The
information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement
is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED MARCH 2, 2020
As
filed pursuant to Rule 424(b)(5)
Registration No. 333-221735
PRELIMINARY
PROSPECTUS SUPPLEMENT
(to Prospectus dated December 1, 2017)
Aytu BioScience, Inc.
Shares of 11% Series I Cumulative Redeemable Preferred Stock
$17.50 Per Share
Liquidation Preference $17.50 Per Share
We are offering shares
of our 11% Series I Cumulative Redeemable Perpetual Preferred Stock, which we refer to in this prospectus supplement as the “Series
I Preferred Stock.”
Dividends on the Series I Preferred Stock
offered hereby are cumulative from the date of issuance, and will be payable monthly in arrears on the fifteenth day of each month,
when, as and if declared by our Board of Directors. Dividends will be payable out of amounts legally available therefor at a rate
equal to 11.0% per annum per $17.50 of stated liquidation preference per share, or $1.925 per share of Series I Preferred Stock
per year.
Commencing on and after ,
2025 we may redeem, at our option, the Series I Preferred Stock, in whole or in part, at a cash redemption price of $
per share, plus all accrued and unpaid dividends to, but not including, the redemption date. The Series I Preferred Stock has no
stated maturity, will not be subject to any sinking fund or other mandatory redemption, and will not be convertible into or exchangeable
for any of our other securities.
Holders
of the Series I Preferred Stock generally will have no voting rights except for limited voting.
We
are subject to General Instruction I.B.6 of Form S-3, which limits the amounts that we may sell under the registration statement
of which this prospectus supplement forms a part. The aggregate market value of our common stock held by non-affiliates pursuant
to General Instruction I.B.6 of Form S-3 is approximately $17.6 million, which was calculated based on 16,929,440 shares of our
outstanding common stock held by non-affiliates on February 28, 2020 at a price of $1.04 per share, the closing price of our common
stock on January 2, 2019. During the 12 calendar months prior to, and including, the date of this prospectus supplement, we have
not offered or sold any securities pursuant to General Instruction I.B.6 of Form S-3.
Prior
to this offering, there has been no public market for our Series I Preferred Stock. We have filed an application to list the Series
I Preferred Stock on The NASDAQ Capital Market (“NASDAQ”) under the symbol “AYTUP.” If the application
is approved, we expect trading of the Series I Preferred Stock on NASDAQ to commence on or shortly after the initial date of issuance.
Our common stock is traded on NASDAQ under the symbol “AYTU.”
Investing
in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the
heading “Risk Factors” beginning on page S-10 of this prospectus supplement and page 6 of the accompanying
prospectus, as well as the risks and uncertainties described under the heading “Risk Factors” contained in our annual
report on Form 10-K for the year ended June 30, 2019, before investing in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.
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PER
SHARE
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TOTAL
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Public Offering Price
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$
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$
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Underwriting discounts and commissions
(1)
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1)
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The
underwriters will receive compensation in addition to the discounts and commissions.
See “Underwriting” for a description of compensation payable to the underwriters.
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We
have granted the representative of the underwriters an option to purchase up to an additional shares of Series I Preferred
Stock from us at the public offering price, less the underwriting discounts and commissions, within 45 days from the date of this
prospectus supplement to cover over-allotments, if any. If the representative of the underwriters exercises the option in full
the total underwriting discounts and commissions payable will be $
and the total proceeds to us, before expenses, will
be $
.
H.C.
Wainwright & Co.
The
date of this prospectus supplement is , 2020
TABLE
OF CONTENTS
Prospectus Supplement
Prospectus
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and accompanying prospectus relates to the offering of our securities. Before buying any of the securities
that we are offering, we urge you to carefully read this prospectus supplement, the accompanying prospectus, any free writing
prospectus that we have authorized for use in connection with this offering, and the information incorporated by reference as
described under the headings “Where You Can Find More Information” and “Information Incorporated by Reference”
in this prospectus supplement. These documents contain important information that you should consider when making your investment
decision.
This
document is comprised of two parts. The first part is this prospectus supplement, which describes the specific terms of this offering
and also adds to, and updates information contained in, the accompanying prospectus and the documents incorporated by reference
into this prospectus supplement and the accompanying prospectus. The second part, the accompanying prospectus, including the documents
incorporated by reference into the accompanying prospectus, provides more general information, some of which may not apply to
this offering. Generally, when we refer to this prospectus, we are referring to the combined document consisting of this prospectus
supplement and the accompanying prospectus. In this prospectus supplement, as permitted by law, we “incorporate by reference”
information from other documents that we file with the Securities and Exchange Commission, or the SEC. This means that we can
disclose important information to you by referring to those documents. The information incorporated by reference is considered
to be a part of this prospectus supplement and the accompanying prospectus and should be read with the same care. When we make
future filings with the SEC to update the information contained in documents that have been incorporated by reference, the information
included or incorporated by reference in this prospectus supplement is considered to be automatically updated and superseded.
