distribution and supply agreement with Lupin, a subsidiary of global pharmaceutical company Lupin Limited, for Lupin to commercialize Adzenys and Cotempla in Canada. We will supply Adzenys and Cotempla to Medomie and Lupin based on forecasts and provide various product commercialization resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for both Adzenys and Cotempla, which is expected to occur over the next 24 months. The agreements with Medomie and Lupin represent our first and second international commercial agreements for Adzenys and Cotempla, respectively.

In light of our own business activities and external developments in the biopharmaceutical industry, we regularly review our performance, prospects and risks such as the potential impact to our business resulting from our competitive landscape (i.e., entry of generic competitors, payer pressures, new branded entrants, etc.). These reviews have included consideration of potential partnerships, collaborations, and other strategic transactions such as acquisitions or divestitures of programs or technology to enhance stockholder value. We continue to evaluate potential strategic transactions and business combinations, but there can be no guarantee that we will be able to enter into such transactions, and there can be no guarantee that such transactions will achieve our desired goals.

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Business Environment

We continue to experience inflationary pressures and could experience supply chain disruptions related to the sourcing of raw materials, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. While we do not have sales or operations in Russia or Ukraine and we do not have significant sales or operations in the Middle East, it is possible that the conflicts or actions taken in response, could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures and supply chain disruptions could be significant across the business throughout fiscal 2025 and into fiscal 2026. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products, and the pediatric product supply has remained adequate to satisfy demand for the preceding four years.

In October 2024, we received a Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. We plan to vigorously enforce our intellectual property rights related to Adzenys.

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Results of Operations

The results of operations for the three and nine months ended March 31, 2025, compared to the three and nine months ended March 31, 2024, is as follows:

	Three Months Ended									Nine Months Ended
	March 31,									March 31,
	2025			2024			Change			2025			2024			Change
	(in thousands)
Net revenue	$	18,452		$	14,025		$	4,427		$	51,247		$	50,590		$	657
Cost of sales		5,646			3,664			1,982			15,670			12,588			3,082
Gross profit		12,806			10,361			2,445			35,577			38,002			(2,425	)

Operating expenses:
Selling and marketing		5,194			5,352			(158	)		16,125			16,661			(536	)
General and administrative		4,109			4,831			(722	)		13,683			15,926			(2,243	)
Research and development		162			611			(449	)		1,110			1,727			(617	)
Amortization of intangible assets		920			920			—			2,762			2,762			—
Restructuring costs		—			244			(244	)		2,101			244			1,857
Total operating expenses		10,385			11,958			(1,573	)		35,781			37,320			(1,539	)
Income (loss) from operations		2,421			(1,597	)		4,018			(204	)		682			(886	)
Other income, net		36			70			(34	)		718			750			(32	)
Interest expense		(900	)		(1,257	)		357			(2,973	)		(3,806	)		833
Derivative warrant liabilities gain (loss)		2,261			1,017			1,244			8,157			(5,467	)		13,624
Income (loss) from continuing operations before income tax expense		3,818			(1,767	)		5,585			5,698			(7,841	)		13,539
Income tax benefit (expense)		122			(521	)		643			—			(1,301	)		1,301
Net income (loss) from continuing operations		3,940			(2,288	)		6,228			5,698			(9,142	)		14,840
Net income (loss) from discontinued operations, net of tax		54			(599	)		653			558			(2,085	)		2,643
Net income (loss)	$	3,994		$	(2,887	)	$	6,881		$	6,256		$	(11,227	)	$	17,483

Net Revenue

Net revenue by portfolio for the three and nine months ended March 31, 2025, compared to the three and nine months ended March 31, 2024, is as follows:

	Three Months Ended							Nine Months Ended
	March 31,							March 31,
	2025		2024			Change		2025		2024		Change
	(in thousands)
ADHD Portfolio	$	15,389	$	12,326		$	3,063	$	44,469	$	44,026	$	443
Pediatric Portfolio		3,059		1,729			1,330		6,752		6,439		313
Other		4		(30	)		34		26		125		(99	)
Total net revenue	$	18,452	$	14,025		$	4,427	$	51,247	$	50,590	$	657

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During the three months ended March 31, 2025, net revenue increased by $4.4 million, or 32%, compared to the same period ended March 31, 2024, primarily due to an increase in gross product revenue as well as overall improvements in savings offers and distributor fees which are certain expenses that reduce gross revenue to determine net revenue (known as “Gross to Net” adjustments).

