Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the Company's 2025 Form 10-K. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the risk factors included in the Company's 2025 Form 10-K, and in Part II, Item 1A of this Form 10-Q.

Objective

The purpose of the Management's Discussion and Analysis (the "MD&A") is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the three months ended September 30, 2025, and our financial condition as of September 30, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and notes thereto.

Overview

We are a pharmaceutical company focused on advancing innovative medicines for complex CNS system diseases to improve the quality of life for patients. Our strategy is to become a leading pharmaceutical company that improves the lives of patients. We use a focused approach of in-licensing, acquiring, developing and commercializing novel prescription therapeutics in order to continue building our portfolio of revenue-generating products and leveraging our commercial team's expertise to build leading brands within large therapeutic markets. In June 2025, we entered into the Commercialization Agreement with Fabre-Kramer to commercialize EXXUA in the United States. Gepirone is a new chemical entity, and we believe EXXUA to be a novel first-in-class selective serotonin 5HT1a receptor agonist approved by the FDA for the treatment of MDD in adults.

EXXUA has been extensively studied in over 5,000 patients and represents a new class of therapeutics to compete in the over $22 billion United States prescription MDD market. We believe it can become a very important treatment option for the estimated 21 million Americans affected by MDD. Over 340 million antidepressant prescriptions were written in 2024 in the United States, yet significant unmet needs remain considering the unacceptable side effects associated with current therapeutics. Importantly, we believe that EXXUA is the only antidepressant acting on serotonin receptors that does not carry a label warning about the risk of sexual dysfunction. The mechanism of the antidepressant effect of EXXUA is believed to be related to its modulation of serotonin activity and, specifically, its exclusive and strong binding affinity for 5HT1a receptors, which are key regulators of mood and emotion. EXXUA is not a SSRI and has no reuptake inhibition activity. EXXUA also exhibits no significant adverse effects on weight, blood pressure, heart rate or liver function. It is our expectation that EXXUA has the potential to serve as a major growth catalyst for us, and we anticipate launching EXXUA in the second quarter of fiscal 2026 as a centerpiece of our commercial efforts.

In addition, we will continue to focus on commercializing innovative prescription products that address other CNS conditions, including ADHD. We are focusing our efforts on accelerating the growth of our commercial business and achieving positive operating cash flows. To achieve these goals, we indefinitely suspended active development of our clinical development programs and have wound down and divested unprofitable operations. In the first quarter of fiscal 2025 we completed the previously announced wind down and divestiture of our Consumer Health business and now operate our business as a single operating and reporting segment. The accounting requirements for reporting the Consumer Health business as a discontinued operation were met when the wind down and divestiture was completed on July 31, 2024. Accordingly, our unaudited consolidated financial statements for all periods presented reflect the Consumer Health business as a discontinued operation.

Our business from continuing operations is focused on the upcoming launch of EXXUA and on our current prescription pharmaceutical products sold primarily through third party wholesalers, distributors and pharmacies and which primarily consists of two product portfolios. The first, the ADHD Portfolio, consists of products for the treatment of ADHD and the second, the Pediatric Portfolio, consists of a line of legacy products. We contract with CMOs for the manufacture and testing of all of our products.

We have entered into two international exclusive collaboration, distribution and supply agreements to commercialize certain of our ADHD products. The first agreement is with Medomie, a privately owned pharmaceutical company, which will commercialize the ADHD products in Israel and the Palestinian Authority. The second agreement is with Lupin, a subsidiary of global pharmaceutical company Lupin Limited, which will commercialize the ADHD products in Canada. We will supply the ADHD products to Medomie and Lupin based on forecasts and provide various product commercialization, regulatory and quality assurance resources. Medomie and Lupin are responsible for seeking local regulatory approvals and marketing authorizations for the ADHD products, which is expected to occur over the next 24 months.

In light of our own business activities and external developments in the biotechnology and biopharmaceutical industries, Aytu management and our Board of Directors regularly reviews our performance, prospects and risks such as the potential impact to our business resulting from our competitive landscape (i.e., entry of generic competitors, payor pressures, new branded entrants, etc.). These reviews have included consideration of potential partnerships, collaborations, and other strategic transactions such as acquisitions or divestitures of programs or technology to enhance stockholder value. Aytu management and our Board expect to continue to evaluate potential strategic transactions and business combinations.

Business Environment

We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors and tariffs, and our industry is currently encountering supply chain disruptions related to the sourcing of raw materials, increased costs of materials as result of tariffs, energy, logistics and labor for a number of reasons, including ongoing geopolitical events. It is possible that trade wars could adversely affect some of our markets and suppliers, economic and financial markets, costs and availability of energy and materials, or cause further supply chain disruptions. Inflationary pressures, increased costs and supply chain disruptions could be significant across the business throughout fiscal 2026 and into fiscal 2027. Understanding these risks, we have not experienced stock outages for our ADHD products since the launch of those products.