In other words, in case of a conflict or inconsistency between information contained in this prospectus supplement and information
in the accompanying prospectus or incorporated by reference into this prospectus supplement, you should rely on the information
contained in the document that was filed later.
This
prospectus supplement and the accompanying prospectus are part of a registration statement on Form S-3 that we filed on November
22, 2017 with the SEC using a “shelf” registration process with respect to up to $100,000,000 in securities that may
be sold thereunder. The shelf registration statement was declared effective by the SEC on December 1, 2017.
Under
the shelf registration process, we may offer and sell any combination of securities described in the accompanying prospectus in
one or more offerings. The purpose of this prospectus supplement is to provide supplemental information regarding us in connection
with this offering of securities.
You
should rely only on the information contained in, or incorporated by reference into, this prospectus supplement, the accompanying
prospectus, and in any free writing prospectus that we have authorized for use in connection with this offering. We have not authorized
any other person to provide you with different information. We are not making an offer to sell or soliciting an offer to buy our
securities in any jurisdiction in which an offer or solicitation is not authorized or in which the person making that offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation. You should assume
that the information appearing in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference
into this prospectus supplement and the accompanying prospectus, and in any free writing prospectus that we have authorized for
use in connection with this offering, is accurate only as of the date of those respective documents. Our business, financial condition,
results of operations, and prospects may have changed since those dates.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary description about us and our business highlights selected information contained elsewhere in this prospectus supplement
or the accompanying prospectus, or incorporated in this prospectus supplement or the accompanying prospectus by reference. This
summary does not contain all of the information you should consider before buying securities in this offering. You should carefully
read this entire prospectus supplement and the accompanying prospectus, including each of the documents incorporated herein or
therein by reference, before making an investment decision. Unless the context otherwise requires, the terms “Aytu,”
“the Company,” “we,” “us” and “our” in this prospectus supplement and accompanying
prospectus refer to Aytu Bioscience, Inc., and its subsidiaries.
Recent
Developments
On February 27, 2020, the Company issued a promissory note to
an unrelated third-party investor in which the investor loaned gross proceeds of $800,000 to the Company. The unsecured,
nonconvertible note has an OID of $160,000 and the Company received net proceeds of $640,000. The note will be repaid
by the Company with eight consecutive monthly payments to the investor in the amount of $100,000, beginning April 1, 2020.
On
February 14, 2020 we completed the acquisition of Innovus Pharmaceuticals. Through this acquisition, Aytu expands into the $40
billion consumer healthcare market with a portfolio of over thirty-five consumer products competing in large therapeutic categories
including diabetes, men’s health, sexual wellness and respiratory health. This expanded product line broadens Aytu’s portfolio
beyond its $20 million prescription therapeutic portfolio to enable wider revenue distribution and consumer reach, reduced seasonality
associated with Aytu’s seasonal antitussive product line, and higher revenue from an expanded base of proprietary products.
Combined,
Aytu and Innovus generated approximately $43 million in revenue over the preceding four quarters ended December 31, 2019 when
accounting for the Innovus business and the recently expanded Rx portfolio following the acquisition of nine pediatric primary
care products from Cerecor, Inc.
This
business combination provides increased scale and enables operational synergies that can be leveraged to accelerate the combined
company’s growth and path to profitability. Initially, the company expects to operate the commercial aspects of the Innovus consumer
business separately from Aytu’s prescription business, while rationalizing general and administrative expenses through the removal
of Innovus’ public company costs and redundant administrative and operational processes, along with the reduction in overhead,
administrative and facilities costs.
The
prescription product portfolio will continue to be primarily commercialized through the existing Aytu sales force, while the consumer
health products will continue to be primarily commercialized via Innovus’ proprietary Beyond Human® marketing platform. However,
we expect both lines of business to benefit from opportunistic cross-selling such that some consumer products may be marketed
in the professional market by Aytu’s Rx commercial team, while the marketing of the prescription products may be bolstered through
various online and direct-to-consumer marketing initiatives.
Overview
We
are a specialty pharmaceutical company focused on commercializing novel products that address significant patient needs such as
hypogonadism (low testosterone), cough and upper respiratory symptoms, insomnia, male infertility, and various pediatric conditions
and we plan to expand opportunistically into other therapeutic areas as we continue to execute on our growth plans. We commercialize
our products through our internal commercial infrastructure and nationwide direct sales force.
We
have been historically focused on commercialization of the following products (i) Natesto®, a testosterone replacement therapy,
or TRT, (ii) ZolpiMist™, a short-term insomnia treatment, and (iii) Tuzistra® XR, a codeine–based antitussive.
Additionally,
we completed an Asset Purchase Agreement (the “Purchase Agreement”) with Cerecor, Inc (“Cerecor”) on November
1, 2019, acquiring six products, (i) AcipHex® Sprinkle™, (ii) Cefaclor for Oral Suspension, (iii) Karbinal® ER,
(iv) Flexichamber™, (v) Poly-Vi-Flor® and Tri-Vi-Flor™ (the “Pediatric Portfolio”). We immediately
began to include these acquired Pediatric Portfolio in our commercialization efforts in order to leverage our internal commercial
infrastructure and national sales force.
Finally,
on February 14, 2020 we successfully completed the acquisition of Innovus Pharmaceuticals, Inc., resulting in our entrance into
the approximately $40 billion consumer healthcare market with a portfolio of over thirty-five consumer products.
In
the future we will seek to acquire additional commercial-stage or near-market products, including existing products we believe
can offer distinct clinical advantages and patient benefits over existing other marketed products. Our management team’s
prior experience has involved identifying both clinical-stage and commercial-stage assets that can be launched or re-launched
to increase value, with a focused commercial infrastructure specializing in novel, niche products.
Key
Product Highlights
Primary
Care Rx Portfolio
Prior
to November 1, 2020, we were focused on the commercial development of the following three primary care focused products:
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Natesto®
– In 2016 We acquired exclusive U.S. rights to Natesto® (testosterone)
nasal gel, a novel formulation of testosterone delivered via a discreet, easy-to-use
nasal gel. Natesto is approved by the U.S. Food and Drug Administration, or FDA, for
the treatment of hypogonadism (low testosterone) in men and is the only testosterone
replacement therapy, or TRT, delivered via a nasal gel. Natesto offers multiple advantages
over currently available TRTs and competes in a $1.7 billion market accounting for nearly
7 million prescriptions annually. Importantly, as Natesto is delivered via the nasal
mucosa and not the skin, there is no risk of testosterone transference to others, a known
potential side effect and black box warning associated with all other topically applied
TRTs, including the market leader AndroGel®.
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ZolpiMist™
– In June 2018 we acquired an exclusive U.S. license to ZolpiMist™. ZolpiMist
is an FDA-approved prescription product that is indicated for the short-term treatment
of insomnia, and is the only oral spray formulation of zolpidem tartrate - the most widely
prescribed prescription sleep aid in the U.S. ZolpiMist is commercially available and
competes in the non-benzodiazepine prescription sleep aid category, a $1.8 billion prescription
drug category with over 43 million prescriptions written annually. Thirty million prescriptions
of zolpidem tartrate (Ambien®, Ambien® CR, Intermezzo®, Edluar®, ZolpiMist™,
and generic forms of immediate-release, controlled release, and orally dissolving tablet
formulations) are written each year in the U.S., representing almost 70% of the non-benzodiazepine
sleep aid category. Approximately 2.5 million prescriptions are written for novel formulations
of zolpidem tartrate products (controlled release and sublingual tablets). We intend
to integrate ZolpiMist into our sales force’s promotional efforts as an adjunct
product to Natesto as there is substantial overlap of physician prescribers of both testosterone
and prescription sleep aids.
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Tuzistra®
XR – In November 2018 we acquired Tuzistra XR, the only FDA-approved 12-hour
codeine-based antitussive. Tuzistra XR is a prescription antitussive consisting of codeine
polistirex and chlorpheniramine polistirex in an extended-release oral suspension. Tuzistra
XR is a patented combination of codeine, an opiate agonist antitussive, and chlorpheniramine,
a histamine-1 receptor antagonist, indicated for relief of cough and symptoms associated
with upper respiratory allergies or a common cold in adults aged 18 years and older.
Tuzistra XR is protected by two Orange Book-listed patents extending to 2031 and multiple
pending patents. According to MediMedia, the US cough cold prescription market is worth
in excess of $3 billion at current brand pricing, with 30-35 million annual prescriptions.
This market is dominated by short-acting treatments, which require dosing 4-6 times a
day. Tuzistra XR was developed using Tris Pharma’s liquid sustained release technology,
LiquiXR®, which allows for extended drug delivery throughout a 12-hour dosing period.
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The
Pediatric Rx Portfolio
In
November 2019 we acquired a portfolio of pediatric primary care products (the “Commercial Portfolio”) from
Cerecor, Inc. in order to expand our portfolio of commercial-stage products and further leverage our commercial
infrastructure and sales force. Through this acquisition the Company now commercializes nine prescription products and
sells directly to pediatric and primary care physicians throughout the U.S.
The
Commercial Portfolio contains established prescription products competing in markets exceeding $8 billion in annual U.S. sales.
Each product has distinct clinical features and patient-friendly benefits and are indicated to treat common pediatric and primary
care conditions.
