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Intangible Assets - Amortizable

12 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

The Company currently holds three existing intangible asset portfolios as of June 30, 2020: (i) Licensed assets, which consist of pharmaceutical product assets that were acquired prior to July 1, 2020; (ii) Product technology rights, acquired from the November 1, 2019 acquisition of the Pediatric Portfolio from Cerecor; and (iii) Patents and tradenames, which as of June 30, 2020, consist entirely of patents, tradenames and customer lists acquired due to the February 2020 acquisition of Innovus.

If acquired in an asset acquisition, the Company capitalized the acquisition cost of each licensed patents or tradename, which can include a combination of both upfront considerations, as well as the estimated future contingent consideration estimated at the acquisition date. If acquired in a business combination, the Company capitalizes the estimated fair value of the intangible asset or assets acquired, based primarily on a discounted cash flow model approach or relief-from-royalties model.

The following table provides the summary of the Company’s intangible assets as of June 30, 2020 and June 30, 2019, respectively.

	June 30, 2020
	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount		Weighted-Average Remaining Life (in years)

Licensed assets	$	23,649,000	$	(7,062,000	)	$	-		$	16,587,000		11.88
MiOXSYS Patent		380,000		(185,000	)		(195,000	)		-		-
Acquired product technology right		22,700,000		(1,513,000	)		-			21,187,000		9.34
Acquired product distribution rights		11,354,000		(565,000	)		-			10,789,000		4.62
Acquired customer lists		390,000		(98,000	)		-			292,000		1.12

	$	58,473,000	$	(9,423,000	)	$	(195,000	)	$	48,855,000		9.11

	June 30, 2019
	Gross Carrying Amount		Accumulated Amortization			Impairment		Net Carrying Amount		Weighted-Average Remaining Life (in years)

Licensed assets	$	23,649,000	$	(4,787,000	)	$	-	$	18,862,000		12.31
MiOXSYS Patent		380,000		(159,000	)		-		221,000		8.70

	$	24,029,000	$	(4,946,000	)	$	-	$	19,083,000		12.27

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

	Licensed Assets		Product Technology Rights		Product Distribution Rights (Patents & Trademarks)		Total

2021	$	2,276,000	$	2,270,000	$	1,768,000	$	6,314,000
2022		2,276,000		2,270,000		1,540,000		6,086,000
2023		2,276,000		2,270,000		1,500,000		6,046,000
2024		2,275,000		2,270,000		1,488,000		6,033,000
2025		917,000		2,270,000		1,292,000		4,479,000
Thereafter		6,567,000		9,837,000		3,493,000		19,897,000
	$	16,587,000	$	21,187,000	$	11,081,000	$	48,855,000

Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the asset. The renewal periods range between approximately 1 to 20 years depending on the license, patent, or other agreement. Renewals are accounted for when they are reasonably assured.

Licensed Assets.

Natesto. In April 2016, Aytu entered into a license and supply agreement to acquire the exclusive U.S. rights to commercialize Natesto (testosterone) nasal gel from Acerus Pharmaceuticals Corporation, or Acerus. We acquired the rights effective upon the expiration of the former licensee’s rights, which occurred on June 30, 2016. The license and supply agreement was formally amended and restated on December 1, 2019. The term of the license runs for the greater of eight years or until the expiry of the latest to expire patent, including claims covering Natesto or until the entry on the market of at least one AB-rated generic product.

The fair value of the net identifiable Natesto asset acquired was determined to be $10.6 million, which is being amortized over eight years. The aggregate amortization expense for fiscal 2020 and fiscal 2019 was $1.3 million, respectively.

ZolpiMist. In June 2018, Aytu signed an exclusive license agreement for ZolpiMist® (zolpidem tartrate oral spray) from Magna Pharmaceuticals, Inc., (“Magna”). This agreement allows for the Company’s exclusive commercialization of ZolpiMist in the U.S. and Canada. Aytu made an upfront payment of $0.4 million to Magna upon execution of the agreement. In July 2018, we paid an additional $0.3 million of which, $297,000 was included in current contingent consideration at June 30, 2018. In addition, the Company also agreed to periodic royalties to Magna as a percentage of ZolpiMist net sales, which was factored into the initial fair value of the license agreement.

The ZolpiMist license agreement was valued at $3.2 million and is amortized over the life of the license agreement up to seven years. The amortization expense for fiscal 2020 and fiscal 2019 was $0.5 million and $0.5 million, respectively.

Tuzistra XR. On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply Agreement (the “Tuzistra License Agreement”) with TRIS Pharma, Inc. (“TRIS”). Pursuant to the Tris License Agreement, TRIS granted the Company an exclusive license in the United States to commercialize Tuzistra XR. As consideration for the Products license, the Company: (i) made an upfront cash payment to TRIS; (ii) issued shares of Series D Convertible preferred stock to TRIS, which were converted into 0.4 million shares of the Company’s common stock during the year ended June 30, 2020; and (iii) will pay certain royalties to TRIS throughout the license term in accordance with the Tris License Agreement and (iv) could incur future payments if certain milestones are achieved.

