VERU INC

Note1 – Basis of Presentation and Significant Accounting Policies

The accompanying unaudited interim condensed consolidated financial statements for Veru Inc. (“we,” “our,” “us,” “Veru” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting of interim financial information. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the informationnot misleading. Accordingly, these statements donot include all the disclosures normally required by U.S. GAAP for annual financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the audited financial statements and notes thereto included in our Annual Report on Form10-K for the fiscal year ended* September 30, 2023*. The accompanying condensed consolidated balance sheet as of* September 30, 2023* has been derived from our audited financial statements. The unaudited condensed consolidated statements of operations and cash flows for thethree andnine months ended* June 30, 2024* arenot necessarily indicative of the results to be expected for any future period or for the fiscal year ending* September 30, 2024*.

The preparation of our unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of only normally recurring adjustments) necessary to present fairly the financial position and results of operations as of the dates and for the periods presented.

Principles of consolidation and nature of operations: Veru Inc. is referred to in these notes collectively with its subsidiaries as “we,” “our,” “us,” “Veru” or the “Company.” The consolidated financial statements include the accounts of Veru and its wholly owned subsidiaries, Veru International Holdco Inc., Aspen Park Pharmaceuticals, Inc. (APP) and The Female Health Company Limited; The Female Health Company Limited’s wholly owned subsidiary, The Female Health Company (UK) plc (The Female Health Company Limited and The Female Health Company (UK) plc, collectively, the “U.K. subsidiary”); The Female Health Company (UK) plc’s wholly owned subsidiary, The Female Health Company (M) SDN.BHD (the “Malaysia subsidiary”); and Veru International Holdco Inc.’s wholly owned subsidiaries, Veru Biopharma UK Limited, Veru Biopharma Europe Limited, and Veru Biopharma Netherlands B.V. All significant intercompany transactions and accounts have been eliminated in consolidation. The Company is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of metabolic diseases (obesity), oncology, and acute respiratory distress syndrome (ARDS). Our drug development program includes enobosarm, a selective androgen receptor modulator, to augment fat loss and to prevent muscle loss, in combination with weight loss drugs, and for the management of advanced breast cancer and sabizabulin, a microtubule disruptor, for the treatment of hospitalized patients with viral induced ARDS. The Company also has theFC2 FemaleCondom/FC2 Internal Condom® (FC2), an FDA-approved commercial product for the dual protection against unplanned pregnancy and sexually transmitted infections. The Company had ENTADFI® (finasteride and tadalafil) capsules for oral use (ENTADFI), a new treatment for benign prostatic hyperplasia that was approved by the FDA in* December 2021.We sold substantially all of the assets related to ENTADFI on April**19,* 2023. See Note15 for additional information. Most of the Company’s net revenues during thethree andnine months ended* June 30, 2024and2023* were derived from sales ofFC2.

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Restatement: In connection with the preparation of its unaudited condensed consolidated financial statements for thethree months ended* December 31, 2023,the Company identified errors related to the accounting for research and development expenses associated with the Company’s projects withthird*-party service providers. The Company inaccurately estimated the work completed by thethird-party service providers. Refer to AmendmentNo. 1 to the Company’s Annual Report on Form10-K/A for the fiscal year ended* September30,* 2023, filed with the SEC on* April1,* 2024 for more information regarding the restatement of the consolidated financial statements for the fiscal years ended* September**30,* 2023 and2022. Due to the inaccurate estimation of the work completed bythird-party service providers, the Company understated its operating expenses for research and development for thethree andnine months ended* June 30, 2023.As a result, this report reflects a restatement of the Company’s interim financial statements as of June 30, 2023and for thethree* andnine months ended* June 30, 2023.*

A summary of the impact of the error on the unaudited condensed consolidated balance sheet as of* June 30, 2023*is as follows:

A summary of the impact of the error on the unaudited condensed consolidated statements of operations for thethree andnine months ended* June 30, 2023*is as follows:

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With respect to the unaudited condensed consolidated statement of cash flows, all adjustments are to line items within operating cash flows and there wasno impact to the subtotal of operating, investing, or financing cash flows for each period. A summary of the impact of the error on the unaudited condensed consolidated statement of cash flows for thenine months ended* June 30, 2023*is as follows:

Investments in equity securities: Investments in equity securities consist of 3,000 shares of Series A Convertible Preferred Stock (the “BWV Preferred Stock”) of Onconetix, Inc., formerly known as Blue Water Vaccines Inc. (“BWV”). The Company has elected to measure the BWV Preferred Stock using the fair value option, as provided for by FASB Accounting Standards Codification (ASC)825, Financial Instruments, which allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Under the fair value option, related gains and losses on the financial instrument will be reflected in non-operating income (expenses) in the Company’s statements of operations. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. Pursuant to this guidance, the carrying value will be adjusted to estimated fair value at the end of each quarter.

Other comprehensive loss: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net loss. Although certain changes in assets and liabilities, such as foreign currency translation adjustments, are reported as a separate component of the equity section of the accompanying unaudited condensed consolidated balance sheets, these items, along with net loss, are components of other comprehensive loss. For thethree andnine months ended* June 30, 2024and2023*, comprehensive loss is equivalent to the reported net loss.

Recent accounting pronouncementsnot yet adopted: In* November 2023,the FASB issued Accounting Standards Update (ASU)2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU2023-07 are also required for public entities with a single reportable segment. The ASU is effective for the Company’s annual periods for the fiscal year ended* September 30, 2025,*and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning fiscal year ended* September**30,* 2026, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

We have reviewed all other recently issued accounting pronouncements and have determined that such standards that arenot yet effective willnot have a material impact on our financial statements or donot otherwise apply to our operations.

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Note2 – Liquidity

The Company anticipates that we will continue to consume cash and incur losses as we develop and commercialize our drug candidates. Because of the numerous risks and uncertainties associated with the development of pharmaceutical products, the Company is unable to estimate the exact amounts of capital outlays and operating expenditures necessary to fund development of our drug candidates and obtain regulatory approvals. The Company’s future capital requirements will depend on many factors.

The Company believes its current cash position and cash expected to be generated from sales ofFC2 will be adequate to fund planned operations of the Company for the next12 months. To the extent the Company* mayneed additional capital for its operations or the conditions for raising capital are favorable, the Company mayaccess financing alternatives that mayinclude debt financing, common stock offerings, or financing involving convertible debt or other equity-linked securities and mayinclude financings under the Company’s current effective shelf registration statement on Form S-3 (FileNo.* 333-270606) (the “Current Shelf Registration Statement”) or under a new registration statement. The Company intends to be opportunistic when pursuing equity or debt financing, which could include selling common stock under its common stock purchase agreement with Lincoln Park Capital Fund, LLC (see Note9) or its open market sale agreement with Jefferies LLC (see Note9) to the extent sales* maybe made pursuant to such agreement. As a result of the Company’s failure to timely file the Quarterly Report on Form10*-Q for the quarter ended* December31,* 2023 and a Current Report on Form8-K that was due on* February27,* 2024, the Company is ineligible to file new registration statements on Form S-3 untilno earlier than* March 1, 2025.If the Company seeks to access the capital markets through a registered offering pursuant to a new registration statement on Form S-1, the Company would be required to disclose the proposed offering and the material terms thereof before the offering commences. As a result of such disclosure and potential for SEC review of such registration statement on Form S-1, the Company mayexperience delays in the offering process and it mayincur increased offering and transaction costs and other impediments to such an offering. If the Company was unable to raise capital through a registered offering, it maybe required to raise capital on a private placement basis, which maybe subject to pricing, size and other limitations imposed under NASDAQ rules, or seek other sources of capital. While the Company believes it will be able to continue to use the Current Shelf Registration Statement until it files its Annual Report on Form10*-K for the year ending* September30,* 2024, the Company’s failure to timely file the Quarterly Report on Form10-Q for the quarter ended* December31,* 2023 and the Form8-K* mayimpair its ability to conduct an underwritten or other offering under the Current Shelf Registration Statement, and as a result of this filing delinquency the Company isnot* in compliance with a provision of the open market sale agreement with Jefferies LLC, which would prevent the Company from making additional sales under such agreement unless such non-compliance is waived. Between the time the Company files its Annual Report on Form10-K for the year ending* September**30,* 2024 and at least* March 1, 2025,the Company willnot* be able to sell any securities pursuant to the Current Shelf Registration Statement, including under its common stock purchase agreement with Lincoln Park Capital Fund, LLC.

Note3 – Fair Value Measurements

ASC820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level1 measurement) and the lowest priority to unobservable inputs (Level3 measurement).

Thethree levels of the fair value hierarchy are as follows:

Level1 – Quoted prices for identical instruments in active markets.

Level2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that arenot active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level3 – Instruments with primarily unobservable value drivers.

As of* June 30, 2024* and* September 30, 2023*, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, were classified within Level3 of the fair value hierarchy.

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The following table provides a reconciliation of the beginning and ending liability balance associated with embedded derivatives measured at fair value using significant unobservable inputs (Level3) as of* June 30, 2024and2023*:

The gain associated with the change in fair value of the embedded derivatives is included as a separate line item on the accompanying unaudited condensed consolidated statements of operations.

The liabilities associated with embedded derivatives represent the fair value of the change of control provision in the Residual Royalty Agreement. See Note8 for additional information. There isno current observable market for these types of derivatives. The Company estimates the fair value of the embedded derivative within the Residual Royalty Agreement by using a scenario-based method, whereby different scenarios are valued and probability weighted. The scenario-based valuation model incorporates transaction details such as the contractual terms of the instrument and assumptions including projectedFC2 revenues, expected cash outflows, probability and estimated dates of a change of control, risk-free interest rates and applicable credit risk. A significant increase in projectedFC2 revenues or a significant increase in the probability or acceleration of the timing of a change of control event, in isolation, would result in a significantly higher fair value measurement of the liability associated with the embedded derivative.

The following tables present quantitative information about the inputs and valuation methodologies used to determine the fair value of the embedded derivatives classified in Level3 of the fair value hierarchy as of* June 30, 2024* and* September 30, 2023*:

The Company also has an investment in equity securities consisting of the BWV Preferred Stock. The BWV Preferred Stock was received on* October3,* 2023 as a settlement of the receivable due on* September30,* 2023 related to the sale of ENTADFI. See Note15 for additional information. The Company has elected to measure the BWV Preferred Stock at fair value in accordance with ASC825. The investment in the BWV Preferred Stock is classified within Level3 of the fair value hierarchy because there isno market for the BWV Preferred Stock and the fair value is determined using significant unobservable inputs. The fair value of the BWV Preferred Stock has been determined using a probability-weighted bond plus call option model, which incorporates the stock price of BWV on the valuation date, expected volatility, expected term, and an applicable discount rate. The Company has also applied a discount for lack of marketability due to the fact that there isno market for the preferred stock and a probability of dissolution. The following table summarizes the significant unobservable inputs used in the bond plus call model as of* October 3, 2023 (the date the shares of BWV Preferred Stock were received and initially recognized) and as of June 30, 2024*:

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Estimating the fair value of the shares of BWV Preferred Stock requires the use of estimates and judgments. Changes in estimates and judgments could result in a significant change in estimate of the fair value and future adjustments.

The following table provides a reconciliation of the beginning and ending balance associated with the BWV Preferred Stock measured at fair value for thenine months ended* June 30, 2024*, which is presented as investments in equity securities on the accompanying unaudited condensed consolidated balance sheet:

Note4 – Revenue from Contracts with Customers

The Company generates all its revenue from direct product sales. Revenue from direct product sales is generally recognized when the customer obtains control of the product, which occurs at a point in time, and* may*be upon shipment or upon delivery based on the contractual shipping terms of a contract. Sales taxes and other similar taxes that the Company collects concurrent with revenue-producing activities are excluded from revenue.

The amount of consideration the Company ultimately receives varies depending upon sales discounts, and other incentives that the Company* mayoffer, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The estimate of variable consideration requires significant judgment. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized willnot* occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely upon an assessment of current contract sales terms and historical payment experience.

Product returns are typicallynot significant because returns are generallynot allowed unless the product is damaged at time of receipt.

The Company’s revenue is from sales ofFC2 in the U.S. prescription channel and direct sales ofFC2 in the global public health sector, and also included sales of ENTADFI for thethree andnine months ended* June 30, 2023.The following table presents net revenues from thesethree* categories:

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The following table presents net revenues by geographic area:

Less than10%* of total net revenues

The Company’s performance obligations consist mainly of transferring control of products identified in the contracts which occurs either when: i) the product is made available to the customer for shipment; ii) the product is shipped via common carrier; or iii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. Some of the Company’s contracts require the customer to make advanced payments prior to transferring control of the products. These advanced payments create a contract liability for the Company. The balances of the Company’s contract liability, included in accrued expenses and other current liabilities on the accompanying unaudited condensed consolidated balance sheets, were approximately $333,000 and $105,000 at* June 30, 2024* and* September 30, 2023*, respectively.

Note5 – Accounts Receivable and Concentration of Credit Risk

The Company's standard credit terms vary from30 to120 days, depending on the class of trade and customary terms within a territory, so accounts receivable are affected by the mix of purchasers within the period. As is typical in the Company's business, extended credit terms* mayoccasionally be offered as a sales promotion or for certain sales. For sales to the Company’s distributor in Brazil, the Company has agreed to credit terms of up to90* days subsequent to clearance of the product by the Ministry of Health in Brazil.

The components of accounts receivable consisted of the following at* June 30, 2024* and* September 30, 2023*:

At* June 30, 2024* and at* September 30, 2023*, no customers had a current accounts receivable balance that represented greater than10% of current assets.

At* June 30, 2024*, four customers had an accounts receivable balance greater than10% of net accounts receivable, representing 67% of net accounts receivable in the aggregate. At* September 30, 2023*, three customers had an accounts receivable balance greater than10% of net accounts receivable, representing 71% of net accounts receivable in the aggregate.

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For thethree months ended* June 30, 2024*, there were three customers whose individual net revenue to the Company exceeded10% of the Company’s net revenues, representing 71% of the Company’s net revenues in the aggregate. For thethree months ended* June 30, 2023*, there were five customers whose individual net revenue to the Company exceeded10% of the Company’s net revenues, representing 79% of the Company’s net revenues in the aggregate.

For thenine months ended* June 30, 2024*, there were three customers whose individual net revenue to the Company exceeded10% of the Company’s net revenues, representing 56% of the Company’s net revenues in the aggregate. For thenine months ended* June 30, 2023*, there weretwo customers whose individual net revenue to the Company exceeded10% of the Company’s net revenues, representing 56% of the Company’s net revenues in the aggregate, including The Pill Club that represented 31% of the Company’s net revenues in the aggregate.

The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments on accounts receivable. Management determines the allowance for credit losses by identifying troubled accounts and by using historical experience applied to an aging of accounts. Management also periodically evaluates individual customer receivables and considers a customer’s financial condition, credit history, and the current economic conditions. In the case of a bankruptcy filing or other similar event indicating the collectability of specific customer accounts isno longer probable, a specific allowance for credit losses* maybe recorded to reduce the related receivable to the amount expected to be recovered. Accounts receivable are charged-off when deemed uncollectible. The Company has an allowance for credit losses of $3.9 million related to the total amount of receivables due from The Pill Club due to The Pill Club’s Chapter11* bankruptcy, filed on* April18,* 2023, which was recorded during thenine months ended* June30,* 2023. The Company has an open claim with The Pill Club bankruptcy estate for these receivables but the timing and amount of recovery, if any, are unknown at this time.

The table below summarizes the change in the allowance for credit losses for thenine months ended* June 30, 2024and2023*:

Recoveries of accounts receivable previously charged off are recorded when received. In the global public health sector, the Company’s customers are primarily large global agencies, non-government organizations, ministries of health and other governmental agencies, which purchase and distributeFC2 for use in HIV/AIDS prevention and family planning programs. In the U.S. prescription channel, the Company’s customers include primarily telehealth providers.

Note6 – Balance Sheet Information

Inventories

Inventories are valued at the lower of cost or net realizable value. The cost is determined using thefirst-in,first-out (FIFO) method. Inventories are also written down for management’s estimates of product which willnot sell prior to its expiration date. Write-downs of inventories establish a new cost basis which isnot increased for future increases in the net realizable value of inventories or changes in estimated obsolescence.

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Inventories consisted of the following at* June 30, 2024* and* September 30, 2023*:

Fixed Assets

We record equipment, furniture and fixtures, and leasehold improvements at historical cost. Expenditures for maintenance and repairs are recorded to expense. Depreciation and amortization are primarily computed using the straight-line method. Depreciation and amortization are computed over the estimated useful lives of the respective assets. Leasehold improvements are depreciated on a straight-line basis over the lesser of the remaining lease term or the estimated useful lives of the improvements.

Plant and equipment consisted of the following at* June 30, 2024* and* September 30, 2023*:

Depreciation expense was approximately $65,000 and $53,000 for thethree months ended* June 30, 2024and2023*, respectively and approximately $197,000 and $146,000 for thenine months ended* June 30, 2024and2023*, respectively. Plant and equipment included $233,000 and $214,000 at* June 30, 2024* and* September 30, 2023*, respectively, for deposits on equipment, furniture, and leasehold improvements, which havenot been placed into service; therefore, the Company hasnot started to record depreciation expense.

Note7 – Goodwill

The carrying amount of goodwill at* June 30, 2024* and* September 30, 2023* was $6.9 million. There wasno change in the balance during thenine months ended* June 30, 2024and2023*.

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Note8 – Debt

SWK Residual Royalty Agreement

On* March5,* 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction. On and subject to the terms of the Credit Agreement, the Lenders provided the Company with a term loan of $10.0 million, which was advanced to the Company on the date of the Credit Agreement. The Company repaid the loan and return premium specified in the Credit Agreement in* August2021,* and as a result hasno further obligations under the Credit Agreement. The Agent has released its security interest in Company collateral previously pledged to secure its obligations under the Credit Agreement.

In connection with the Credit Agreement, the Company and the Agent also entered into a Residual Royalty Agreement, dated as of* March**5,* 2018 (as amended, the “Residual Royalty Agreement”), which provides for an ongoing royalty payment of 5% of product revenue from net sales ofFC2. The Residual Royalty Agreement will terminate upon (i) a change of control or sale of theFC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Residual Royalty Agreement, or (ii) mutual agreement of the parties. If a change of control or sale of theFC2 business occurs, the Agent will receive a payment that is the greater of (A) $2.0 million or (B) the product of (x)5% of the product revenue from net sales ofFC2 for the most recently completed12-month period multiplied by (y) five.

For accounting purposes, the $10.0 million advance under the Credit Agreement was allocated between the Credit Agreement and the Residual Royalty Agreement on a relative fair value basis. A portion of the amount allocated to the Residual Royalty Agreement, equal to the fair value of the respective change of control provisions, was allocated to an embedded derivative liability. The derivative liability is adjusted to fair market value at each reporting period.

At* June 30, 2024* and* September 30, 2023*, the Residual Royalty Agreement liability consisted of the following:

As the Company has repaid the original principal of $10.0 million advanced in connection with the Credit Agreement and the Residual Royalty Agreement, payments under the Residual Royalty Agreement are classified as interest payments and included in operating activities on the accompanying unaudited condensed consolidated statements of cash flows. The short-term portion of the Residual Royalty Agreement liability represents the aggregate of the estimated quarterly payments on the Residual Royalty Agreement payable during the12-month period subsequent to the balance sheet date.

Interest expense on the accompanying unaudited condensed consolidated statements of operations relates to the accretion of the liability for the Residual Royalty Agreement. The accretion of the liability is based on projectedFC2 revenues.

Premium Finance Agreement

On* November 1, 2022,the Company entered into a Premium Finance Agreement to finance $1.4 million of its directors and officers liability insurance premium at an annual percentage rate of 6.3%. The financing is payable ineleven* monthly installments of principal and interest, beginning on* December**1,* 2022. The balance of the insurance premium liability was $0.1 million as of* September 30, 2023* and was included in accrued expenses and other current liabilities on the accompanying unaudited condensed consolidated balance sheet. The last payment was made in* October 2023and there isno balance outstanding as of June 30, 2024*.

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Note9 – Stockholders’** Equity**

Preferred Stock

The Company has 5,000,000 authorized shares designated as Class A Preferred Stock with a par value of $0.01 per share. There are 1,040,000 shares of Class A Preferred Stock – Series1 authorized;1,500,000 shares of Class A Preferred Stock – Series2 authorized;700,000 shares of Class A Preferred Stock – Series3 authorized; and 548,000 shares of Class A Preferred Stock – Series4 (the “Series4 Preferred Stock”) authorized. There wereno shares of Class A Preferred Stock of any series issued and outstanding at* June 30, 2024* and* September 30, 2023*. The Company has 15,000 authorized shares designated as Class B Preferred Stock with a par value of $0.50 per share. There wereno shares of Class B Preferred Stock issued and outstanding at* June 30, 2024* and* September 30, 2023*, and there wasno activity during thethree andnine months ended* June 30, 2024and2023*.

Shelf Registration Statement

In* March2023,* the Company filed a shelf registration statement on Form S-3 (FileNo. 333-270606) with a capacity of $200 million, which was declared effective by the SEC on* April14,* 2023. As of* June 30, 2024*, $35.1 million remains available under that shelf registration statement. The Company’s failure to timely file the Quarterly Report on Form10-Q for the quarter ended* December31,* 2023 and a Current Report on Form8-K that was due on* February27,* 2024 * mayimpair its ability to raise capital under the Company’s current effective shelf registration statement on Form S-3 (FileNo.* 333-270606). See Part II, Item1A, “Risk Factors.”

Common Stock Offering

On* December**18,* 2023, we completed an underwritten public offering of 52,708,332 shares of our common stock, which included the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $0.72 per share. Net proceeds to the Company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the Company. All of the shares sold in the offering were by the Company. The offering was made pursuant to the Company’s shelf registration statement on Form S-3 (FileNo. 333-270606).

Lincoln Park Capital Fund LLC Purchase Agreement

On* May2,* 2023, the Company entered into a purchase agreement (as amended, the “Lincoln Park Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company* maysell to Lincoln Park up to $100.0 million of shares (the “Purchase Shares”) of the Company’s common stock over the 36 month term of the Lincoln Park Purchase Agreement. The Lincoln Park Purchase Agreement maybe terminated by the Company at any time, at its sole discretion, without any cost or penalty, by givingone* business day notice to Lincoln Park. Lincoln Park has covenantednot to in any manner whatsoever enter into or effect, directly or indirectly, any short selling or hedging of the Company’s common stock. On* December13,* 2023, the Company entered into an amendment (the “Lincoln Park Amendment”) with Lincoln Park to reduce the amount of shares of common stock subject to the registration from $100.0 million to $50.0 million until the Company has sold at least $50.0 million of shares of common stock under the Lincoln Park Purchase Agreement. The issuance of shares of common stock pursuant to the Lincoln Park Purchase Agreement up to $50.0 million have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (FileNo. 333-270606), and a related prospectus supplement that was filed with the SEC on* May3,* 2023, as further supplemented on* December13,* 2023 to reflect the Lincoln Park Amendment.

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Under the Lincoln Park Purchase Agreement, the Company has the right, butnot the obligation, on any business day selected by the Company (the “Purchase Date”), provided that on such day the closing sale price per share of the Company’s common stock isnot below $0.25 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Lincoln Park Purchase Agreement), to require Lincoln Park to purchase up to 225,000 shares of the Company’s common stock (the “Regular Purchase Amount”) at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”) provided, however, that (1) the limit on the Regular Purchase Amount will be increased to 250,000 shares, if the closing sale price of the Company’s common stock on the applicable Purchase Date isnot below $6.00 and to 275,000 shares, if the closing sale price of the Company’s common stock on the applicable Purchase Date isnot below $8.00. Lincoln Park’s committed obligation under each Regular Purchase shallnot exceed $2,500,000 or 2,000,000 Purchase Shares per each Regular Purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to the lesser of: (i) the lowest sale price of the Company’s common stock during the Purchase Date, or (ii) the average of thethree lowest closing sale prices of the Company’s common stock on the10 consecutive business days ending on the business day immediately preceding such Purchase Date. The Company shall have the right to submit a Regular Purchase notice to Lincoln Park as often as every business day. A Regular Purchase notice is delivered to Lincoln Park after the market has closed (i.e., after4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time the Company elects to sell shares to Lincoln Park.

In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion* mayrequire Lincoln Park on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i)three times the number of shares purchased pursuant to such Regular Purchase or (ii)30% of the trading volume on the Accelerated Purchase Date (the “Accelerated Purchase”) at a purchase price equal to the lesser of 97% of (i) the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”). The Company may*also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Lincoln Park Purchase Agreement, to make additional purchases upon the same terms as an Accelerated Purchase (an “Additional Accelerated Purchase”).

The purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the Lincoln Park Purchase Agreement* mayinno* case exceed 17,678,502 shares (subject to adjustment as described above) of the Company’s common stock (which is equal to approximately 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the Lincoln Park Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap willno longer apply, or (ii) the average price of all applicable sales of the Company’s common stock to Lincoln Park under the Lincoln Park Purchase Agreement equals or exceeds $1.26 per share (subject to adjustment as described above) (which represents the Minimum Price, as defined under Nasdaq Listing Rule5635(d), on the Nasdaq Capital Market immediately preceding the signing of the Lincoln Park Purchase Agreement, such that the transactions contemplated by the Lincoln Park Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules).

During thenine months ended* June 30, 2024*, we sold 1,800,000 shares of common stock to Lincoln Park resulting in proceeds to the Company of $1.7 million. As a result of these sales, we recorded approximately $164,000 of deferred costs to additional paid-in capital. Since inception of the Lincoln Park Purchase Agreement through* June 30, 2024*, we have sold 3,025,000 shares of common stock to Lincoln Park resulting in proceeds to the Company of $3.1 million.

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In consideration for entering into the Lincoln Park Purchase Agreement, concurrently with the execution of the Lincoln Park Purchase Agreement, the Company issued 800,000 shares of the Company’s common stock to Lincoln Park. The shares of common stock issued as consideration were valued at $1.0 million, based on the closing price per share of the Company’s common stock on the date the shares were issued. This amount and related expenses of $57,000, which total approximately $1.1 million, were recorded as deferred costs. The unamortized deferred costs related to the Lincoln Park Purchase Agreement of $870,000 and $1.0 million as of* June 30, 2024* and* September 30, 2023*, respectively, are included in other assets on the accompanying unaudited condensed consolidated balance sheets.

At-the-Market Sale Agreement

On* May 12, 2023,the Company entered into an Open Market Sale Agreement℠ (the “Jefferies Sales Agreement”) with Jefferies LLC (“Jefferies”), as sales agent, pursuant to which the Company mayissue and sell, from time to time, through Jefferies, shares of the Company’s common stock, with an aggregate value of up to $75 million (not to exceed the lesser of 39,609,072 shares of common stock or the number of authorized, unissued and available shares of common stock at any time). Shares of common stock offered and sold pursuant to the Jefferies Sale Agreement have been registered pursuant to the Company’s effective shelf registration statement on Form S-3 (FileNo.* 333-270606), and a related prospectus supplement that was filed with the SEC on* May 12, 2023.*The Company will pay Jefferies a commission of 3% of the aggregate gross proceeds from each sale of common stock. The Company incurred issuance costs of $207,000, which were recorded as deferred costs.

During thenine months ended* June 30, 2024*, we sold 90,156 shares of common stock under the Jefferies Sales Agreement resulting in net proceeds to the Company of $67,000. Since inception of the Jefferies Sales Agreement through* June 30, 2024*, we have sold 1,367,415 shares of common stock resulting in net proceeds to the Company of $1.1 million. The unamortized deferred costs related to the Jefferies Sales Agreement of $204,000 as of* June 30, 2024* and* September 30, 2023* are included in other assets on the accompanying unaudited condensed consolidated balance sheets.

As a result of the Company’s failure to timely file the Quarterly Report on Form10-Q for the quarter ended* December31,* 2023 and a Current Report on Form8-K that was due on* February27,* 2024, the Company isnot in compliance with a provision of the Jefferies Sales Agreement, which would prevent it from making additional sales under the Jefferies Sales Agreement unless such non-compliance is waived.

Note10 – Share-based Compensation

We allocate share-based compensation expense to cost of sales, selling, general and administrative expense, and research and development expense based on the award holder’s employment function. For thethree andnine months ended* June 30, 2024and2023*, we recorded share-based compensation expenses as follows:

We have issued share-based awards to employees and non-executive directors under the Company’s approved equity plans. Upon the exercise of share-based awards, new shares are issued from authorized common stock.

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Equity Plans

In* June 2022,the Company’s board of directors adopted the Company’s2022* Employment Inducement Equity Incentive Plan (the “Inducement Plan”). The Inducement Plan is a non-shareholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Inducement Plan is used exclusively for the issuance of equity awards to certain new hires who satisfied the requirements to be granted inducement grants under Nasdaq rules as an inducement material to the individual’s entry into employment with the Company. The Company reserved 4.0 million shares of common stock under the Inducement Plan and as of* June 30, 2024*,3,967,083 shares remain available for issuance under the Inducement Plan.

In* March 2018,the Company’s stockholders approved the Company's2018* Equity Incentive Plan (as amended, the*“2018* Plan”). On* March**29,* 2022, the Company’s stockholders approved an increase in the number of shares that* maybe issued under the2018* Plan to 18.5 million. As of* June 30, 2024*,1,685,939 shares remain available for issuance under the2018 Plan.

In* July 2017,the Company’s stockholders approved the Company's2017* Equity Incentive Plan (the*“2017* Plan”). A total of 4.7 million shares are authorized for issuance under the2017 Plan. As of* June 30, 2024*,8,405 shares remain available for issuance under the2017 Plan. The2017 Plan replaced the Company's2008 Stock Incentive Plan (the*“2008* Plan”), andno further awards will be made under the2008 Plan.

Stock Options

Each option grants the holder the right to purchase from usone share of our common stock at a specified price, which is generally the closing price per share of our common stock on the date the option is issued. Options generally vest on a pro-rata basis on each anniversary of the issuance date within three years of the date the option is issued. Options* maybe exercised after they have vested and prior to the specified expiry date provided applicable exercise conditions are met, if any. The expiry date can be for periods of up toten years from the date the option is issued. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions established at that time. The Company accounts for forfeitures as they occur and doesnot* estimate forfeitures as of the option grant date. The Company recognized a reduction in share-based compensation expense for stock options forfeited during the period of $0.2 million and $0.3 million during thethree months ended* June 30, 2024and2023*, respectively, and $1.5 million and $1.8 million during thenine months ended* June 30, 2024and2023*, respectively.

The following table outlines the weighted average assumptions for options granted during thethree andnine months ended* June 30, 2024and2023*:

During thethree andnine months ended* June 30, 2024and2023*, the Company used historical volatility of our common stock over a period equal to the expected life of the options to estimate their fair value. The dividend yield assumption is based on the Company’s recent history and expectation of future dividend payouts on the common stock. The risk-free interest rate is based on the implied yield available on U.S. treasuryzero-coupon issues with an equivalent remaining term.

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The following table summarizes the stock options outstanding and exercisable at* June 30, 2024*:

The aggregate intrinsic values in the table above are before income taxes and represent the number of in-the-money options outstanding or exercisable multiplied by the closing price per share of the Company’s common stock on the last trading day of the quarter ended* June 30, 2024* of $0.84, less the respective weighted average exercise price per share at period end.

The total intrinsic value of options exercised during thenine months ended* June 30, 2024and2023* was approximately $200 and $486,000, respectively. Cash received from options exercised during thenine months ended* June 30, 2024and2023* was approximately$3,280 and $336,610, respectively.

As of* June 30, 2024*, the Company had unrecognized compensation expense of approximately $15.7 million related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.8 years.

Stock Appreciation Rights

In connection with the closing of our acquisition of Aspen Park Pharmaceuticals, Inc. on* October31,* 2016 (the “APP Acquisition”), the Company issued stock appreciation rights based on 50,000 and 140,000 shares of the Company’s common stock to an employee and an outside director, respectively, that vested on* October31,* 2018. The stock appreciation rights have aten-year term and an exercise price per share of $0.95, which was the closing price per share of the Company’s common stock as quoted on Nasdaq on the trading day immediately preceding the date of the completion of the APP Acquisition. Upon exercise, the stock appreciation rights will be settled in common stock issued under the2017 Plan. As of* June 30, 2024*, vested stock appreciation rights based on 50,000 shares of common stock remain outstanding.

Note11 – Leases

The Company has operating leases for its office, manufacturing and warehouse space, and office equipment. The Company’s leases have remaining lease terms of less thantwo years to less thansix years. Certain of our lease agreements include variable lease payments for common area maintenance, real estate taxes, and insurance or based on usage for certain equipment leases. Forone of our office space leases, the Company entered into a sublease, for which it received sublease income. Sublease income was recognized as a reduction to operating lease costs as the sublease is outside of the Company’s normal business operations. This lease, and the related sublease, terminated on* October**31,* 2023 and willnot be renewed. The Company doesnot have any leases that havenot yet commenced as of* June 30, 2024*.

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The components of the Company’s lease cost were as follows for thethree andnine months ended* June 30, 2024and2023*:

The Company paid cash of $797,000 and $777,000 for amounts included in the measurement of operating lease liabilities during thenine months ended* June 30, 2024and2023*, respectively.

The Company’s operating lease right-of-use assets and the related lease liabilities are presented as separate line items on the accompanying unaudited condensed consolidated balance sheets as of* June 30, 2024* and* September 30, 2023*.

Other information related to the Company’s leases as of* June 30, 2024* and* September 30, 2023* was as follows:

The Company’s lease agreements donot provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value.

Note12 – Contingent Liabilities

The testing, manufacturing and marketing of consumer products by the Company and the clinical testing of our product candidates entail an inherent risk that product liability claims will be asserted against the Company. The Company maintains product liability insurance coverage for claims arising from the use of its products. The coverage amount is currently $10.0 million.

Legal Proceedings

On* December 5, 2022,a putative class action complaint was filed in federal district court for the Southern District of Florida (Ewing v. Veru Inc., et al., CaseNo.* 1:22-cv-23960) against the Company and Mitchell Steiner, its Chairman, CEO and President, and Michele Greco, its CFO (the “Ewing Lawsuit”). The First Amended Class Action Complaint, filed on* September 15, 2023by purported stockholders Dr. Myo Thant and Karen Brounstein, alleges that certain public statements about sabizabulin as a treatment for COVID-19 between March 1, 2021and March 2, 2023violated Sections10*(b) and20(a) of the Securities Exchange Act of1934 and Rule10b-5 promulgated thereunder, and seeks monetary damages.

On* July 7, 2023,Anthony Maglia, a purported stockholder, filed a derivative action in the Circuit Court for the Eleventh Judicial Circuit, Miami-Dade County, Florida (Maglia v. Steiner et al., CaseNo.* 2023-019406-CA-01), against the Company as a nominal defendant, and Company officers and directors Mitchell S. Steiner, Michele Greco, Harry Fisch, Mario Eisenberger, Grace S. Hyun, Lucy Lu and Michael L. Rankowitz (the “Maglia Lawsuit”). The Maglia lawsuit asserts claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment primarily in connection with the issues and claims asserted in the Ewing Lawsuit. The Maglia Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and also seeks monetary damages, injunctive relief, restitution, and an award of reasonable fees and expenses.

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On* September1,* 2023, Anthony Franchi, a purported stockholder, filed a derivative action in the United States District Court for the Eastern District of Wisconsin (Franchi v. Steiner et al., CaseNo. 2:23-CV-01164), against the Company as a nominal defendant, and Company officers and directors Mitchell S. Steiner, Mario Eisenberger, Harry Fisch, Michael L. Rankowitz, Grace Hyun, Lucy Lu, and Michele Greco (the “Franchi Lawsuit”). The Franchi lawsuit asserts claims for breach of fiduciary duty and unjust enrichment primarily in connection with the issues and claims asserted in the Ewing Lawsuit. The Franchi Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and also seeks monetary damages, restitution, and an award of reasonable fees and expenses. On* November8,* 2023, this action was consolidated with the Renbarger action, discussed below.

On* September**28,* 2023, Philip Renbarger, a purported stockholder, filed a derivative action in the United States District Court for the Eastern District of Wisconsin (Renbarger v. Steiner et al., CaseNo. 2:23-CV-01291), against the Company as a nominal defendant, and Company officers and directors Mitchell Steiner, Mario Eisenberger, Harry Fisch, Michael L. Rankowitz, Grace S. Hyun, Lucy Lu, and Michele Greco (the “Renbarger Lawsuit”). The Renbarger lawsuit asserts claims for breach of fiduciary duty, aiding and abetting, gross mismanagement, waste of corporate assets, and unjust enrichment primarily in connection with the issues and claims asserted in the Ewing Lawsuit. The Renbarger Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and also seeks monetary damages and an award of reasonable fees and expenses. On* November 8, 2023,*the Renbarger Lawsuit was consolidated with the Franchi Lawsuit, discussed above.

On* October**9,* 2023, Mohamed Alshourbagy, a purported stockholder, filed a derivative action in the United States District Court for the Southern District of Florida (Alshourbagy v. Steiner et al., CaseNo. 1:23-cv-23846), against the Company as a nominal defendant, and Company officers and directors Mitchell S. Steiner, Mario A. Eisenberger, Harry D. Fisch, Michael L. Rankowitz, Grace S. Hyun, Lucy Lu, and Michele Greco (the “Alshourbagy Lawsuit”). The Alshourbagy lawsuit asserts claims for breach of fiduciary duty and contribution primarily in connection with the issues and claims asserted in the Ewing Lawsuit. The Alshourbagy Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and also seeks monetary damages, injunctive relief, restitution, and an award of reasonable fees and expenses.

The Ewing Lawsuit, Maglia Lawsuit, Franchi Lawsuit, Renbarger Lawsuit, and Alshourbagy Lawsuit are collectively referred to as the “Shareholder Litigation.” At this time, the Company is unable to estimate potential losses, if any, related to the Shareholder Litigation.

License and Purchase Agreements

From time to time, we license or purchase rights to technology or intellectual property fromthird parties. These licenses and purchase agreements require us to pay upfront payments as well as development or other payments upon successful completion of preclinical, clinical, regulatory or revenue milestones. In addition, these agreements* mayrequire us to pay royalties on sales of products arising from the licensed or acquired technology or intellectual property. Because the achievement of future milestones isnot* reasonably estimable, we havenot recorded a liability on the accompanying unaudited condensed consolidated financial statements for any of these contingencies.

Collaborative Arrangements

On* January 31, 2022,the Company entered into a Clinical Trial Collaboration and Supply Agreement (the “Lilly Agreement”) with Eli Lilly and Company (“Lilly”). The Company was sponsoring a clinical trial in which both the Company’s enobosarm compound and Lilly’s compound were being dosed in combination. The ENABLAR-2 clinical trial is currently suspended. Under the Lilly agreement, the Company conducts the research at its own cost and Lilly contributes its compound towards the study atno* cost to the Company. The parties continue to hold exclusive rights to all intellectual property relating solely to their own respective compounds. The Company would provide to Lilly copies of clinical data relating to the clinical trial and certain rights to use the clinical data. Veru maintains full exclusive, global commercialization rights to the enobosarm compound.

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The terms of the Lilly Agreement meet the criteria under ASC Topic808, Collaborative Arrangements (“ASC808”), as both parties are active participants in the activity and are exposed to the risks and rewards dependent on the commercial success of the activity. ASC808 doesnot provide guidance on how to account for the activities under the collaboration, and the Company determined that Lilly didnot meet the definition of a customer under ASC606, Revenue from Contracts with Customers. The Company has concluded that ASC730, Research and Development, should be applied by analogy. There isno financial statement impact for the Lilly Agreement as the value of the drug supply received from Lilly would be offset against the drug supply cost within research and development expense.

Resolution of Commercial Dispute

A supplier claimed that we owed approximately $10 million for products and services relating to our efforts to commercialize sabizabulin under an EUA. We disputed the amount owed and on* February29,* 2024, we entered into an agreement with the supplier, which resolves the dispute by modifying the payment terms under the original agreement. The Company agreed to pay $8.3 million, with $2.3 million payable upon execution of the agreement, $3.5 million payable in equal monthly installments over 48 months, and $2.5 million payable (the “Balance”) on or prior to* December31,* 2025 out of the proceeds of certain payments that* maybe received by the Company from BWV on promissory notes due in April 2024and September 2024.If all or any portion of the Balance remains unpaid as of December**31,* 2025, the Company shall pay the amount of the unpaid Balance in equal monthly installments over 24 months, commencing in* January 2026.The agreement resulted in a reduction in research and development expense for thenine* months ended* June 30, 2024* of $0.6 million. $0.9 million is included in accounts payable and $4.7 million is included in other liabilities related to this agreement as of* June 30, 2024* on the accompanying condensed consolidated balance sheet.