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AcipHex®
Sprinkle™ (rabeprazole sodium) – AcipHex Sprinkle is a granule formulation
of rabeprazole sodium, a commonly prescribed proton pump inhibitor. AcipHex Sprinkle
is indicated for the treatment of gastroesophageal reflux disease (GERD) in pediatric
patients 1 to 11 years of age for up to 12 weeks.
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Cefaclor
(cefaclor oral suspension) – Cefaclor for oral suspension is a second-generation
cephalosporin antibiotic suspension and is indicated for the treatment of numerous common
infections caused by Streptococcus pneumoniae, Haemophilus influenzae,
staphylococci, and Streptococcus pyogenes, and others.
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Flexichamber®
– Flexichamber is an anti-static, valved collapsible holding chamber intended
to be used by patients to administer aerosolized medication from most pressurized metered
dose inhalers (MDIs) such as commonly used asthma medications.
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Karbinal®
ER (carbinoxamine maleate extended-release oral suspension) – Karbinal ER is
an H1 receptor antagonist (antihistamine) indicated to treat various allergic conditions
including seasonal and perennial allergic rhinitis, vasomotor rhinitis, and other common
allergic conditions.
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Poly-Vi-Flor®
and Tri-Vi-Flor® – Poly-Vi-Flor and Tri-Vi-Flor are two complementary prescription
fluoride-based supplement product lines containing combinations of vitamins and fluoride
in various oral formulations. These prescription supplements are prescribed for infants
and children to treat or prevent fluoride deficiency due to poor diet or low levels of
fluoride in drinking water and other sources.
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Innovus
Merger (Consumer Portfolio)
Upon
the February 14, 2020 acquisition of Innovus Pharmaceuticals, Inc., we now market and sell over 35 products in the U.S. and
more than 10 in multiple countries around the world through 5 international commercial partners. The following
represents the core products:
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Vesele®
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UriVarx®
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FlutiCare®
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Apeaz®
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Diabasens®
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Prostagorx®
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Sensum+®
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Trexar®
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In
addition, we currently expect to launch in the U.S. the following products in 2020, subject to the applicable regulatory approvals,
if required:
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Musclin®
is a proprietary supplement made of two FDA Generally Recognized As Safe (GRAS) approved ingredients designed to increase
muscle mass, endurance and activity (first half of 2020). The main ingredient in Musclin® is a natural activator
of the transient receptor potential cation channel, subfamily V, member 3 (TRPV3) channels on muscle fibers responsible to
increase fibers width resulting in larger muscles;
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Regenerum™
is a proprietary product containing two natural molecules: the first is an activator of the TRPV3 channels resulting in the
increase of muscle fiber width, and the second targets a different unknown receptor to build the muscle’s capacity for energy
production and increases physical endurance, allowing longer and more intense exercise. Regenerum™ is being developed
for patients suffering from muscle wasting. We currently expect to launch this product in 2020 pending successful clinical
trials in patients with muscle wasting or cachexia;
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Octiq™
is an expected FDA ophthalmic OTC monograph compliant product for the treatment of eye redness and eye lubrication (early
2020); and
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Regoxidine™
is an ANDA approved 5% Minoxidil foam for men and women for hair growth on the top of the scalp (first half 2020).
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We
have extensive experience across a wide range of business development activities and have in-licensed or acquired products from
large, mid-sized, and small enterprises in the United States and abroad. Through an assertive product and business development
approach, we expect that we will continue to build a substantial portfolio of complementary products.
Our
Strategy
In
the near-term, we expect to create value for shareholders by implementing a focused strategy of increasing sales of our prescription
therapeutics while leveraging our commercial infrastructure. Further, we expect to increase sales of our newly acquired consumer
healthcare product portfolio following the closing of our acquisition of Innovus Pharmaceuticals, Additionally, we expect to expand
both our Rx and consumer health product portfolios through continuous business and product development. Finally, we expect to
identify operational efficiencies identified through our recent transactions and implement expense reductions accordingly,
Corporate
Information
Our
principal executive offices are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112, and our phone number is
(720) 437-6580. Our corporate website address is http://www.aytubio.com. The information contained on, connected to or that can
be accessed via our website is not part of this prospectus. We have included our website address in this prospectus as an inactive
textual reference only and not as an active hyperlink.
THE
OFFERING
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Securities
offered by us pursuant to this prospectus supplement
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shares
of 11% Series I Cumulative Redeemable Perpetual Preferred Stock (the “Series I Preferred Stock), assuming no exercise
by the underwriters of their over-allotment option
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Series
I Preferred Stock to be outstanding after this offering if the maximum number of shares are sold
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shares
of Series I Preferred Stock, assuming no exercise by the underwriters of their over-allotment option.
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Offering
Price
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$17.50
per share of Series I Preferred Stock
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Dividends
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Holders
of the Series I Preferred Stock will be entitled to receive cumulative cash dividends
at a rate of 11% per annum of the $17.50 per share liquidation preference (equivalent
to $1.925 per annum per share).
Cumulative
dividends on the Series I Preferred Stock will accrue daily connecting on the date of issuance and will be payable monthly
in arrears on the 15th day of each month
Any
dividend payable on the Series I Preferred Stock, including dividends payable for any partial dividend period, will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
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No Maturity,
Sinking Fund or Mandatory Redemption
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The
Series I Preferred Stock has no stated maturity and will not be subject to any sinking
fund or mandatory redemption. Shares of the Series I Preferred Stock will remain outstanding
indefinitely unless we decide to redeem or otherwise repurchase them. We are not required
to set aside funds to redeem the Series I Preferred Stock.
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Optional
Redemption
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The
Series I Preferred Stock is not redeemable by us prior to , 2025, except
as described below under “Special Optional Redemption.” On and after such date, we may, at our option, redeem the
Series I Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to $17.50 per
share, plus any accumulated and unpaid dividends to, but not including, the redemption date. Please see the section entitled “Description
of the Series I Preferred Stock—Redemption—Optional Redemption.”
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Special
Optional Redemption
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Upon
the occurrence of a Change of Control, we may, at our option, redeem the Series I Preferred Stock, in whole or in part, within
120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $17.50 per
share, plus any accumulated and unpaid dividends to, but not including, the redemption date.
A
“Change of Control” is deemed to occur when the following have occurred and are continuing:
the
acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, or the Exchange Act, of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions
of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote
generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all
securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition); and following the closing of any transaction referred to above, neither
we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing
such securities) listed on the NYSE, the NYSE American or NASDAQ or listed or quoted on an exchange or quotation system
that is a successor to the NYSE, the NYSE American or NASDAQ.
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Liquidation
Preference
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If
we liquidate, dissolve or wind up, holders of the Series I Preferred Stock will have the right to receive $17.50 per share,
plus any accumulated and unpaid dividends to, but not including, the date of payment, before any payment is made to the holders
of our common stock. Please see the section entitled “Description of the Series I Preferred Stock—Liquidation
Preference.”
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Ranking
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The
Series I Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon
our liquidation, dissolution or winding up, (1) senior to all classes or series of our common stock and to all other equity
securities issued by us other than equity securities referred to in clauses (2) and (3); (2) on a parity with all equity securities
issued by us with terms specifically providing that those equity securities rank on a parity with the Series I Preferred Stock
with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding
up; (3) junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior
to the Series I Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our
liquidation, dissolution or winding up; and (4) effectively junior to all of our existing and future indebtedness (including
indebtedness convertible into our common stock or preferred stock) and to the indebtedness and other liabilities of (as well
as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries. Please see the
section entitled “Description of the Series I Preferred Stock–Ranking.”
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Limited
Voting Rights
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Holders
of Series I Preferred Stock will generally have no voting rights. However, the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series I Preferred Stock (voting together as a class with all other series of parity
preferred stock we may issue upon which like voting rights have been conferred and are exercisable) is required at any time
for us to authorize or issue any class or series of our capital stock ranking senior to the Series I Preferred Stock with
respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up, to amend any
provision of our certificate of incorporation or the Series I Preferred Stock Certificate of Designations so as to materially
and adversely affect any rights of the Series I Preferred Stock or to take certain other actions. Please see the section entitled
“Description of the Series I Preferred Stock—Voting Rights.”
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Information
Rights
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During
any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series I Preferred Stock
are outstanding, we will use our best efforts to (i) make available on our website copies of the Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon
request, supply copies of such reports to any holders or prospective holder of Series I Preferred Stock, subject to certain
exceptions described in this prospectus. We will use our best efforts to mail (or otherwise provide) the information to the
holders of the Series I Preferred Stock within 15 days after the respective dates by which a periodic report on Form 10-K
or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC, if we
were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to
file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.
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Listing
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We
have filed an application to list our Series I Preferred Stock on The NASDAQ Capital Market under the symbol “AYTUP”
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Use
of Proceeds
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We
intend to use the net proceeds from this offering for general corporate purposes, including working capital. See “Use
of Proceeds” on page S-16.
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Risk
Factors
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Investing
in our securities involves significant risks. You should read the “Risk Factors” section beginning on page S-10
of this prospectus supplement and in the documents incorporated by reference in this prospectus supplement and accompanying
prospectus, including the risk factors described under the section entitled “Risk Factors” contained in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2019, for a discussion of factors to consider before deciding
to purchase our securities.
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Transfer
Agent
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The
registrar, transfer agent and dividend and redemption price disbursing agent in respect
of the Series I Preferred Stock will be I Direct Transfer, LLC, subsidiary of Issuer
Direct Corporation, located at One Glenwood Avenue, Suite 1001 Raleigh, NC, 27603.
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Certain U.S.
Federal Income Tax Considerations
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For
a discussion of the federal income tax consequences of purchasing, owning and disposing
of the Series I Preferred Stock, please see the section entitled “Certain Material U.S.
Federal Income Tax Considerations.” You should consult your tax advisor with respect
to the U.S. federal income tax consequences of owning the Series I Preferred Stock in
light of your own particular situation and with respect to any tax consequences arising
under the laws of any state, local, foreign or other taxing jurisdiction.
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Book Entry
and Form
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The
Series I Preferred Stock will be represented by one or more global certificates in definitive, fully registered form deposited
with a custodian for, and registered in the name of, a nominee of The Depository Trust Company (“DTC”).
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RISK
FACTORS
An
investment in our securities involves a high degree of risk. Prior to making a decision about investing in our securities, you
should carefully consider the specific factors discussed below, the risk factors beginning on page 6 of the accompanying
prospectus, as well as the risk factors discussed under the section entitled “Risk Factors” contained in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2019 as updated by our subsequent filings under the Exchange Act,
each of which is incorporated by reference in this prospectus supplement and accompanying prospectus in their entirety, together
with all of the other information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus,
the documents incorporated by reference herein and therein, and any related free writing prospectus. The risks and uncertainties
we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently
deem immaterial may also affect our operations. These risks might cause you to lose all or part of your investment in the offered
securities.
Risks
Related to our Operations
Our
cash position is low relative to our anticipated cash needs.
As
of February 28, 2020, we had a cash balance of approximately $2.4 million. This is substantially less than our projected short-term
cash requirements (including fixed costs and projected future costs). There can be no guaranty that we can raise additional funds
from sales of our equity or debt securities on terms that are acceptable to us or otherwise generate sufficient revenue to maintain
our operations. Our inability to obtain such funds would have a material adverse effect on the Company’s financial condition
and operations.
Risks
Related to our Bylaws
Our
Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain litigation
that may be initiated by our stockholders, including claims under the Securities Act, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our
Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware shall, to the fullest extent permitted
by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting
a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders,
(iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate
of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. The choice of forum
provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with
us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers,
employees and agents. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing
any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery may also reach different
judgments or results than would other courts, including courts where a stockholder considering an action may be located or would
otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively,
if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely
affect our business and financial condition. Notwithstanding the foregoing, the exclusive provision shall not preclude or contract
the scope of exclusive federal or concurrent jurisdiction for actions brought under the Exchange Act, or the Securities Act of
1933, as amended, or the Securities Act, or the respective rules and regulations promulgated thereunder.
Risks
Related to this Offering
Our
management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not
yield a significant return.
Our
management will have broad discretion over the use of proceeds from this offering. We will use the net proceeds from this offering
primarily for working capital and general corporate purposes. Our management will have considerable discretion in the application
of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds
are being used appropriately. We may use the net proceeds for corporate purposes that do not increase our operating results or
enhance the value of our preferred stock. The failure of our management to use these funds effectively could have a material adverse
effect on our business, cause the market price of our preferred stock to decline and potentially impair the operation and expansion
of our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing
instruments and U.S. government securities. These investments may not yield a favorable return to our stockholders.
Our
Series I Preferred Stock is subordinate to our existing and future debt, and your interests could be diluted by the issuance of
additional preferred shares and by other transactions.
The
Series I Preferred Stock will rank junior to all of our existing and future debt and to other non-equity claims on us and our
assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings. Our future
debt may include restrictions on our ability to pay distributions to preferred stockholders. The issuance of additional shares
of Series I Preferred Stock or another series of preferred stock designated as ranking on parity with the Series I Preferred Stock
would dilute the interests of the holders of shares of the Series I Preferred Stock, and the issuance of shares of any class or
series of our capital stock expressly designated as ranking senior to the Series I Preferred Stock or the incurrence of additional
indebtedness could affect our ability to pay distributions on, redeem or pay the liquidation preference on the Series I Preferred
Stock. The Series I Preferred Stock do not contain any terms relating to or limiting our indebtedness or affording the holders
of shares of the Series I Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger
or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of shares of
the Series I Preferred Stock, so long as the rights, preferences, privileges or voting power of the Series I Preferred Stock or
the holders thereof are not materially and adversely affected, and so long as such transaction does not involve the authorization
or creation, or increasing the authorized or issued amount of, any class or series of capital stock ranking senior to the Series
I Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation
The
Series I Preferred Stock has not been rated.
Our
Series I Preferred Stock has not been rated by any nationally recognized statistical rating organization, which may negatively
affect their market value and your ability to sell such shares. No assurance can be given, however, that one or more rating agencies
might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market
price of our Series I Preferred Stock. In addition, we may elect in the future to obtain a rating of our Series I Preferred Stock,
which could adversely impact the market price of our Series I Preferred Stock. Ratings only reflect the views of the rating agency
or agencies issuing the ratings and such ratings could be revised downward or withdrawn entirely at the discretion of the issuing
rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of a rating could have an
adverse effect on the market price of our Series I Preferred Stock.
As
a holder of shares of the Series I Preferred Stock, you have extremely limited voting rights.
Your
voting rights as a holder of shares of the Series I Preferred Stock will be limited. Our shares of common stock are the only class
of our securities carrying full voting rights. Voting rights for holders of shares of the Series I Preferred Stock exist primarily
with respect to adverse changes in the terms of the Series I Preferred Stock and the creation of additional classes or series
of preferred shares that are senior to the Series I Preferred Stock. Other than these limited voting rights described in this
prospectus supplement, holders of shares of the Series I Preferred Stock will not have any voting rights. See “Description
of the Series I Preferred Stock—Voting Rights” in this prospectus supplement.
Our
cash available for distributions may not be sufficient to pay distributions on the Series I Preferred Stock at expected levels,
and we cannot assure you of our ability to pay distributions in the future. We may use borrowed funds or funds from other sources
to pay distributions, which may adversely impact our operations.
We
intend to pay regular monthly distributions to holders of our Series I Preferred Stock. Distributions declared by us will be authorized
by our Board of Directors in its sole discretion out of assets legally available for distribution and will depend upon a number
of factors, including our earnings, our financial condition, restrictions under applicable law, our need to comply with the terms
of our existing financing arrangements, the capital requirements of our company and other factors as our Board of Directors may
deem relevant from time to time. We may be required to fund distributions from working capital, proceeds of this offering or a
sale of assets to the extent distributions exceed earnings or cash flows from operations. Funding distributions from working capital
would restrict our operations. If we are required to sell assets to fund distributions, such asset sales may occur at a time or
in a manner that is not consistent with our disposition strategy. If we borrow to fund distributions, our leverage ratios and
future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise
would have been. We may not be able to pay distributions in the future. In addition, some of our distributions may be considered
a return of capital for income tax purposes. If we decide to make distributions in excess of our current and accumulated earnings
and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent
of the holder’s adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing
the holder’s adjusted tax basis in its investment. If distributions exceed the adjusted tax basis of a holder’s shares,
they will be treated as gain from the sale or exchange of such stock.
We
could be prevented from paying cash dividends on the Series I Preferred Stock due to prescribed legal requirements.
Holders
of shares of Series I Preferred Stock do not have a right to dividends on such shares unless declared or set aside for payment
by our Board of Directors. Under Delaware law, cash dividends on capital stock may only be paid from “surplus” or,
if there is no “surplus,” from the corporation’s net profits for the then-current or the preceding fiscal year.
Unless we operate profitably, our ability to pay cash dividends on the Series I Preferred Stock would require the availability
of adequate “surplus,” which is defined as the excess, if any, of net assets (total assets less total liabilities)
over capital. Our business may not generate sufficient cash flow from operations to enable us to pay dividends on the Series I
Preferred Stock when payable. Further, even if adequate surplus is available to pay cash dividends on the Series I Preferred Stock,
we may not have sufficient cash to pay dividends on the Series I Preferred Stock.
Furthermore,
no dividends on Series I Preferred Stock shall be authorized by our Board of Directors or paid, declared or set aside for payment
by us at any time when the authorization, payment, declaration or setting aside for payment would be unlawful under Delaware law
or any other applicable law. See “Description of the Series I Preferred Stock — Dividends.”
We
may redeem the Series I Preferred Stock and you may not receive dividends that you anticipate if we do redeem the Series I.
On
or after , 2025 we may,
at our option, redeem the Series I Preferred Stock, in whole or in part, at any time or from time to time. Also, upon the occurrence
of a Change of Control, we may, at our option, redeem the Series I Preferred Stock, in whole or in part, within 120 days after
the first date on which such Change of Control occurred. We may have an incentive to redeem the Series I Preferred Stock voluntarily
if market conditions allow us to issue other preferred stock or debt securities at a rate that is lower than the dividend rate
on the Series I Preferred Stock. If we redeem the Series I Preferred Stock, then from and after the redemption date, dividends
will cease to accrue on shares of Series I Preferred Stock, the shares of Series I Preferred Stock shall no longer be deemed outstanding
and all rights as a holder of those shares will terminate, except the right to receive the redemption price plus accumulated and
unpaid dividends, if any, payable upon redemption.
Holders
of shares of the Series I Preferred Stock should not expect us to redeem the Series I Preferred Stock on or after the date they
become redeemable at our option.
