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Revenue Recognition

9 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

We generate revenues from the sale of products. Revenue is recognized when control of products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products.

The Company determines revenue recognition through the following five-step model:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations; and

(v) recognition of revenue when, or as the Company satisfies each performance obligation.

Product Revenues, Net

The Company sells its products principally to a limited number of wholesale distributors and pharmacies in the United States, which account for the largest portion of our total revenue. International sales are made primarily to specialty distributors, as well as hospitals, laboratories, and clinics, some of which are government owned or supported (collectively, its “Customers”). The Company’s Customers in the United States subsequently resell the products to patients and pharmacies. In accordance with ASC 606, the Company recognizes net revenues from product sales when the Customer obtains control of the Company’s product, which typically occurs upon delivery to the Customer. The Company’s payment terms are between 30 to 60 days in the United States and consistent with prevailing practice in international markets.

Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from coupons, discounts, chargebacks and distributor fees, processing fees, as well as allowances for returns and government rebates. Provisions are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sale. Provision balances related to estimated amounts payable to direct customers are netted against accounts receivable from such customers. Balances related to indirect customers are included in accounts payable and accrued liabilities. Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the Company’s historical experience and specific known market events and trends. We constrain our estimates by giving consideration to factors that could otherwise lead to a probable reversal of revenue.

Revenues by Geographic location

The following table reflects our product revenues by geographic location as determined by the billing address of our customers:

		Three Months Ended March 31,								Nine Months Ended March 31,
		2019				2018				2019				2018
U.S		$	2,024,000			$	483,000			$	5,025,000			$	2,380,000
Rest-of-the-World			348,000				124,000				574,000				355,000
Total net revenue		$	2,372,000			$	607,000			$	5,599,000			$	2,735,000

License Revenue, Net

The license revenue of $6,000 and $0 recognized in the three and nine months ended March 31, 2019 and 2018, respectively, represent the payment received from the Company’s ZolpiMist sublicensing agreement with SUDA Pharmaceuticals. In connection with the ZolpiMist License Agreement, Aytu assumed the SUDA Pharmaceuticals sublicensing agreement for ZolpiMist outside of the United States and Canada. This licensing agreement calls for SUDA to lead commercial development and sublicensing efforts for ZolpiMist in major territories outside the United States and Canada, including Europe, Asia, and Latin America. SUDA has already entered into sublicensing agreements in key markets with large, multi-national pharmaceutical companies and has agreements in place in China, Chile, Brazil, and throughout Southeast Asia.