Note13 – Income Taxes

The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of its assets and liabilities, and for net operating loss (NOL) and tax credit carryforwards.

A reconciliation of income tax expense (benefit) and the amount computed by applying the U.S. statutory rate of 21% to loss before income taxes is as follows:

Note14 – Net Income (Loss) Per Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net income by the weighted average number of common shares outstanding during the period after giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of stock options and stock appreciation rights. Due to our net loss for the periods presented, all potentially dilutive instruments were excluded because their inclusion would have been anti-dilutive. See Note10 for a discussion of our potentially dilutive common shares.

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Note15 – Sale of ENTADFI Assets

On* April 19, 2023,the Company entered into an asset purchase agreement (the “BWV Asset Purchase Agreement”) to sell substantially all of the assets related to ENTADFI® (finasteride and tadalafil) capsules for oral use, a new treatment for benign prostatic hyperplasia that was approved by the FDA in December 2021,with BWV. The transaction closed on April19,* 2023. The purchase price for the transaction was $20.0 million, consisting of $6.0 million paid at closing, $4.0 million payable pursuant to a promissory note due on* September 30, 2023,$5.0 million payable pursuant to a promissory note due on April19,* 2024 (the* “April 2024Promissory Note”), and $5.0 million payable pursuant to a promissory note due on September 30, 2024 (the “September 2024Promissory Note” and, together with the April 2024*Promissory Note, the “BWV Promissory Notes”), plus up to $80.0 million based on BWV’s net revenues from ENTADFI after closing (the “Milestone Payments”). The Company believes the probability of receiving any Milestone Payments is remote.

On* September 29, 2023,the Company entered into an Amendment to the BWV Asset Purchase Agreement (the “Amendment”) providing that the promissory note for the $4.0 million installment of the purchase price due September 30, 2023would be deemed paid and fully satisfied upon (1) the payment to the Company of the sum of $1.0 million in immediately available funds on September 29, 2023and (2) the issuance to the Company by October3,* 2023 of 3,000 shares of BWV Preferred Stock. The Company received payment of $1.0 million on* September 29, 2023and the BWV Preferred Stock on October3,* 2023, which the Company determined had a fair value as of* October**3,* 2023 of $0.9 million. The BWV Preferred Stock is convertible by the Company at any time and from time to time from and afterone year from the date of issuance of the BWV Preferred Stock into that number of shares of the Purchaser’s common stock determined by dividing the stated value of $1,000 per share by the Conversion Price of $0.5254 per share. The BWV Preferred Stock issued to the Company is initially convertible into an aggregate of approximately 5,709,935 shares of BWV’s common stock, subject to certain shareholder approval limitations. BWV agreed in the Amendment to use commercially reasonable efforts to obtain such shareholder approval by* December 31, 2023.Such shareholder approval hasnot* been obtained as of* June 30, 2024*. BWV also agreed to include the shares of common stock issuable upon conversion of the BWV Preferred Stock in the next resale registration statement filed with the Securities and Exchange Commission. Such registration statement hasnot been filed as of* June 30, 2024*.

On* April24,* 2024, the Company entered into a Forbearance Agreement (the "Forbearance Agreement") with BWV, relating to certain defaults under the BWV Promissory Notes. Pursuant to the Forbearance Agreement, (a) BWV agreed to make a payment of $50,000 of the principal payable under the* April 2024Promissory Notenot* later than* April29,* 2024, which was paid on* April**25,* 2024, and (b) the Company agreed, subject to the terms and conditions set forth in the Forbearance Agreement, to forbear from exercising its rights and remedies on account of the failure by BWV to pay the amounts due under the* April 2024Promissory Note on the due date of April 19, 2024,and on account of any failure by BWV to make any mandatory repayment under the BWV Promissory Notes that mayhave become due or maybecome due in connection with certain transactions relating to BWV’s acquisition of Proteomedix AG, in each case for a period (the “Forbearance Period”) commencing on April 24, 2024and ending on the earlier of (a) March 31, 2025and (b) the occurrence of an Event of Default (as defined in the Forbearance Agreement). The Company also agreed that during the Forbearance Period the default provision in the BWV Promissory Notes relating to insolvency of BWV willnot* apply.

BWV agreed in the Forbearance Agreement to make the following required payments during the Forbearance Period towards the remaining principal balance of the* April 2024Promissory Note: (1) monthly payments equal to 15% of cash receipts of BWV or its subsidiaries from certain sale or licensing revenues or payments; and (2) payment of 10% of the net proceeds from certain financing or other transactions outside the ordinary course of business completed by BWV or any of its subsidiaries during the Forbearance Period. The Company received payments of $110,000 during thethree* months ended* June 30, 2024and $150,000 subsequent to June 30, 2024under the Forbearance Agreement. The remaining balance of the April 2024*Promissory Note will be due at the end of the Forbearance Period.

The Forbearance Agreement doesnot affect the maturity date of the* September 2024Promissory Note, which continues to have a maturity date of September 30, 2024*for the payment of the full principal amount of $5.0 million.

The Company determined that it wasnot probable, at the time of the transaction and at* June 30, 2024*, that substantially all of the consideration promised under the BWV Asset Purchase Agreement would be collected. Therefore, the Company recognized the difference between the nonrefundable consideration received and the carrying amount of the assets as a gain. The Company recorded a gain of approximately $5.7 million on the transaction during fiscal2023. The Company recognized a gain on sale of $1.0 million during thenine months ended* June 30, 2024* based on the determination of the fair market value of the BWV Preferred Stock and the cash received from BWV under the Forbearance Agreement. Additional gain could be recognized in future periods if additional consideration is received or when it is deemed probable that substantially all of the consideration promised will be collected. The Company will continue to evaluate the collectability of the BWV Promissory Notes for future installments of the purchase price.

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