Item 1.01 Entry into a Material Definitive
Agreement.
On June 8, 2023, Aytu BioPharma, Inc. (the
“Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors
named therein (the “Purchasers”), and a placement agency agreement (the “PAA”) with Maxim Group LLC (the
“Placement Agent”), pursuant to which the Company agreed to issue and sell to investors in the offering (the
“Offering”) an aggregate of 1,743,695 shares (the “Offered Shares”) of the Company’s common stock, par
value $0.0001 per share (the “Common Stock”), pre-funded warrants in lieu of Offered Shares to purchase 430,217 shares
of Common Stock (the “Pre-Funded Warrants”), accompanying Tranche A warrants to purchase 2,173,912 shares of Common
Stock (the “Tranche A Warrants”), and accompanying Tranche B warrants to purchase 2,173,912 shares of Common Stock (the
“Tranche B Warrants”, and together with the Tranche A Warrants, the “Common Warrants”) in a best-efforts
offering. The Common Warrants may be exercised for either shares of Common Stock or pre-funded warrants to purchase Common Stock at
a future exercise price of $0.0001 per share in the same form as the Pre-Funded Warrant (the “Exchange Warrants”). The
aggregate proceeds to the Company from the Offering are expected to be approximately $4 million before deducting placement agent
fees and other estimated offering expense payable by the Company, and excluding the proceeds, if any, from the exercise of the
Pre-Funded Warrants or Common Warrants. The Offering is expected to close on June 13, 2023,
subject to customary closing conditions.
Each Offered
Share, together with the accompanying Common Warrants, is being sold at a public offering price of $1.84. Each Pre-Funded Warrant, together
with the accompanying Common Warrants, is being sold at a public offering price of $1.8399.
Each Pre-Funded Warrant will be exercisable for
one share of common stock at an exercise price of $0.0001 per share. The Pre-Funded Warrants will be immediately exercisable and may be
exercised at any time until all of the Pre-Funded Warrants are exercised in full. A holder (together with its affiliates) may not exercise
any portion of the Common Warrants, Pre-Funded Warrants, or Exchange Warrants if, immediately after exercise, such holder shall own more
than 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, except that upon at least
61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising
the holder’s warrants up to 9.99% or 19.99% of the number of shares of Common Stock outstanding immediately after giving effect
to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants.
The Common
Warrants will be immediately exercisable at a price of $1.59 per share (or $1.5899 per Exchange Warrant). The Tranche A Warrants will
expire upon the earlier of (i) five years after the date of issuance, and (ii) 30 days following the closing price of the Company’s
Common Stock equaling 200% of the exercise price for at least 40 consecutive trading days. The Tranche B Warrants will expire upon the
earlier of (x) five years after the date of issuance, and (y) 30 days following the Company’s achievement of consolidated trailing
twelve-month adjusted EBITDA, as defined in the Purchase Agreement, of $12 million.
Additionally, pursuant to the terms of the Purchase
Agreement, the Company will provide Nantahala Capital Management, LLC (“Nantahala”), an investor in the Offering, the right to appoint one member of the
Company’s Board of Directors (the “Board”) and one member of each Board Committee as well as the right to nominate an
additional Board member mutually agreeable to Nantahala and the Company. Upon the closing of the Offering, the Company shall appoint Abhinav
Jain to the Board and to each of the Audit Committee, Compensation Committee, and Nominating and Governance Committee of the Board, pursuant
to such right.
The Purchase
Agreement and PAA contain customary representations, warranties and agreements by the Company, customary conditions to closing, and indemnification
obligations of the Company and the Purchasers. The representations, warranties and covenants contained in the Purchase Agreement and PAA
were made only for purposes of such agreements and as of a specific date, were solely for the benefit of the parties to such agreements,
and may be subject to limitations agreed upon by the contracting parties.
The Company
engaged Maxim Group LLC as the Company’s sole placement agent for the Offering pursuant to the PAA. Pursuant to the PAA, the Company
agreed to pay the Placement Agent a cash placement fee equal to 7.0% of the gross proceeds of the Offering, plus reimbursement of certain
expenses and legal fees.
Copies of
the forms of Pre-Funded Warrant, Tranche A Warrant, and Tranche B Warrant are filed hereto as Exhibits 4.1, 4.2, and 4.3, respectively.
Copies of the forms of Purchase Agreement and PAA are filed hereto as Exhibits 10.1 and 10.2. The foregoing descriptions of the terms
of the Pre-Funded Warrant, Tranche A Warrant, Tranche B Warrant, the Purchase Agreement and the PAA are qualified in their entirety by
reference to such exhibits.