AYTU BIOPHARMA, INC

Previous wording

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 for the three and six months ended December 31, 2025, our cash flows for the six months ended December 31, 2025, and our financial condition as of December 31, 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.

Current wording

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 for the three and nine months ended March 31, 2026, our cash flows for the nine months ended March 31, 2026, and our financial condition as of March 31, 2026. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited consolidated financial statements and notes thereto.

Previous wording

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 18 to 24 months.

Current wording

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 18 to 24 months, however, there can be no guarantee that local regulatory approvals and marketing authorizations will be obtained on the expected timeline.

Previous wording

We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors, trade wars 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 and economic or political policies 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.

Current wording

We continue to experience inflationary pressures and economic uncertainty caused by global geopolitical factors, trade wars and tariffs, and members of our industry are 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 and economic or political policies 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.

Previous wording

The results of operations for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Current wording

The results of operations for the three and nine months ended March 31, 2026, compared to the three and nine months ended March 31, 2025, is as follows:

Previous wording

Net revenue disaggregated by product portfolios for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Current wording

Net revenue disaggregated by product portfolios for the three and nine months ended March 31, 2026, compared to the three and nine months ended March 31, 2025, is as follows:

Previous wording

During the three months ended December 31, 2025, net revenue decreased by $1.1 million, or 7%, compared to the same period ended December 31, 2024, primarily due to a broader deemphasis in marketing towards the ADHD Portfolio and the Pediatric Portfolio as our marketing efforts have shifted towards EXXUA, which is now the centerpiece of our commercial efforts. These decreases were partially offset by a $0.2 million increase related to the successful new product launch of EXXUA in the second quarter of fiscal 2026.

Current wording

During the three months ended March 31, 2026, net revenue decreased by $6.0 million, or 33%, compared to the same period ended March 31, 2025, primarily due to a broader deemphasis in marketing towards the ADHD Portfolio as our marketing efforts have shifted towards EXXUA, which is now the centerpiece of our commercial efforts as well as a decrease in ADHD Portfolio net revenue attributed to the launch of a generic version of one of our ADHD products late in the second quarter of fiscal 2026. The Pediatric Portfolio was negatively impacted by payer mix resulting in higher rebates and an increase in returns. These decreases were partially offset by a $2.4 million increase in net revenue related to the successful new product launch of EXXUA in the second quarter of fiscal 2026.

Previous wording

During the six months ended December 31, 2025, net revenue decreased by $3.7 million, or 11%, compared to the same period ended December 31, 2024, primarily due to a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor.

Current wording

During the nine months ended March 31, 2026, net revenue decreased by $9.8 million, or 19%, compared to the same period ended March 31, 2025, primarily due to a broader deemphasis in marketing towards the ADHD Portfolio as our marketing efforts have shifted towards EXXUA, which is now the centerpiece of our commercial efforts, and a decrease in ADHD Portfolio net revenue attributed to the launch of a generic version of one of our ADHD products late in the second quarter of fiscal 2026. The decrease in the Pediatric Portfolio was primarily due to returns experienced during the quarter. These decreases were partially offset by a $2.6 million increase in net revenue related to the successful new product launch of EXXUA in the second quarter of fiscal 2026 and $3.3 million of net revenue recorded in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor.

Previous wording

Gross profit and gross profit percentage for the three and six months ended December 31, 2025, compared to the three and six months ended December 31, 2024, is as follows:

Current wording

Gross profit and gross profit percentage for the three and nine months ended March 31, 2026, compared to the three and nine months ended March 31, 2025, is as follows:

Previous wording

During the three months ended December 31, 2025, gross profit decreased by $1.2 million, or 11%, compared to the same period ended December 31, 2024. Gross profit percentage was 63% for the three months ended December 31, 2025, compared to 66% for the same period ended December 31, 2024. The decrease in gross profit percentage is primarily related to a $1.1 million decrease in net revenue driven by a broader deemphasis in marketing towards the ADHD Portfolio and the Pediatric Portfolio as our marketing efforts have shifted towards EXXUA and a $0.8 million inventory write-down recorded to cost of goods sold primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products.