In October 2024, we received the Notice Letter from Granules, stating that it intends to market a generic version of Adzenys before the expiration of all patents currently listed in the Orange Book. The Notice Letter states that Granules' NDA for the generic version of Adzenys contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the generic version of Adzenys. We timely filed a patent infringement lawsuit on December 11, 2024, against Granules to trigger a stay precluding the FDA from approving Granules' NDA for a generic version of Adzenys for up to 30 months or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first. On January 7, 2025, Granules submitted an answer to the complaint. On October 28, 2025, the case was reassigned to visiting judge, Judge Jennifer Choe-Groves of the United States Court of International Trade. This litigation is ongoing, and a trial has been rescheduled to begin on January 11, 2027. We plan to vigorously enforce our intellectual property rights related to Adzenys.

Results of Operations

The results of operations for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

		Three Months Ended
		September 30,
		2025				2024				Change
		(in thousands)
Net revenue		$	13,888			$	16,574			$	(2,686	)
Cost of goods sold			4,702				4,589				113
Gross profit			9,186				11,985				(2,799	)
Operating expenses:
Selling and marketing			5,322				5,659				(337	)
General and administrative			4,924				5,125				(201	)
Research and development			-				426				(426	)
Amortization of intangible assets			444				921				(477	)
Restructuring costs			-				784				(784	)
Total operating expenses			10,690				12,915				(2,225	)
Loss from operations			(1,504	)			(930	)			(574	)
Other income, net			201				542				(341	)
Interest expense			(516	)			(994	)			478
Derivative warrant liabilities gain			3,784				2,880				904
Income from continuing operations before income tax expense			1,965				1,498				467
Income tax expense			-				(405	)			405
Net income from continuing operations			1,965				1,093				872
Net income from discontinued operations, net of tax			-				381				(381	)
Net income		$	1,965			$	1,474			$	491

Net Revenue by Product Portfolio

Net revenue disaggregated by product portfolios for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

		Three Months Ended
		September 30,
		2025				2024				Change
		(in thousands)
ADHD Portfolio		$	13,156			$	15,264			$	(2,108	)
Pediatric Portfolio			715				1,293				(578	)
Other			17				17				-
Total net revenue		$	13,888			$	16,574			$	(2,686	)

During the three months ended September 30, 2025, net revenue decreased by $2.7 million, or 16% compared to the same period ended September 30, 2024, primarily due to a $3.3 million one-time increase in our ADHD Portfolio net revenue in the first quarter of fiscal 2025 related to a change is estimated variable consideration that resulted from negotiations with a vendor that resulted in a reduction to the liability purportedly owed the vendor.

Gross Profit

Gross profit and gross profit percentage for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, is as follows:

​		Three Months Ended
​		September 30,
​		2025				2024				Change
		(in thousands, except gross profit percentage)
Gross profit		$	9,186			$	11,985			$	(2,799	)
Gross profit percentage			66	%			72	%			(6	)%

During the three months ended September 30, 2025, gross profit decreased by $2.8 million, or 23% compared to the three months ended September 30, 2024. Gross profit percentage was 66% for the three months ended September 30, 2025, compared to 72% for the three months ended September 30, 2024. The decrease in gross profit and gross profit percentage is primarily related to a $3.3 million one-time increase in our ADHD Portfolio net revenue in the first quarter of fiscal 2025 related to a change is estimated variable consideration that resulted from negotiations with a vendor that resulted in a reduction to the liability purportedly owed the vendor.

Selling and Marketing

During the three months ended September 30, 2025, selling and marketing expense decreased by $0.3 million, 6% compared to the same period ended September 30, 2024, primarily driven by reduced commission expense and variable commercial marketing program fees, partially offset by increases in labor, service costs and EXXUA launch costs.

General and Administrative

During the three months ended September 30, 2025, general and administrative expense decreased by $0.2 million, or 4% compared to the same period ended September 30, 2024. The decrease is primarily a result of continued cost reduction efforts and improved operational efficiencies such as reduced facilities expense, partially offset by increases in labor and service costs.

Research and Development

During the three months ended September 30, 2025, there was no research and development expense compared to $0.4 million for the same period ended September 30, 2024, primarily driven by our previously announced suspension of our development programs to focus on our commercial operations resulting in a decrease in research and development spending.

Amortization of Intangible Assets

During the three months ended September 30, 2025, amortization expense of intangible assets, excluding amounts included in cost of goods sold, decreased by $0.5 million, or 52% compared to the same period ended September 30, 2024, primarily due to impairments of certain intangible assets recorded in fiscal 2025.