The Tuzistra License Agreement was valued at $9.9 million and is amortized over the life of the Tris License Agreement up to twenty years. The amortization expense for fiscal 2020 and 2019 was $0.5 million and $0.3 million, respectively. The Company also agreed to make certain quarterly royalty payments to TRIS which will be calculated as a percentage of our Tuzistra XR net sales, payable within 45 days of the end of the applicable quarter.

Product Technology Rights

In November 2019, Aytu Therapeutics, LLC., acquired the Pediatric Portfolio. This transaction expanded our product portfolio with the addition of four prescription products, (i) Cefaclor for Oral Suspension, (ii) Karbinal® ER, (iii) Poly-Vi-Flor® and Tri-Vi-Flor™. The fair value of the acquired Product Technology Rights (the “Product Technology Rights”) utilized a Multiple-Period Excess Earnings Method model. The Company amortizes the Product Technology Rights over ten years, with total amortization expense of approximately $1.5 million and $0 for the years ended June 30, 2020 and June 30, 2019 respectively.

Karbinal ER. The Company acquired and assumed all rights and obligations pursuant to the Supply and Distribution Agreement, as Amended, with TRIS for the exclusive rights to commercialize Karbinal® ER in the United States (the “TRIS Karbinal Agreement”). The TRIS Karbinal Agreement’s initial term terminates in August of 2033, with an optional initial 20-year extension. The Company owes periodic royalties on sales of Karbinal as a percent of net revenues on a quarterly basis. As part of the agreement, the Company has agreed to pay TRIS a product make-whole payment of approximately $2.1 million per year through July 2023, totaling a minimum of $10.7 million as of June 30, 2020 (see Note 17).

Poly-vi-Flor & Tri-vi-Flor. The Company acquired and assumed all rights and obligations pursuant to a Supply and License Agreement and various assignment and release agreements, including a previously agreed to Settlement and License Agreements (the “Poly-Tri Agreements”) for the exclusive rights to commercialize Poly-Vi-Flor and Tri-Vi-Flor in the United States. The Company owes royalties to multiple parties based on a percentage of net revenues on a quarterly basis. There are no milestones, make-whole payments other otherwise any contingencies related to these agreements.

Cefaclor (cefaclor oral suspension). Cefaclor for oral suspension is a second-generation cephalosporin antibiotic suspension and is indicated for the treatment of numerous common infections caused by Streptococcus pneumoniae, Haemophilus influenzae, staphylococci, and Streptococcus pyogenes, and others. Aytu does not own or license any patents covering this product. The Company acquired the License, Supply and Distribution Agreement for rights to promote and commercialize Cefaclor within the United States. The Company is required to pay periodic royalties based on a percent of net revenues.

Patents and Trademarks Tradenames – Acquired from Innovus

On February 14, 2020, the Company and Innovus Pharmaceuticals, Inc. (“Innovus”) completed the Merger after successful approval of the Merger by the shareholders of the Company and Innovus at separate special meetings held on February 13, 2020. Upon completion of the Merger, the Company obtained 22 products with a combination of over 300 registered trademarks and/or patent rights including, but not limited to the following:

Patented Products

●	Sensum – a male moisturizer cream to increase gland sensitivity.

●	Vesele – A dietary supplement formulated for healthy blood flow.

●	Zestra - Patented blend of botanical oils and extracts, scientifically formulated to support women's sexual satisfaction.

Trademarks

●	Diabasens – Topical cream formulated to relieve cutaneous pain associated with conditions such as Postherpetic Neuralgia and Diabetic Neuropathy.

●	FlutiCare – 24-hour nasal allergy relief that helps fight indoor and outdoor allergens causing congestion, sneezing and a runny nose.

●	UriVarx – a dietary supplement to support bladder tone and function.

●	Beyond Human Testosterone Booster - A daily dietary supplement that naturally increases testosterone Levels, supporting natural stamina, endurance and strength.

●	Trexar – a dietary supplement to support healthy nerves in men and women.

On February 14, 2020, upon completion of the Merger with Innovus, the Company recognized the fair value of the rental of the customer lists for $0.4 million and amortizes the asset over a useful life of 1.5 years.

The Company recognized the fair value of trademarks, patents or a combination of both for 18 distinct products that the Company markets, distributes and sells for approximately $11.4 million and amortizes the asset over a useful life of 3 – 10 years.

Patents and Tradenames – MiOXSYS

The cost of the oxidation-reduction potential (“ORP”) technology related patents for the MiOXSYS Systems was $0.4 million when they were acquired and are being amortized over the remaining U.S. patent life of approximately 15 years as of the date, which expires in March 2028. Aytu recorded the amortization expense totaling $0.03 and $0.03 million for the years ended June 30, 2020 and 2019, respectively. In June 2020, the Company decided to write off the entire remaining balance of the MiOXSYS patents, resulting in a loss of approximately $0.2 million for the year ended June 30, 2020, presented as Impairment of intangible assets in the Statement of Operations. This charge was a part of the Aytu BioScience reportable segment (see Note 18) The Company’s decision was based on the fact that the product demand has declined due to pandemic caused by the Coronavirus Disease 2019 (“COVID-19”). COVID-19 has caused a decline in demand for fertility services, which creates downstream impacts on demand for products such as MiOXSYS.