Current wording

During the three months ended March 31, 2026, gross profit decreased by $5.2 million, or 41%, compared to the same period ended March 31, 2025. Gross profit percentage was 61% for the three months ended March 31, 2026, compared to 69% for the same period ended March 31, 2025. The decrease in gross profit percentage is primarily related to a $6.0 million decrease in net revenue driven by a broader deemphasis in marketing towards the ADHD Portfolio as our marketing efforts have shifted towards EXXUA and a $0.7 million inventory write-down recorded to cost of goods sold primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products.

Previous wording

During the six months ended December 31, 2025, gross profit decreased by $4.0 million, or 17%, compared to the same period ended December 31, 2024. Gross profit percentage was 65% for the six months ended December 31, 2025, compared to 69% for the same period ended December 31, 2024. This decrease in gross profit percentage is primarily related to a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor as well as a $1.1 million inventory write-down recorded to cost of goods sold primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products.

Current wording

During the nine months ended March 31, 2026, gross profit decreased by $9.2 million, or 26%, compared to the same period ended March 31, 2025. Gross profit percentage was 64% for the nine months ended March 31, 2026, compared to 69% for the same period ended March 31, 2025. This decrease in gross profit percentage is primarily related to a decrease in net revenue driven by a broader deemphasis in marketing towards the ADHD Portfolio as our marketing efforts have shifted towards EXXUA, a $3.3 million increase in net revenue in the first quarter of fiscal 2025 related to a decrease in estimated variable consideration as a result of successful negotiations with a vendor and a $1.8 million inventory write-down recorded to cost of goods sold primarily resulting from a shift from our Adzenys branded products to the Adzenys generic products. These decreases were partially offset by a $2.6 million increase in net revenue related to the successful new product launch of EXXUA in the second quarter of fiscal 2026.

Previous wording

During the three and six months ended December 31, 2025, selling and marketing expense increased by $0.7 million, or 14% and $0.4 million, or 4% compared to the same periods ended December 31, 2024, primarily driven by increases in labor, service costs and EXXUA launch costs.

Current wording

During the three and nine months ended March 31, 2026, selling and marketing expense increased by $0.7 million, or 14% and $1.1 million, or 7% compared to the same periods ended March 31, 2025, primarily driven by increases in labor, service costs and EXXUA launch costs.

Previous wording

During the three and six months ended December 31, 2025, general and administrative expense increased by $0.6 million, or 14% and $0.4 million, or 4% compared to the same periods ended December 31, 2024, primarily driven by increases in labor, service costs and EXXUA launch costs, partially offset by improved operational efficiencies such as reduced facilities expense.

Current wording

During the three and nine months ended March 31, 2026, general and administrative expense increased by $0.9 million, or 21% and $1.3 million, or 9% compared to the same periods ended March 31, 2025, primarily driven by increases in labor, service costs and EXXUA launch costs, partially offset by improved operational efficiencies such as reduced facilities expense.

Previous wording

During the three and six months ended December 31, 2025, there was no research and development expense compared to $0.5 million and $0.9 million for the same periods ended December 31, 2024, respectively, 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.

Current wording

During the three and nine months ended March 31, 2026, there was no research and development expense compared to $0.2 million and $1.1 million for the same periods ended March 31, 2025, respectively, 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.

Previous wording

During the three and six months ended December 31, 2025, amortization expense of intangible assets, excluding amounts included in cost of goods sold, decreased by $0.4 million, or 43% and $0.9 million, or 47% compared to the same periods ended December 31, 2024, respectively, primarily due to impairments of certain intangible assets recorded in fiscal 2025, partially offset by increased amortization expense from new intangible assets placed into service upon the launch of EXXUA in the second quarter of fiscal 2026.

Current wording

During the three and nine months ended March 31, 2026, amortization expense of intangible assets, excluding amounts included in cost of goods sold, decreased by $0.2 million, or 17% and $1.0 million, or 37% compared to the same periods ended March 31, 2025, respectively, primarily due to impairments of certain intangible assets recorded in fiscal 2025, partially offset by increased amortization expense from new intangible assets placed into service upon the launch of EXXUA in the second quarter of fiscal 2026.

