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Acquisitions

12 Months Ended

Jun. 30, 2021

4. Acquisitions

Fiscal Year 2020 acquisitions

On October 10, 2019, the Company entered into the Purchase Agreement with Cerecor, Inc. (“Cerecor”) to acquire a line of prescription pediatric products, (the "Pediatric Portfolio"), which closed on November 1, 2019. At closing, the Pediatric Portfolio consisted of four prescription products (i) Cefaclor™ for Oral Suspension, (ii) Karbinal® ER, (iii) Poly-Vi-Flor® and (iv) Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million in cash and approximately 9.8 million shares of Series G Convertible Preferred Stock.

On February 14, 2020, the Company completed the merger with Innovus Pharmaceuticals, Inc. (“Innovus”) after approval by the stockholders of both companies on February 13, 2020 (the "Innovus Merger"). Upon the effectiveness of the Innovus Merger, a subsidiary of the Company merged with and into Innovus, and all outstanding Innovus common stock was exchanged for approximately 380,000 shares of the Company’s common stock and up to $16.0 million of Contingent Value Rights (“CVRs”). The outstanding Innovus warrants at the time of merger with 'cash out' rights were exchanged for approximately 2,000,000 shares of Series H Convertible Preferred stock of the Company over a period of time covering February 26, 2020 through March 10, 2020. The remaining Innovus warrants outstanding at the time of the merger, those without ‘cash out’ rights at the time of the Innovus Merger, remain outstanding, and upon exercise, retain the right to the merger consideration offered to Innovus stockholders, including any remaining claims represented by CVRs at the time of exercise. Innovus is now a 100% wholly-owned subsidiary of the Company, (“Aytu Consumer Health”).

Neos Merger

On March 19, 2021, the Company completed the Neos Merger with Neos Therapeutics, Inc. after approval by the stockholders of Neos on March 18, 2021 and the approval of the consideration to be delivered by the Company in connection with the merger by the shareholders of Aytu, also on March 18, 2021. Upon the effectiveness of the Neos Merger, a subsidiary of the Company merged with and into Neos, and all outstanding Neos common stock was exchanged for approximately 5.5 million shares of the Company’s common stock. Neos is now a 100% wholly-owned subsidiary of the Company. The Company pursued the acquisition of Neos in order to gain scale in the industry, expand its product portfolio and as an opportunity to potentially accelerate the pathway to breakeven. The Company incurred in relation to the Neos Merger (i) approximately $2.9 million of acquisition related costs, recognized as part of operating expense, and (ii) $0.1 million of issuance costs, recognized as a component of stockholders’ equity.

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 liabilities, and therefore, are subject to revisions that may result in adjustments to the values presented below;


	March 19, 2021
	(In thousands, except share and per-share)
Considerations:
Fair Value of Aytu Common Stock
Total shares issued at close		5,471,804
Estimated fair value per share of Aytu common stock	$	9.73
Estimated fair value of equity consideration transferred	$	53,241
Cash		15,383
Estimated fair value of replacement equity awards		432
Total consideration transferred	$	69,056


	March 19, 2021
	(In thousands)
Total consideration transferred	$	69,056
Recognized amounts of identified assets acquired and liabilities assumed
Cash and cash equivalents	$	15,722
Accounts receivable		24,696
Inventory		10,984
Prepaid expenses and other current assets		2,929
Operating leases right-to-use assets		3,515
Property, plant and equipment		5,519
Intangible assets		56,530
Other long-term assets		149
Accounts payable and accrued expenses		(56,718)
Short-term line of credit		(10,707)
Long-term debt, including current portion		(17,678)
Operating lease liabilities		(3,515)
Other long-term liabilities		(82)
Total identifiable net assets		31,344
Goodwill	$	37,712

The fair values of intangible assets were determined using variations of the cost approach, excess earnings method and the relief-from-royalties method. The fair value of Neos trade name, in-process R&D and developed product technology, which is the proprietary technology for the development of Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and generic Tussionex, were determined using the relief from royalty method. The fair value of developed

technology right, which is a proprietary modified-release drug delivery technology, was determined using multi-period excess earnings method. The fair value of RxConnect, which is a developed technology for the Neos-sponsored patient support program that offers affordable and predictable copays to all commercially insured patients, was determined using cost to recreate method. The finite-lived intangible assets are being amortized over a range of between 1 to 17 years.

The fair values of the identifiable intangible assets acquired were as follows;


	March 19, 2021
	(In thousands)
Identified intangible assets acquired:
Developed technology right	$	30,200
Developed products technology		22,700
In-process R&D		2,600
RxConnect		630
Trade name		400
Total intangible assets acquired	$	56,530

Pro Forma Impact due to Business Combinations

The following supplemental unaudited proforma financial information presents the Company’s results as if the following acquisitions had occurred on July 1, 2019:

●

Acquisition of the Pediatric Portfolio, effective November 1, 2019.

●

Merger with Innovus effective February 14, 2020.

●

Merger with Neos, effective March 19, 2021.


	Year ended June 30,
	2021		2020
	Pro forma		Pro forma
	Unaudited		Unaudited (aa)

	(In thousands)
Total revenues, net	$	98,064	$	97,561
Net (loss)	$	(74,710)	$	(35,321)

(aa)	Due to the absence of discrete financial information for Innovus, covering the period from February 1, 2020 through February 13, 2020, the Company did not include the impact of that stub-period for the pro forma results for the year ended June 30, 2020.

Since the acquisition of Neos on March 19, 2021, Neos has contributed approximately $11.5 million in net revenues and $8.0 million to net loss.

Other acquisitions

On April 12, 2021, the Company acquired substantially all the assets of Rumpus Therapeutics, LLC through an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”). This asset was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million. Upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the Company’s option. AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways.