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Summary of Significant Accounting Policies | 12 Months Ended
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Jun. 30, 2021
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principals of Consolidation. The Company’s consolidated financial statements include the accounts of: Aytu Therapeutics, LLC, Innovus Pharmaceuticals, Inc. and Neos Therapeutics, Inc. and their respective wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Basis of Presentation. The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Use of estimate. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, revenue recognition, allowance for doubtful accounts, determination of variable consideration for accruals of chargebacks, administrative fees and rebates, government rebates, returns and other allowances, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, fair value of long-lived assets, income tax provision, deferred taxes and valuation allowance, determination of right-of-use assets and lease liabilities, purchase price allocations, and the depreciable lives of long-lived assets. Because of the uncertainties inherent in such estimates, actual results may differ from those estimates. Management periodically evaluates estimates used in the preparation of the financial statements for reasonableness. Prior Period Reclassification. Certain prior year amounts in the consolidated balance sheets, statements of earnings and statements of cashflows have been reclassified to conform to the current year presentation, including a reclassification made in the presentation of FDA fees for commercialized product. This was previously included in general and administrative expenses and now is recorded as a component of cost of sales on the consolidated statements of earnings. These reclassifications did not affect operating earnings or other consolidated financial statements for the years ended June 30, 2021 and 2020. Cash, Cash Equivalents and Restricted Cash. The Company’s primary objectives for investment of available cash are the preservation of capital and the maintenance of liquidity. The Company invests its available cash balances in bank deposits and money market funds. The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists primarily of amounts held in a certificate of deposit to maintain certain business credit cards. As of June 30, 2021 and 2020, cash, cash equivalents and restricted cash was $49.9 million and $48.3 million, respectively. Accounts Receivable. Accounts receivables are reported on the consolidated balance sheets at outstanding amounts due from customers, less an allowance for doubtful accounts, discounts and pricing chargebacks. The Company extends credit without requiring collateral and typically does not charge interest on past due accounts but reserves the right to do so. As of June 30, 2021, reserve for discounts and chargebacks were $1.1 million and $1.0 million, respectively, and were $0.3 million and negligible amount as of June 30, 2020. The Company writes off uncollectible receivables when the likelihood of collection is remote. The Company evaluates the collectability of accounts receivable on a quarterly basis. An allowance, when needed, is based upon various factors, including: the financial condition and payment history of customers; an overall review of collections experience on other accounts; and, economic factors or events expected to affect future collections experience. Allowance for doubtful accounts was $1.0 million and $0.4 million as of June 30, 2021 and 2020, respectively. Inventories. Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Until objective and persuasive evidence exists that regulatory approval has been received and future economic benefit is probable, pre-launch inventories are expensed into research and development. Post-FDA approval, manufacturing costs for the production of our products are capitalized into inventory. The Company periodically reviews the composition of its inventories in order to identify obsolete, slow-moving, excess or otherwise unsaleable items. Unsaleable items will be written- down to net realizable value in the period identified. The reserve for slow moving inventories was $2.5 million and $1.3 million as of June 30, 2021 and 2020, respectively. Going Concern Determination. The Company periodically performs an evaluation for going concern accounting if the Company has experienced negative financial trends. The evaluation should be based on relevant conditions and events that are known and reasonably knowable within one year after the date that the financial statements are issued. Recurring operating losses or year over year negative cash flows from operating activities are considered negative trends. Property and equipment. Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. Leasehold improvements are amortized over the term of the lease agreement or the service lives of the improvements, whichever is shorter. The Company begins depreciating assets when they placed into service. When property and equipment is disposed, the associated cost and accumulated depreciation is removed from the consolidated balance sheets and any resulting gain or loss included in the consolidated statements of operations. Maintenance and repairs are expenses as incurred. Useful lives of property and equipment by each asset category is summarized below: ​
​ | ​ | ​
​ | ​ | Estimated
​ |  | Useful Lives
​ | ​ | in years
Manufacturing equipment | ​ | 2 - 7
Leasehold improvements |  | 3
Office equipment, furniture and other |  | 2 - 7
Lab equipment |  | 3 - 7
​ Leases. At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the unique facts and circumstances present in such arrangement. Lease classification, recognition and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company will (i) identify lease and non-lease components, (ii) determine the consideration in the contract, (iii) determine whether the lease is an operating or financing lease, and (iv) recognize lease right-of-use (“ROU”) assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the lease commencement date in determining the present value of the lease payments. Fixed lease payments are recognized over the expected term of the lease using the effective interest method. Variable lease expenses that are not considered fixed, or in substance fixed, are expensed as incurred. Fixed and variable lease expense on operating leases are recognized within cost of goods sold and operating expenses in the Company’s consolidated statements of operations. ROU asset amortization and interest costs on financing leases are recorded within cost of goods sold and interest expense, respectively, in the Company’s consolidated statements of operations. The Company has elected the short-term lease exemption and recognizes a short-term lease expense over lease terms of 12 months or less. Operating leases are included in operating lease ROU assets, current portion of operating lease liabilities and operating lease liabilities in the Company’s consolidated balance sheets. Financing leases are included in property and equipment, net, current portion of long-term debt and long-term debt, net of current portion in the Company’s consolidated balance sheets. Fair Value of Financial Instruments. Cash, cash equivalents and restricted cash, accounts receivable and accounts payable. The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair value due to their short maturities. Contingent consideration. The Company classifies contingent consideration liabilities related to business acquisitions within Level 3 as factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity. The Company estimates the fair value of contingent consideration liabilities using a Monte Carlo models. Changes in the fair value of contingent liabilities in subsequent periods are recorded as a loss (gain) in the statements of operations. Warrants. The Company accounts for liability classified warrants by recording the fair value of each instrument in its entirety and recording the fair value of the warrant derivative liability. The fair value of liability classified derivative financial instruments were calculated using a lattice valuation model. Equity classified warrants are valued using a Black-Scholes model. Changes in the fair value of liability classified derivative financial instruments in subsequent periods are recorded as derivative income or expense in the statements of operations. Contingent value rights. The Company classifies contingent value rights liabilities related to business acquisitions within Level 3 as factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity. The Company estimates the fair value of contingent value rights liabilities using a Monte Carlo model. Changes in the fair value of contingent liabilities in subsequent periods are recorded as a loss (gain) in the statements of operations. Fixed Payment Arrangements. Fixed payment arrangements are comprised of minimum product payment obligations relating to either make whole payments or fixed minimum royalties. The fixed payment arrangements were recognized at their amortized cost basis using a market appropriate discount rate and are accreted up to their ultimate face value over time. The liabilities related to fixed payment arrangements are not remeasured at each reporting period unless there is an occurrence of a modification or extinguishment of these obligations. Revenue Recognition. The Company generates revenue from product sales through its prescription pharmaceutical products segment (“Aytu BioPharma Segment”) and its consumer healthcare products segment (“Aytu Consumer Health Segment”). The Company recognizes revenue when all of the following criteria are satisfied: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) as each performance obligation is individually satisfied. Aytu BioPharma Segment Net product sales consist of sales of prescription pharmaceutical products under the Rx Portfolio, principally to a limited number of wholesale distributors and pharmacies in the United States. International sales are made primarily to specialty distributors, as well as to hospitals, laboratories, and clinics, some of which are government owned or supported (collectively, its “Customers”). Products are generally shipped “free-on-board” destination when shipped domestically within the United States, and “free-on-board” shipping point when shipped internationally consistent with the contractual terms. The Company makes estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler (distributor) fees, wholesaler chargebacks and estimated rebates) to be incurred on the respective product sales, and recognizes the estimated amount as revenue when control of the product is transferred to its customers (e.g., upon delivery). Variable consideration is determined using either an expected value or a most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint requires the use of significant management judgment and other market data. The Company provides for prompt payment discounts, wholesaler fees and wholesaler chargebacks based on customer contractual stipulations. The Company analyzes recent product return history to determine a reliable return rate. Additionally, management analyzes historical savings offers and rebate payments based on patient prescriptions and information obtained from third party providers to determine these respective variable considerations. Savings offers The Company offers savings programs for its patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The amount of redeemed savings offers is recorded based on information from third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a gross to net sales adjustment at the time revenue is recognized. Historical trends of estimated savings offers will be regularly monitored, which may result in adjustments to such estimates in the future. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustment at the time revenue is recognized. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s products by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized. Rebates The Rx Portfolio products are subject to commercial managed care and government managed Medicare and Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Calculations related to rebate accruals are estimated based on information from third-party providers. Estimated rebates are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Historical trends of estimated rebates will be regularly monitored, which may result in adjustments to such estimates in the future. Returns Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. The Company analyzed return data available from sales since inception date to determine a reliable return rate. Wholesaler chargeback The Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to the Company. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustment at the time revenue is recognized based on information provided by third parties. Aytu Consumer Health Segment The Aytu Consumer Health Portfolio generates its revenue from sales of various consumer health products through direct-to-consumer marketing channels utilizing the Company's proprietary Beyond Human marketing and sales platform and on e-commerce platforms. Revenue is generally recognized ”free-on-board” shipping point, as those are the agreed-upon contractual terms. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales. Customer Contract Costs. The Company has elected to adopt the practical expedient on expensing the incremental costs to obtain a contract, given the expectation that any amounts attributable to obtaining such a contract would be satisfied within one year. Credit Risk and Customer Concentrations. Financial instruments that potentially subject the Company to credit risk concentrations consist of cash, cash equivalents and accounts receivable. The counterparties are various corporations, governmental institutions and financial institutions of high credit standing. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company periodically monitors the credit quality of the financial institutions with which it invests. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s customers, sometimes referred to as partners or customers, are primarily large wholesale distributors that resell the Company’s products to retailers. As such, the loss of one or more of these large customers could have a material adverse effect on the Company’s business, operating results or financial condition. The Company is also subject to credit risk from accounts receivable related to product sales. Historically, the Company has not experienced significant credit losses on its accounts receivable and does not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on the Company’s financial position, liquidity or results of operations. The following table presents certain customers that contributed more than 10% of gross revenue and accounts receivable: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Percentage of gross revenue | ​ | Percentage of accounts receivable
​ |  | June 30,
​ |  | 2021 | ​ | 2020 |  | 2021 | ​ | 2020
Customer A | ​ | 25 | % | ​ | 16 | % | ​ | 35 | % | ​ | 19 | %
Customer B | ​ | 15 | % | ​ | 16 | % | ​ | 29 | % | ​ | 16 | %
Customer C | ​ | 14 | % | ​ | 14 | % | ​ | 22 | % | ​ | 14 | %
Customer D | ​ | — | % | ​ | — | % | ​ | — | % | ​ | 12 | %
​ ​ Costs of Sales. Costs of sales consists primarily of manufactured product cost, products acquired from third-party manufacturers, freight, production and indirect manufacturing overhead costs, FDA fees for commercialized products and cost of royalties. In addition, distribution, shipping and handling costs invoiced by the Company's third party logistics companies are included in cost of sales. Stock-Based Compensation. The Company accounts for stock-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant over the period of service. Stock option grants are valued on the grant date using the Black-Scholes option pricing model and compensation costs are recognized ratably over the period of service using the graded method. Restricted stock and restricted stock unit grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratable over the requisite service period. Forfeitures are adjusted for as they occur. Research and Development. Research and development costs are expensed as incurred with and include salaries and benefits, facilities costs, overhead costs, raw materials, laboratory and clinical supplies, clinical trial costs, contract services, fees paid to regulatory authorities for review and approval of the Company’s product candidates and other related costs. Intangible Assets and Goodwill. The Company records intangible assets based on fair value on the date of acquisition. Intangible assets include licensed asset, product technology rights, developed technology right, distribution rights, commercial technology, tradename, trademarks and customer lists and in-process research and development ("IPR&D"). The finite-lived intangible assets are recorded at cost and amortized on a straight-line basis over the estimated lives of the assets. The indefinite-lived intangible assets are not subject to amortization. Goodwill is recorded as the difference between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible assets acquired. Goodwill and other intangible assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Useful lives of finite-lived intangible assets by each asset category is summarized below: ​
​ | ​ | ​
​ | ​ | Estimated
​ |  | Useful Lives
​ | ​ | in years
Licensed asset | ​ | 7
Product technology rights |  | 10 - 17
Developed technology | ​ | 17
Product distribution rights | ​ | 5 - 10
Commercial technology | ​ | 2
Tradename | ​ | 1
Customer list | ​ | 1.5
​ Impairment of Long-lived Assets. The Company assesses impairment of long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Long-lived assets consist of property and equipment, net and goodwill and other intangible assets, net. Circumstances which could trigger a review include, but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. The Company evaluated its long-lived assets for impairment as of June 30, 2021 and 2020 respectively, and recorded an impairment of $12.8 million for the Natesto and Tuzistra licensed asset and $0.2 million for the MiOXSYS patent portfolio. Advertising Costs. Advertising costs consist of the direct marketing activities related to the Aytu Consumer Health segment. The Company expenses all advertising costs as incurred. The Company incurred $15.2 million and $4.7 million for the years ended June 30, 2021 and 2020, respectively. Income Taxes. The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date. The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on historical taxable income, projected future taxable income, remaining carryforward periods, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the positions will be sustained upon examination. Tax positions that meet the more-likely-than-not threshold are measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met for a tax position is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. The Company recognizes interest and penalties related to uncertain tax positions in Income tax (provision) benefit in the consolidated statements of operations. As of June 30, 2021, the Company had $0.2 million deferred tax liabilities included in other long-term liabilities in the consolidated balance sheet. There was no such liabilities as of June 30, 2020. Debt issuance costs, discounts (premium). Debt issuance costs reflect fees paid to lenders as compensation for services beyond their role as a creditor, and third parties whose costs are directly related to issuing debt and that otherwise would not be