Previous wording

During the three and six months ended December 31, 2025, we incurred zero restructuring costs compared to $1.3 million and $2.1 million during the same periods ended December 31, 2024, respectively. Restructuring costs during the first half of fiscal 2025 related to our previously announced operational realignment and related costs, which was completed during fiscal 2025.

Current wording

During the three and nine months ended March 31, 2026, we incurred zero restructuring costs compared to zero and $2.1 million during the same periods ended March 31, 2025, respectively. Restructuring costs during the first half of fiscal 2025 related to our previously announced operational realignment and related costs, which was completed during fiscal 2025.

Previous wording

During the three and six months ended December 31, 2025, other income, net was relatively consistent compared to the same periods ended December 31, 2024.

Current wording

During the three and nine months ended March 31, 2026, other income, net was relatively consistent compared to the same periods ended March 31, 2025.

Previous wording

During the three and six months ended December 31, 2025, interest expense decreased by $0.5 million, or 48% and $1.0 million, or 48% compared to the same periods ended December 31, 2024, respectively, primarily due to the paydown of our fixed payment arrangements.

Current wording

During the three and nine months ended March 31, 2026, interest expense decreased by $0.5 million, or 52% and $1.5 million, or 49% compared to the same periods ended March 31, 2025, respectively, primarily due to the paydown of our fixed payment arrangements.

Previous wording

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 and six months ended December 31, 2025, we recognized a loss of $8.2 million and $4.5 million, respectively, from the fair value adjustment primarily driven by an increase in our stock price during the three and six months ended December 31, 2025, partially offset by gains from the exercise of liability classified warrants. For the three and six months ended December 31, 2024, we recognized a gain of $3.0 million and $5.9 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three and six months ended December 31, 2024.

Current wording

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 and nine months ended March 31, 2026, we recognized a loss of $1.3 million and $5.7 million, respectively, from the fair value adjustment primarily driven by an increase in our stock price during the three and nine months ended March 31, 2026, partially offset by gains from the exercise of liability classified warrants. For the three and nine months ended March 31, 2025, we recognized a gain of $2.3 million and $8.2 million, respectively, from the fair value adjustment primarily driven by a decrease in our stock price during the three and nine months ended March 31, 2025.

Previous wording

For both the three and six months ended December 31, 2025, there was zero income tax expense from continuing operations, which was an effective tax rate of zero. This was primarily driven by operating losses and favorable deductions from tax law changes coupled with existing valuation allowances.

Current wording

For both the three and nine months ended March 31, 2026, there was less than $0.1 million of income tax expense from continuing operations, which was an effective tax rate of negative 0.2% and negative 0.1%. This was primarily driven by operating losses and favorable deductions from tax law changes coupled with existing valuation allowances and adjustments from our income tax return filings

Previous wording

For the three and six months ended December 31, 2024, we recorded an income tax benefit of $0.3 million from continuing operations, which represented an effective tax rate of negative 74.1% and we recorded income tax expense of $0.1 million from continuing operations, which represented an effective tax rate of 6.5%, respectively. These effective tax rates were primarily driven by the limitations on losses as a result of Section 382 of the Internal Revenue Code changes in ownership coupled with existing valuation allowances, the divestiture of our Consumer Health business that occurred during the first quarter of fiscal 2025 and changes to our first quarter of fiscal 2025 projections, which resulted in an income tax benefit for the second quarter of fiscal 2025.

Current wording

For the three and nine months ended March 31, 2025, we recorded an income tax benefit of $0.1 million from continuing operations, which represented an effective tax rate of negative 3.2% and an income tax expense of zero, which represented an effective tax rate of zero. These effective tax rates were primarily driven by the limitations on losses as a result of Section 382 of the Internal Revenue Code changes in ownership coupled with existing valuation allowances, the divestiture of our Consumer Health business that occurred during the first quarter of fiscal 2025 and changes to our fiscal 2025 projections, which resulted in an income tax benefit for the three months ended March 31, 2025, that reduced income tax expense for the nine months ended March 31, 2025, to zero.