During the nine months ended March 31, 2025, net revenue increased by $0.7 million, or 1%, compared to the same period ended March 31, 2024, primarily due to a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor offset by increases in savings offers costs impacting the net revenue.

Gross Profit

During the three and nine months ended March 31, 2025, gross profit increased by $2.4 million, or 24% and decreased by $2.4 million, or 6%, compared to the same periods ended March 31, 2024, respectively. Gross profit percentage was 69% for both the three and nine months ended March 31, 2025, compared to 74% and 75% for the same periods ended March 31, 2024, respectively. The decrease in gross profit percentage is primarily related to increased cost of sales for our ADHD Portfolio inventory as we sell through self-manufactured inventory burdened with certain fixed costs associated with its manufacture, which were capitalized into inventory costs in prior periods and is expected to normalize in the coming quarters as we finish selling through our self-manufactured inventory.

Selling and Marketing

During the three months ended March 31, 2025, selling and marketing expense was relatively flat compared to the same period ended March 31, 2024, and during the nine months ended March 31, 2025, selling and marketing expense decreased by $0.5 million, or 3%, compared to the same period ended March 31, 2024. Selling and marketing expense decreases are primarily driven by reduced commission expense and variable commercial marketing program fees in response to lower revenue, partially offset by increases in labor and service costs.

General and Administrative

During the three and nine months ended March 31, 2025, general and administrative expense decreased by $0.7 million, or 15% and $2.2 million, or 14% compared to the same period ended March 31, 2024. The decrease is primarily a result of continued cost reduction efforts and improved operational efficiencies.

Research and Development

During the three and nine months ended March 31, 2025, research and development expense decreased by $0.4 million, or 73% and $0.6 million, or 36% compared to the same period ended March 31, 2024. Our research and development costs are primarily associated with support for our commercialized products and costs associated with maintaining our intellectual property on our AR101 asset, for which we have indefinitely suspended clinical development. We did not have significant costs related to these activities during the third quarter of fiscal 2025, which was the primary reason for the decrease in research and development expense.

Amortization of Intangible Assets

During the three and nine months ended March 31, 2025, amortization expense of intangible assets, excluding amounts included in cost of sales, was relatively consistent compared to the same periods ended March 31, 2024.

Restructuring Costs

During the three and nine months ended March 31, 2025, we incurred zero and $2.1 million of restructuring costs, respectively, related to our previously announced operational realignment and related costs. For both the three and nine months ended March 31, 2024, we incurred $0.2 million of restructuring costs related to our previously announced operational realignment and related costs.

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Other Income, Net

During the three and nine months ended March 31, 2025, other income, net was relatively consistent compared to the same periods ended March 31, 2024.

Interest Expense

During the three and nine months ended March 31, 2025, interest expense decreased by $0.4 million, or 28% and $0.8 million, or 22%, compared to the same periods ended March 31, 2024, primarily due to the extinguishment of our $15.0 million term loan while entering into the $13.0 million Eclipse Term Loan on more favorable terms during the fourth quarter of fiscal 2024 and the gradual paydown of the outstanding principal balance throughout the year as well as reductions in our fixed payment arrangement balance during the period.

Derivative Warrant Liabilities Gain (Loss)

The fair value of derivative warrant liabilities is calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model and is revalued at each reporting period, and changes are reflected through income or expense. For the three and nine months ended March 31, 2025, we recognized an unrealized gain of $2.3 million and $8.2 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three and nine months ended March 31, 2025. For the three and nine months ended March 31, 2024, we recognized an unrealized gain of $1.0 million and an unrealized loss of $5.5 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three months ended March 31, 2024, but an overall increase in our stock price during the nine months ended March 31, 2024.