incurred. Amounts paid to the lender as a reduction in the proceeds received are considered a component of the discount on the issuance and not an issuance cost. Debt issuance costs, discounts (premium) related to term loans are reported as a direct deduction (increase) to the outstanding debt and amortized over the term of the debt using the effective interest method as an addition (reduction) to interest expense. Debt issuance costs related to a line of credit facility are accounted for in accordance with ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, in which the Company elects to defer and present debt issuance costs as an asset and are recorded at cost and subsequently amortized over the term of the line of credit as additional interest expense. As of the Neos merger date of March 19, 2021, the Company recorded a $0.8 million premium on the Deerfield debt (see Note 18) with a balance remaining of $0.6 million as of June 30, 2021. Segment information. The Company determines its reportable segments in accordance with ASC 280—Segment Reporting. The Company’s operating segments engage in business activities from which it may earn revenues and incur expenses and for which discrete information is available. Operating results for the operating segments are regularly reviewed by the Company’s chief operating decision maker, who is the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and to assess performance. Operating segments are aggregated for reporting purposes when the operating segments are identified as similar in accordance with the basic principles and aggregation criteria in the accounting standards. The Company’s reporting segments are based primarily on product lines. The reporting segments have different lines of management responsibility as each business requires different marketing strategies and management expertise. The Company has two reportable segments: Aytu BioPharma (Rx division) and Aytu Consumer Health. The Company uses operating income (loss) to compare and evaluate its financial performance (see Note 17). Paragraph IV litigation costs. Legal costs incurred by the Company in the enforcement of the Company’s intellectual property rights are charged to expense. Business Combination and Contingent considerations. The Company recognizes the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of purchase price over the aggregate fair values is recorded as goodwill. The Company calculates the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed to allocate the purchase price at the acquisition date. The consideration for our acquisitions and certain licensing agreements often includes future payments that are contingent upon the occurrence of a particular event or events. The Company records an obligation for such contingent payments at fair value on the acquisition date. Management estimates the fair value of contingent consideration obligations through valuation models that incorporate probability-adjusted assumptions related to the achievement of the milestones and thus likelihood of making related payments. The Company revalues its contingent consideration obligations each reporting period using Monte Carlo simulation. Changes in the fair value of contingent consideration obligations are recognized in the consolidated statements of income. Net Loss Per Common Share. Basic income (loss) per common share is calculated by dividing the net income (loss) available to the common shareholders by the weighted average number of common shares outstanding during that period. Diluted net loss per share reflects the potential of securities that could share in the net loss of Aytu. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. Restricted stock is considered legally issued and outstanding on the grant date, while RSUs are not considered legally issued and outstanding until the RSUs vest. Once the RSUs vest, equivalent common shares will be issued or issuable to the grantee and therefore the RSUs are not considered for inclusion in total common shares issued and outstanding until vested. The following table sets-forth securities that could be potentially dilutive, but as of the years ended June 30, 2021 and 2020 are anti-dilutive, and therefore are excluded from the calculation of diluted earnings per share. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | June 30,
​ | ​ | ​ | ​ | 2021 | ​ | 2020
Warrants to purchase common stock - liability classified |  | (Note 14) | ​ | 24,105 |  | 24,105
Warrant to purchase common stock - equity classified |  | (Note 14) | ​ | 1,254,952 |  | 2,288,454
Employee stock options |  | (Note 13) | ​ | 109,588 |  | 76,594
Employee unvested restricted stock |  | (Note 13) | ​ | 1,955,426 |  | 418,606
Employee unvested restricted stock units |  | (Note 13) | ​ | 78,318 |  | —
​ | ​ | ​ | ​ | 3,422,389 |  | 2,807,759
​ Recent Accounting Pronouncements Fair Value Measurements (“ASU 2018-03”). In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in the standard apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements in ASC 820, Fair Value Measurement. The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this as of July 1, 2020, the beginning of the Company’s fiscal year-ended June 30, 2021. The most relevant component of ASU 2018-13 to the Company’s financial statements relates to the need to disclose the range and weighted-average of significant unobservable inputs used in Level 3 fair value measurements. However, the Company discloses on a discrete basis all significant inputs for all Level 3 Fair Value measurements. Financial Instruments – Credit Losses (“ASU 2016-13”). In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard was originally effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption was permitted for interim and annual reporting periods beginning after December 15, 2018. However, in November 2019, the Financial Accounting Standard Board (FASB) issued ASU 2019-10, Financial Instruments—Credit Losses, (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) — Effective Dates (“ASU 2019-10”). ASU 2019-10 deferred the adoption date for (i) public business entities that meet the definition of an SEC filer, excluding entities eligible to be “smaller reporting companies” as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and (2) all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As of June 30, 2020, the Company qualified as a smaller reporting companies as defined by the SEC. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements but does not anticipate there to be a material impact.

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