Restructuring Costs

During the three months ended September 30, 2025, we incurred zero restructuring costs compared to $0.8 million during same period ended September 30, 2024. Restructuring costs during the first quarter of fiscal 2025 related to our previously announced operational realignment and related costs, which was completed during fiscal 2025.

Other Income, Net

During the three months ended September 30, 2025, other income, net was relatively consistent compared to the same periods ended September 30, 2024.

Interest Expense

During the three months ended September 30, 2025, interest expense decreased by $0.5 million, or 48% compared to the same period ended September 30, 2024, primarily due to the paydown of our fixed payment arrangements.

Derivative Warrant Liabilities Gain

The fair value of derivative warrant liabilities is calculated using either the Black-Scholes option pricing model or the Monte Carlo simulation model and is revalued at each reporting period, and changes are reflected through income or expense. For the three months ended September 30, 2025, and 2024, we recognized a gain of $3.8 million and $2.9 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three months ended September 30, 2025, and 2024.

Income Tax Expense

For the three months ended September 30, 2025, and 2024, there was zero and $0.4 million of income tax expense from continuing operations, which was an effective tax rate of zero and negative 27.0%, respectively. This income tax expense was primarily driven by Section 382 limitation of the Internal Revenue Code of 1986, as amended (the "IRC") on pre-TCJA and post-TCJA net operating loss ("NOL") utilization, coupled with existing valuation allowances.

Net Income from Discontinued Operations, Net of Tax

Net income from discontinued operations, net of tax is related to the wind down and divestiture of our Consumer Health business that was completed in the first quarter of fiscal 2025. See Part I, Item 1, Note 20 - Discontinued Operations in this Form 10-Q for further detail.

Liquidity and Capital Resources

Sources of Liquidity

We have obligations related to our loan agreements, milestone payments for licensed products, and manufacturing purchase commitments. We finance our operations through a combination of sales of our common stock and warrants, borrowings under our revolving credit facility and from cash generated from operations.

Shelf Registrations

On September 26, 2024, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. This shelf registration statement covers the offering, issuance and sale by us of up to an aggregate of $100.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the "2024 Shelf"). Through the filing date of this Annual Report, $100.0 million remains available under the 2024 Shelf. This availability is subject to the SEC's "baby shelf" limitation as set forth in SEC Instruction I.B.6 limitation to the Form S-3.

Equity Financing

We have engaged in several different types of equity financings throughout our history. Most recently in June 2025, we raised gross proceeds of $16.6 million from the issuance of (i) 2,806,688 shares of our common stock, at a public offering price of $1.50 and 8,233,332 prefunded warrants at a public offering price of $1.4999 to purchase 8,233,332 shares of our common stock at an exercise price of $0.0001 per share. We received $14.8 million in proceeds net of underwriting commissions and offering expenses and intend to use the net proceeds from the offering for working capital, general corporate purposes and to enable us to exclusively commercialize EXXUA.

In June 2024, the June 2023 Tranche B Warrants to purchase 2,173,912 shares of our common stock at an exercise price of $1.59 were exercised, generating proceeds of $3.5 million. The June Tranche B Warrants were converted into 367,478 shares of our common stock and 1,806,434 prefunded warrants to purchase shares of our common stock with an exercise price of $0.0001 per share. We used a portion of these proceeds as part of a $15.0 million term loan repayment made in June of 2024. For further information on our equity financings and related warrants outstanding, please refer to Note 14 - Stockholders' Equity and Note 16 - Warrants in Part I, Item 1 of this Form 10-Q.

Eclipse Agreement

Under our Eclipse Agreement, we have two loan agreements, the Eclipse Term Loan and the Eclipse Revolving Loan. The Eclipse Term Loan consists of an outstanding principal amount of $13.0 million on the closing date of the Eclipse Amendment No. 6, at an interest rate of the SOFR plus 7.0%, with a four-year term and a straight-line loan amortization period of seven years, which would provide for a loan balance at the end of the four-year term of $5.6 million to be repaid on the June 12, 2029, maturity date, as amended. In June 2024, we used the initial proceeds from the Eclipse Term Loan and a portion of the proceeds from the warrant exercises described above to repay in full a $15.0 million term loan. The Eclipse Revolving Loan has a potential maximum borrowing base of $14.5 million at an interest rate of the SOFR plus 4.5%, which was temporarily increased pursuant to the $1.5 million Eclipse Incremental Advance, with repayment and permanent reduction of the Eclipse Incremental Advance commencing on August 1, 2025, and continuing on the first day of each calendar month thereafter, in an amount equal to $125,000 per month, until the Eclipse Incremental Advance has been reduced to $0. In addition, we are required to pay an unused line fee of 0.5% of the average unused portion of the maximum Eclipse Revolving Loan amount during the immediately preceding month. The ability to make borrowings and obtain advances of the Eclipse Revolving Loan remains subject to a borrowing base and reserve, and availability blockage requirements and the maturity date, as amended, is June 12, 2029. Please refer to Note 10 - Revolving Credit Facility and Note 11 - Debt in Part I, Item 1 of this Form 10-Q for further information.