Income Tax Benefit (Expense)

For income (loss) from continuing operations we recorded an income tax benefit of $0.1 million, which represented an effective tax rate of negative 3.2% and income tax expense of $0.5 million, which represented an effective tax rate of negative 29.5%, for the three months ended March 31, 2025, and 2024, respectively. For income (loss) from continuing operations we recorded an income tax expense of zero and income tax expense of $1.3 million, which represented an effective tax rate of zero and negative 16.6% for the nine months ended March 31, 2025, and 2024, respectively. These effective tax rates were primarily driven by the limitations on losses as a result of Section 382 of the IRC changes in ownership coupled with existing valuation allowances, the divestiture of our Consumer Health business that occurred during the first quarter of fiscal 2025 and changes to our fiscal 2025 projections, which resulted in an income tax benefit for the current quarter that reduced income tax expense for fiscal 2025 to zero.

Net Income (Loss) from Discontinued Operations, Net of Tax

Net income (loss) from discontinued operations, net of tax is related to the wind down and divestiture of our Consumer Health business that was completed in the first quarter of fiscal 2025. See Part I, Item 1, Note 20 – Discontinued Operations in this Form 10-Q for further detail.

Liquidity and Capital Resources

Sources of Liquidity

We have obligations related to our loan agreements, milestone payments for licensed products, and manufacturing purchase commitments.

We finance our operations through a combination of sales of our common stock and warrants, borrowings under our revolving credit facility and from cash generated from operations.

Shelf Registrations

On September 26, 2024, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $100.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the “2024 Shelf”). Through the filing date of this Form 10-Q, $100.0 million remains available under the 2024 Shelf. This availability is subject to the SEC’s “baby shelf” limitation as set forth in SEC Instruction I.B.6 limitation to the Form S-3.

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Eclipse Agreement

In June 2024, we and certain of our subsidiaries entered into the Eclipse Amendment No. 5, with the Eclipse Lender. Under the Eclipse Agreement No. 5, we have two loan agreements, the Eclipse Term Loan and the Eclipse Revolving Loan.

The Eclipse Term Loan consists of a principal amount of $13.0 million, at an interest rate of SOFR plus 7.0%, with a four-year term and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on June 12, 2028, the maturity date. We used the proceeds of the Eclipse Term Loan and a portion of the proceeds from warrant exercises described below to repay in full a $15.0 million term note.

The Eclipse Revolving Loan allows us to borrow up to $14.5 million at an interest rate of SOFR plus 4.5%. In addition, we are required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of the Eclipse Revolving Loan remains subject to a borrowing base and reserve, and availability blockage requirements and the maturity date, as amended, is June 12, 2028.

Cash Flows

The following table shows cash flows for the nine months ended March 31, 2025, and 2024:

	Nine Months Ended March 31,
	2025			2024			Change
	(in thousands)
Net cash used in operating activities	$	(4,740	)	$	(600	)	$	(4,140	)
Net cash provided by (used in) investing activities	$	457		$	(295	)	$	752
Net cash provided by (used in) financing activities	$	2,450		$	(2,330	)	$	4,780

Net Cash Used in Operating Activities

Net cash used in operating activities during these periods primarily reflects our net income (loss) from continuing operations, partially offset by cash provided by discontinued operations and changes in working capital and non-cash charges including stock-based compensation expense, derivative warrant liabilities gain or loss, depreciation, amortization and accretion, and other charges.

During the nine months ended March 31, 2025, net cash used in operating activities totaled $4.7 million, which was primarily the result of an increase in accounts receivable, net and prepaid expenses and other current assets as well as a decrease in accounts payable and accrued liabilities, partially offset by positive cash earnings (net income of $6.3 million partially offset primarily by non-cash depreciation, amortization and accretion, stock compensation expense and derivative warrant liabilities adjustment).

During the nine months ended March 31, 2024, net cash used in operating activities totaled $0.6 million. The use of cash was primarily the result of the decrease in accounts payable and accrued liabilities and an increase in inventories, partially offset by positive cash earnings (net loss of $11.2 million offset by non-cash depreciation, amortization and accretion, derivative warrant liabilities adjustment, and stock compensation expense) and by funds received from the ERC program recorded in other operating liabilities (see Part I, Item 1, Note 2 – Summary of Significant Accounting Policies and Part I, Item 1, Note 9 – Other Liabilities in this Form 10-Q for further detail).

Net Cash Provided By (Used In) Investing Activities

Net cash provided by investing activities for the nine months ended March 31, 2025, was driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases. Net cash used in investing activities was nominal during the nine months ended March 31, 2024.

