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Acquisitions

6 Months Ended

Dec. 31, 2021

3. Acquisitions

Neos Merger

On March 19, 2021, the Company acquired Neos Therapeutics, Inc. (“Neos”), a commercial-stage pharmaceutical company developing and manufacturing central nervous system-focused products (the “Neos Merger”) 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 5,472,000 shares of the Company’s common stock. 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 summarizes the preliminary fair value of assets acquired and liabilities assumed at the date of acquisition. These 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 18 years.

The fair value 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

Unaudited Pro Forma Information

The following supplemental unaudited proforma financial information presents the Company’s results as if the Neos acquisition had occurred on July 1, 2020.

The unaudited pro forma results have been prepared based on estimates and assumptions, which management believes are reasonable; however, the results are not necessarily indicative of the consolidated results of operations had the acquisition occurred on July 1, 2020, or of future results of operations:


	Six Months Ended
	December 31,
	2021		2020
			Pro forma
	Unaudited		Unaudited

	(In thousands)
Total revenues, net	$	45,022	$	52,331
Net loss	$	(39,399)	$	(23,037)

Rumpus Acquisition

On April 12, 2021, the Company entered into an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”) pursuant to which the Company acquired certain rights and other assets, including key commercial global licenses, relating primarily to the pediatric-onset rare disease development asset enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied for the treatment of vascular Ehlers-Danlos Syndrome (“VEDS”). 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, are payable to Rumpus. AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways (see Note 12 and Note 17).