Note 12 - Fair Value Considerations

6 Months Ended

Dec. 31, 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  December 31, 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  December 31, 2024, and June 30, 2024, by level within the fair value hierarchy as follows:

	Fair Value at December 31,		Fair Value Measurements at December 31, 2024
	2024		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Liabilities:
Derivative warrant liabilities	$	6,386	$	—	$	—	$	6,386
Total	$	6,386	$	—	$	—	$	6,386

		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 is as follows:

	Derivative
	Warrant Liabilities
	(in thousands)
Balance as of June 30, 2024	$	12,745
Settlements (1)		(463	)
Included in earnings		(5,896	)
Balance as of December 31, 2024	$	6,386

⁽¹⁾  Relates to the exercise of 176,000 of the Tranche B Pre-Funded Warrants during the first quarter of fiscal 2025, 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 December 31, 2024, are as follows:

	June 2023 Warrants	Warrants
	Tranche A	Other (1)
	Monte Carlo &
	Black-Scholes	Black-Scholes
Aytu closing stock price	$ 1.70	$ 1.70
Equivalent term (years)	3.4	2.1-2.7
Expected volatility	80.8%	74.7%-80.5%
Risk-free rate	4.3%	4.3%
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.