Cash Flows

The following table shows cash flows for the three months ended September 30, 2025, and 2024:

		Three Months Ended September 30,
		2025				2024				Change
		(in thousands)
Net cash used in operating activities		$	(618	)		$	(1,190	)		$	572
Net cash provided by investing activities		$	-			$	381			$	(381	)
Net cash provided by financing activities		$	2,296			$	911			$	1,385

Net Cash Used in Operating Activities

Net cash used in operating activities during these periods primarily reflects our net income from continuing operations, partially offset by cash provided by discontinued operations and changes in working capital and non-cash charges including stock-based compensation expense, derivative warrant liabilities gain or loss, depreciation and amortization, and other charges.

During the three months ended September 30, 2025, net cash used in operating activities totaled $0.6 million, which was primarily the result of an increase in accounts receivable, net and a decrease in accrued liabilities as well as negative cash earnings (derivative warrant liabilities adjustment partially offset by net income of $2.0 million, non-cash depreciation and amortization, stock-based compensation expense, and inventory write-down), partially offset by a decrease in inventories and an increase in accounts payable.

During the three months ended September 30, 2024, net cash used in operating activities totaled $1.2 million. The use of cash was primarily the result of the decrease in accounts receivable, net; inventories; prepaid expenses and other assets; other accrued liabilities; and accrued liabilities, partially offset by positive cash earnings (net income of $1.5 million offset by non-cash depreciation and amortization, derivative warrant liabilities adjustment, and stock compensation expense). Additionally, these were partially offset by an increase in accounts payable.

Net Cash Provided by Investing Activities

There was no net cash provided by or used in investing activities during the three months ended September 30, 2025. Net cash provided by investing activities for the three months ended September 30, 2024, were driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases.

Net Cash Provided by Financing Activities

Net cash provided by financing activities of $2.3 million during the three months ended September 30, 2025, was primarily from $5.8 million of net proceeds from our Eclipse Revolving Loan, partially offset by $3.1 million of payments for fixed payment arrangements and $0.5 million of payments made against the principal balance of our Eclipse Term Loan.

Net cash provided by financing activities of $0.9 million during the three months ended September 30, 2024, was primarily from net proceeds received from our Eclipse Revolving Loan, partially offset by payments made to fixed payment arrangements and payments made against borrowings.

Contractual Obligations, Commitments and Contingencies

As a result of our acquisitions, exclusive commercialization agreement, and licensing agreements, we are contractually and contingently obliged to pay, when due, various fixed and contingent milestone payments. See Note 13 - Commitments and Contingencies in Part I, Item 1 of this Form 10-Q for further information.

In May 2022, we entered into an agreement with Tris to terminate the License, Development, Manufacturing and Supply Agreement dated November 2, 2018, related to Tuzistra (the "Tuzistra License Agreement"). Pursuant to such termination we accrued a settlement liability, which was paid in full during the first quarter of fiscal 2026.

Upon closing of the acquisition of a line of prescription pediatric products from Cerecor, Inc. in October 2019, we assumed payment obligations that required us to make fixed and product milestone payments. As of September 30, 2025, we had no remaining fixed payment arrangement accruals recorded in our unaudited consolidated balance sheet.

In connection with our suspension of active development of AR101 (enzastaurin) ("AR101"), we engaged in negotiations with EnzCo, LLC ("EnzCo") and Rumpus VEDS LLC, ("Rumpus VEDS"), Rumpus Therapeutics LLC, ("Rumpus Therapeutics") and Rumpus Vascular LLC, ("Rumpus Vascular" and, together with Rumpus VEDS and Rumpus Therapeutics, "Rumpus") for the repurchase of AR101. In the first quarter of fiscal 2026, we reached terms with Rumpus and EnzCo whereby for mutual consideration and releases, we transferred all of ours and Rumpus' rights, title and interest in AR101 to EnzCo, which extinguished and terminated all of our obligations and Rumpus' obligations under the April 21, 2021, asset purchase agreement by and between us and Rumpus (the "Rumpus Asset Purchase Agreement"). There is no other relationship between us, EnzCo or Rumpus other than as contracting parties to terminate the Rumpus Asset Purchase Agreement, and there are no penalties or remaining obligations for us for terminating the Rumpus Asset Purchase Agreement.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed discussion about our critical accounting estimates, refer to our 2025 Form 10-K.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.