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Net Cash Provided By (Used In) Financing Activities

Net cash provided by financing activities of $2.5 million during the nine months ended March 31, 2025, was primarily from net proceeds received from revolving credit facility partially offset by payments made to fixed payment arrangements and payments made on borrowings. Net cash used in financing activities of $2.3 million during the nine months ended March 31, 2024, was primarily from payments made to fixed payment arrangements.

Contractual Obligations, Commitments and Contingencies

As a result of our acquisitions and licensing agreements, we are contractually and contingently obliged to pay, when due, various fixed and contingent milestone payments. See Note 13 – Commitments and Contingencies in the accompanying notes to the unaudited consolidated financial statements for further information.

In May 2022, we entered into the Tuzistra License Agreement. Pursuant to such termination the Company accrued a settlement liability, which as of March 31, 2025, had a remaining balance of $4.3 million accrued in other current liabilities on the consolidated balance sheet payable to Tris, with a provision that allows the Company to pay interest on any principal amounts due but remaining unpaid past July 2024.

Upon closing of the acquisition of a line of prescription pediatric products from Cerecor, Inc. in October 2019, we assumed payment obligations that require us to make fixed and product milestone payments. As of March 31, 2025, the Tris Karbinal Agreement accrued fixed payment arrangement balance was $0.7 million recorded in other current liabilities on the consolidated balance sheet.

In connection with our acquisition of the assets from Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (collectively, “Rumpus”), and only if we resume and ultimately complete clinical development of AR101 and gain regulatory clearances to commercialize the product in multiple markets around the world, we may be required to pay up to $67.5 million in regulatory and commercial-based earn-out payments to Rumpus, which are primarily paid against commercial milestone achievements. Under the licensing agreement with Denovo Biopharma LLC (“Denovo”), we made a payment of $0.6 million for a license fee in April 2022. In addition, upon the achievement of regulatory and commercial milestones, we may be required to pay up to $101.7 million. Under the licensing agreement with Johns Hopkins University (“JHU”), upon achievement of regulatory and commercial milestone, we may be required to pay up to $1.6 million to JHU. In fiscal 2022, two milestones payable to Rumpus were achieved totaling $4.0 million, which were paid in 109,447 shares of common stock and $2.6 million in cash. We also assumed the responsibility for royalties of 3.0% of net revenue from the product, with a minimum of $20,000 per year, and upon the achievement of certain regulatory and commercial milestones, up to $1.6 million. With clinical development currently suspended, only if and when we resume and ultimately complete clinical development of AR101, are substantially all milestone payments payable to these parties.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed discussion about our critical accounting estimates, refer to our 2024 Form 10-K.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2025, at reasonable assurance levels, in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Accordingly, we believe that the financial statements presented in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented herein.

Inherent Limitations on Effectiveness of Internal Controls over Financial Reporting

Our management team, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple errors or mistakes. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this Form 10-Q, that have a material effect, or are reasonably likely to have a material effect, on our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEDINGS

From time to time, we become involved in or are threatened with legal disputes arising from our business and operations in the normal course of business. Most of these disputes are not likely to have a material effect on our business, financial condition, or operations.

Granules PIV

On October 31, 2024, the Company received a Paragraph IV Certification Notice Letter (“Notice Letter”) from Granules Pharmaceuticals, Inc. (“Granules”), stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules’ New Drug Application (“NDA”) for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. On December 11, 2024, the Company filed a patent infringement lawsuit against Granules which triggered a stay precluding the United States Food and Drug Administration (“FDA”) from approving Granules’ NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. This litigation is ongoing, and a trial has been scheduled to begin on December 7, 2026. The Company plans to vigorously enforce its intellectual property rights related to Adzenys.

Revive Investing

The Company had been named as a nominal plaintiff in a lawsuit by two shareholders against Armistice Capital Master Fund, Ltd, entitled Revive Investing, LLC. et al v. Armistice Master Fund, Ltd. et al, Case 1:20-cv-02849-CMA-TPO, in the United States District Court for the District of Colorado, contending that Armistice was liable for short swing trading profits in violation of Section 16(b) of the Exchange Act for certain trades it made in Company stock in 2019 and 2020 and must disgorge those profits to the Company. That matter proceeded to trial before a jury, which on January 29, 2025, returned a verdict finding no liability. On March 6, 2025, the plaintiffs filed an appeal in the United States Court of Appeals for the Tenth Circuit. As with the original case, regardless of the outcome, this case will not have a materially adverse effect upon the Company’s financial condition, results of operations, or cash flows.