Previous wording

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.

Current wording

On September 26, 2024, we filed the 2024 Shelf registration statement on Form S-3, which was declared effective by the SEC on October 15, 2024. The 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. 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.

Previous wording

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 toNote 10 - Revolving Credit Facility andNote 11 - Debt in Part I, Item 1 of this Form 10-Q for further information.

Current wording

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 zero. 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 toNote 10 - Revolving Credit Facility andNote 11 - Debt in Part I, Item 1 of this Form 10-Q for further information.

Previous wording

The following table shows cash flows for the six months ended December 31, 2025, and 2024:

Current wording

The following table shows cash flows for the nine months ended March 31, 2026, and 2025:

Previous wording

Net Cash Used in Financing Activities

Current wording

Net Cash Used in Operating Activities

Previous wording

During the six months ended December 31, 2025, net cash provided by operating activities totaled $3.1 million, which was primarily the result of an increase in accounts payable and accrued liabilities and a decrease in inventories, partially offset by negative cash earnings (net loss of $8.6 million partially offset by non-cash derivative warrant liabilities adjustment, depreciation and amortization, stock-based compensation expense, and inventory write-down) and a decrease in prepaid expenses and other current assets.

Current wording

During the nine months ended March 31, 2026, net cash used in operating activities totaled $1.1 million, which was primarily the result of an increase in accrued liabilities and accounts payable, a decrease in prepaid expenses and other current assets as well as negative cash earnings (net loss partially offset by non-cash items primarily from depreciation and amortization, stock-based compensation expense, derivative warrant liabilities adjustment, inventory write-down and other certain non-cash adjustments), partially offset by a decrease in accounts receivable, inventories and other operating assets and liabilities, net.

Previous wording

During the six months ended December 31, 2024, net cash provided by operating activities totaled $1.7 million, which was primarily the result of an increase in accounts payable and accrued liabilities and a decrease in inventories, partially offset by increases in accounts receivable, prepaid expenses and other current assets and cash used in operations (net income of $2.3 million offset primarily by non-cash depreciation, amortization and accretion, stock compensation expense and derivative warrant liabilities adjustment).

Current wording

During the nine months ended March 31, 2025, net used in operating activities totaled $4.7 million, which was primarily the result of an increase in accounts receivable, net and prepaid expenses and other current assets as well as a decrease in accounts payable and accrued liabilities, partially offset by positive cash earnings (net income of $6.3 million partially offset primarily by non-cash depreciation, amortization and accretion, stock compensation expense and derivative warrant liabilities adjustment).

Previous wording

Net cash used in investing activities was nominal during the six months ended December 31, 2025. Net cash provided by investing activities for the six months ended December 31, 2024, was driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases.

Current wording

Net cash used in investing activities was nominal during the nine months ended March 31, 2026. Net cash provided by investing activities for the nine months ended March 31, 2025, was driven by cash received from the sale of fixed assets, partially offset by cash payments for fixed asset purchases.

Previous wording

Net cash used in financing activities of $4.0 million during the six months ended December 31, 2025, was primarily due to $3.1 million of payments for fixed payment arrangements and $0.9 million of payments made against the principal balance of our Eclipse Term Loan.

Current wording

Net cash used in financing activities of $3.1 million during the nine months ended March 31, 2026, was primarily due to $3.1 million of payments for fixed payment arrangements and $1.4 million of payments made against the principal balance of our Eclipse Term Loan, partially offset by $1.3 million of net proceeds received from our Eclipse Revolving Loan.

Previous wording

Net cash used in financing activities of $1.8 million during the six months ended December 31, 2024, was primarily due to payments made to fixed payment arrangements and payments made on borrowings, partially offset by net proceeds received from our Eclipse Revolving Loan.

Current wording

Net cash provided by financing activities of $2.5 million during the nine months ended March 31, 2025, was primarily due to $7.6 million of net proceeds received from our Eclipse Revolving Loan, partially offset by $3.8 million of payments made to fixed payment arrangements and $1.4 million of payments made on borrowings.