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Acquisitions | 6 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Acquisitions | On October 10, 2019, the Company entered into the Purchase Agreement with Cerecor, Inc. (“Cerecor”) to purchase and acquire Cerecor’s Pediatric Portfolio, which closed on November 1, 2019. The Pediatric Portfolio consists of six prescription products consisting of (i) AcipHex® Sprinkle™, (ii) Cefaclor for Oral Suspension, (iii) Karbinal® ER, (iv) Flexichamber™, (v) Poly-Vi-Flor® and Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million cash and approximately 9.8 million shares of Series G Convertible Preferred Stock. The Company also assumed certain of Cerecor’s financial and royalty obligations, and not more than $3.5 million of Medicaid rebates and products returns. The Company also retained the majority of Cerecor’s workforce focused on commercial sales, commercial contracts and customer relationships. In addition, the Company assumed Cerecor obligations due to an investor that include fixed and variable payments aggregating to $25.6 million. The Company assumed fixed monthly payments equal to $0.1 million from November 2019 through January 2021 plus $15 million due in January 2021. Monthly variable payments due to the same investor are equal to 15% of net revenue generated from a subset of the Product Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a one-time payment of $0.2 million is due to the investor. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.5 million have been made, or (ii) February 12, 2026. Further, certain of the products in the Product Portfolio require royalty payments ranging from 12% to 15% of net revenue. One of the products in the Product Portfolio requires the Company to generate minimum annual sales sufficient to represent annual royalties of approximately $1.8 million, in the event the minimum sales volume is not satisfied. While no equity was acquired by the Company, the transaction was accounted for as a business combination under the acquisition method of accounting pursuant to Topic 805. Accordingly, the tangible and identifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the date of acquisition, with the remaining purchase price recorded as goodwill. The goodwill recognized is attributable primarily to strategic opportunities related to an expanded commercial footprint and diversified pediatric product portfolio that is expected to provide revenue and cost synergies. Transaction costs of $0.3 million were included as general and administrative expense in the consolidated statements of operations for the three and six months ended December 31, 2019. The following table summarized the preliminary fair value of assets acquired and liabilities assumed at the date of acquisition. These estimates are preliminary, pending final evaluation of certain assets, and therefore, are subject to revisions that may result in adjustments to the values presented below:
|  | As of |
|  | November 1, 2019 |
Consideration |  |  |
Cash and cash equivalents |  | $ | 4,500,000 |
Fair value of Series G Convertible Preferred Stock |  |  |  |
Total shares issued |  |  | 9,805,845 |
Estimated fair value per share of Aytu common stock |  | $ | 0.567 |
Estimated fair value of equity consideration transferred |  | $ | 5,559,914 |
Total consideration transferred |  | $ | 10,059,914 |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |  |
Inventory, net |  | $ | 459,123 |
Prepaid assets |  |  | 1,743,555 |
Other current assets |  |  | 2,548,187 |
Intangible assets - product technology rights |  |  | 22,700,000 |
Accrued product program liabilities |  |  | (6,320,853 | )
Assumed fixed payment obligations |  |  | (26,457,162 | )
Total identifiable net assets |  |  | (5,327,150 | )
Goodwill |  | $ | 15,387,064 |
The fair values of intangible assets, including product technology rights were determined using variations of the income approach. Varying discount rates were also applied to the projected net cash flows. The Company believes the assumptions are representative of those a market participant would use in estimating fair value (see Note 10).
|  | As of November 1, 2019 |
Acquired product technology rights |  | $ | 22,700,000 |
The fair value of the net identifiable asset acquired was determined to be $22.7 million, which is being amortized over ten years. The aggregate amortization expense was $0.4 and $0, for the three and six months ended December 31, 2019 and 2018 respectively. Pro Forma Impact of Business Combination The following supplemental unaudited proforma financial information presents the Company’s results as if the acquisition of the Pediatric Portfolio, which was completed on November 1, 2019, had occurred on July 1, 2018. Due to limitations on information on revenues and expenses for certain gap periods within each fiscal year, this unaudited proforma financial information may not reflect how the acquisition would fully impact the Company had the acquisition occurred at the beginning of the earliest fiscal year presented in these financial statements.
|  | Three Months Ended December 31, |  |  | Six Months Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | Unaudited (aa) |  |  | Pro forma Unaudited |  |  | Pro forma Unaudited |  |  | Pro forma Unaudited |
Total revenues, net |  | $ | 3,175,236 |  |  | $ | 8,016,356 |  |  | $ | 8,027,106 |  |  | $ | 14,207,635 |
Net income/(loss) |  |  | 306,314 |  |  |  | (2,532,910 | ) |  |  | (5,997,071 | ) |  |  | (3,854,640 | )
Net income/(loss) per share (bb) |  | $ | 0.01 |  |  | $ | (0.39 | ) |  | $ | (0.38 | ) |  | $ | (0.92 | )
(aa) | Due to a lack of financial information covering the period from October 1, 2019 through November 1, 2019, the Company was not able to provide pro forma adjusted financial statements without making estimated extrapolations that the Company did not believe would be useful to user of the above pro forma information.
(bb) | Pro forma net loss per share calculations excluded the impact of the issuance of the Series G Convertible Preferred under the assumption those shares would continue to remain non-participatory until the July 1, 2020 effective registration.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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