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Note 12 - Fair Value Measurements
 3 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 12 - Fair Value Considerations

 

The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to determine fair value as follows:

 

 

●

Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Aytu for identical assets or liabilities;

 

 

●

Level 2: Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and

 

 

●

Level 3: Unobservable inputs that are supported by little or no market activity.

 

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative warrant liabilities, contingent consideration liabilities, fixed payment arrangements, and current and non-current debt. The carrying amounts of certain short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. Current and non-current debt are reported at their amortized costs on the Company’s consolidated balance sheets. The remaining financial instruments are reported on the Company’s consolidated balance sheets at amounts that approximate current fair values. The Company’s carrying value of its consolidated amounts of cash and cash equivalents approximate their fair value as of September 30, 2024, and June 30, 2024, and are categorized within level 1 of the U.S. GAAP fair value hierarchy. The Company’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

 

Recurring Fair Value Measurements

 

The Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of  September 30, 2024, and June 30, 2024, by level within the fair value hierarchy as follows:

 

 

 Fair Value at September 30,  Fair Value Measurements at September 30, 2024 
  

2024

  

(Level 1)

  

(Level 2)

  

(Level 3)

 
  

(in thousands)

 

Liabilities:

                

Derivative warrant liabilities

 $9,402  $—  $—  $9,402 

Total

 $9,402  $—  $—  $9,402 

 

 

  Fair Value at June 30,  Fair Value Measurements at June 30, 2024 
  

2024

  

(Level 1)

  

(Level 2)

  

(Level 3)

 
  

(in thousands)

 

Liabilities:

                

Derivative warrant liabilities

 $12,745  $—  $—  $12,745 

Total

 $12,745  $—  $—  $12,745 

 

Summary of Level 3 Input Changes

 

A summary of changes to those fair value measures using Level 3 inputs for the three months ended September 30, 2024, is as follows:

 

  

Derivative

 
  

Warrant Liabilities

 
  

(in thousands)

 

Balance as of June 30, 2024

 $12,745 

Settlements (1)

  (463)

Included in earnings

  (2,880)

Balance as of September 30, 2024

 $9,402 

(1) 

Relates to the exercise of 176,000 of the Tranche B Pre-Funded Warrants, which were liability classified and exercised at a price of $0.0001 per share.

 

Significant Assumptions

 

The valuation methodologies and key assumptions used for the mark to market fair value measurements of derivative warrant liabilities as of September 30, 2024, are as follows:

 

  

June 2023 Warrants

  

Warrants

 
  

Tranche A

  

Other (1)

 
  

Monte Carlo &

    
  

Black-Scholes

  

Black-Scholes

 

Aytu closing stock price

 

$ 2.35

  

$ 2.35

 

Equivalent term (years)

 3.7  2.3-2.9 

Expected volatility

 

79.9%

  

79.9%-82.7%

 

Risk-free rate

 

3.6%

  

3.6%

 

Dividend yield

 

0.0%

  

0.0%

 

(1) 

Includes August 2022 Warrants, March 2022 Warrants, Avenue Capital Warrants and Tranche B Pre-Funded Warrants. See Note 16 - Warrants for definitions of these terms and further information.