For a description of our material pending legal proceedings, see Note 13 – Commitments and Contingencies of the notes to the unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by reference. As of the filing of this report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a materially adverse effect upon our financial condition, results of operations, or cash flows.

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ITEM 1A. RISK FACTORS

Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on our business prospects, financial condition, and results of operations, and you should carefully consider them. The risk factors included in our 2024 Form 10-K have not materially changed, except as reflected in the following new risk factors:

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of actual or perceived changes in interest rates and economic inflation), which included severely diminished liquidity and credit availability, declines in consumer confidence, slower economic growth, high inflation, uncertainty about economic stability and swings in unemployment rates. The financial markets and the global economy may also be adversely affected by the impact of supply chain disruptions, labor shortages, fluctuations in currency exchange rates, changes in interest rates, military conflict, acts of terrorism or other geopolitical events. Sanctions imposed, and other actions taken, by the United States and other countries in response to geopolitical conflicts, including the one in Ukraine, may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. There can be no assurance that a deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions, including our ability to purchase necessary supplies on acceptable terms, if at all. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to further delay or abandon clinical development plans, if we were to resume such development. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.

The United States government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. In addition, the United States government has initiated or is considering imposing tariffs on certain foreign goods. Related to this action, certain foreign governments, including China, have instituted or are considering imposing tariffs on certain United States goods. It remains unclear what the United States administration or foreign governments will or will not do with respect to tariffs or other international trade agreements and policies. A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to disrupt our research activities, affect our suppliers and/or the United States or global economy or certain sectors thereof and, thus, could adversely impact our businesses.

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We are and may become involved in litigation or other proceedings from time to time relating to the enforcement or defense of patent and other intellectual property rights, which could cause us to divert our resources and could put our intellectual property at risk.

To prevent infringement or unauthorized use of our intellectual property, we have in the past, and may in the future, need to file infringement claims. For example, on December 11, 2024, we filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Granules Pharmaceuticals, Inc. (see Part I, Item II, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q for further detail of this matter). When we pursue litigation to stop another party from using the inventions claimed in any patents we own or control, that party has the right to ask the court to rule that such patents are invalid or should not be enforced against that third party. In addition to patent infringement lawsuits, we may decide to file interferences, oppositions, ex parte reexaminations, post-grant review, or inter partes review proceedings before the United States Patent and Trademark Office (the “USPTO”) and corresponding foreign patent offices. Litigation and other proceedings relating to intellectual property are unpredictable and expensive and may consume time and resources and divert the attention of managerial and scientific personnel. Such litigations and proceedings could substantially increase our operating losses and reduce the resources available for research, development, and other activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings or may be required to divert such resources from our ongoing and planned research and development activities. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

There also is a risk that a court or patent office in such proceeding will decide that our patents or the patents of our licensors are not valid or are not enforceable, and that we do not have the right to stop the other party from using the inventions. Additionally, even if the validity of such patents is upheld, the court may refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents. If we are not successful in enforcing or defending our intellectual property, our competitors could develop and market products based on our discoveries and technologies, which may reduce the commercial viability of, and demand for, our product candidates and any future products.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2025, none of our directors or executive officers (as defined in Rule 16a-1 under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K).

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ITEM 6. EXHIBITS

Exhibit No.		Description
31.1*		Certificate of the Chief Executive Officer of Aytu BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certificate of the Chief Financial Officer of Aytu BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certificate of the Chief Executive Officer and the Chief Financial Officer of Aytu BioPharma, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Schema Linkbase Document.
101.CAL*		Inline XBRL Taxonomy Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Labels Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AYTU BIOPHARMA, INC.

Date: May 14, 2025	By:	/s/ Joshua R. Disbrow
		Joshua R. Disbrow
		Chief Executive Officer
		(Principal Executive Officer)

Date: May 14, 2025	By:	/s/ Ryan J. Selhorn
		Ryan J. Selhorn
		Chief Financial Officer
		(Principal Financial Officer)
		(Principal Accounting Officer)