The
Series I Preferred Stock will be a perpetual equity security. This means that it will have no maturity or mandatory redemption
date and will not be redeemable at the option of the holders. The Series I Preferred Stock may be redeemed by us at our option
either in whole or in part, from time to time, at any time on or after
, 2025, or upon the occurrence of a Change of Control. Any decision we may make at any time to propose a redemption of the Series
I Preferred Stock will depend upon, among other things, our evaluation of our capital position, the composition of our stockholders’
equity and general market conditions at that time.
The
Series I Preferred Stock is not convertible, and investors will not realize a corresponding upside if the price of the common
stock increases.
The
Series I Preferred Stock is not convertible into shares of our common stock and earns dividends at a fixed rate. Accordingly,
an increase in market price of our common stock will not necessarily result in an increase in the market price of our Series I
Preferred Stock. The market value of the Series I Preferred Stock may depend more on dividend and interest rates for other preferred
stock, commercial paper and other investment alternatives and our actual and perceived ability to pay dividends on, and in the
event of dissolution satisfy the liquidation preference with respect to, the Series I Preferred Stock.
The
Change of Control right may make it more difficult for a party to acquire us or discourage a party from acquiring us.
The
Change of Control right (as defined under “Description of the Series I Preferred Stock — Special Optional Redemption”)
may have the effect of discouraging a third party from making an acquisition proposal for us or of delaying, deferring or preventing
certain of our change of control transactions under circumstances that otherwise could provide the holders of our Series I Preferred
Stock with the opportunity to realize a premium over the then-current market price of such equity securities or that stockholders
may otherwise believe is in their best interests.
There
is no established trading market for the Series I Preferred Stock, listing on NASDAQ does not guarantee a market for the Series
I Preferred Stock and the market price and trading volume of the Series I Preferred Stock may fluctuate significantly.
The
Series I Preferred Stock is a new issue of securities with no trading market. We have filed an application to list the Series
I Preferred Stock on NASDAQ. However, an active and liquid trading market to sell the Series I Preferred Stock may not develop
after the issuance of the Series I Preferred Stock offered hereby or, even if it develops, may not be sustained. Because the Series
I Preferred Stock has no stated maturity date, investors seeking liquidity may be limited to selling their shares in the secondary
market. If an active trading market does not develop, the market price and liquidity of the Series I Preferred Stock may be adversely
affected. Even if an active public market does develop, the market price for the Series I Preferred Stock may not equal or exceed
the price you pay for your Series I Preferred Stock.
The
market determines the trading price for the Series I Preferred Stock and may be influenced by many factors, including our history
of paying distributions on the Series I Preferred Stock, variations in our financial results, the market for similar securities,
investors’ perception of us, our issuance of additional preferred equity or indebtedness and general economic, industry,
interest rate and market conditions. Because the Series I Preferred Stock carries a fixed distribution rate, its value in the
secondary market will be influenced by changes in interest rates and will tend to move inversely to such changes. In particular,
an increase in market interest rates may result in higher yields on other financial instruments and may lead purchasers of Series
I Preferred Stock to demand a higher yield on the price paid for the Series I Preferred Stock, which could adversely affect the
market price of the Series I Preferred Stock.
If
the Series I Preferred Stock is delisted, the ability to transfer or sell shares of the Series I Preferred Stock may be limited
and the market value of the Series I Preferred Stock will likely be materially adversely affected.
The
Series I Preferred Stock does not contain provisions that are intended to protect investors if the Series I Preferred Stock is
delisted from NASDAQ. If the Series I Preferred Stock is delisted from NASDAQ, investors’ ability to transfer or sell shares
of the Series I Preferred Stock will be limited and the market value of the Series I Preferred Stock will likely be materially
adversely affected. Moreover, since the Series I Preferred Stock has no stated maturity date, investors may be forced to hold
shares of the Series I Preferred Stock indefinitely while receiving stated dividends thereon when, as and if authorized by our
Board of Directors and paid by us with no assurance as to ever receiving the liquidation value thereof.
Market
interest rates may have an effect on the value of the Series I Preferred Stock.
One
of the factors that will influence the price of the Series I Preferred Stock will be the distribution yield on the Series I Preferred
Stock (as a percentage of the market price of the Series I Preferred Stock) relative to market interest rates. An increase in
market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the
Series I Preferred Stock to expect a higher distribution yield (and higher interest rates would likely increase our borrowing
costs and potentially decrease funds available for distribution payments). Thus, higher market interest rates could cause the
market price of the Series I Preferred Stock to decrease and reduce the amount of funds that are available and may be used to
make distribution payments.
In
the event of a liquidation, you may not receive the full amount of your liquidation preference.
In
the event of our liquidation of the Company, the proceeds will be used first to repay indebtedness and then to pay holders of
shares of the Series I Preferred Stock and any other class or series of our capital stock ranking senior to or on parity with
the Series I Preferred Stock as to liquidation the amount of each holder’s liquidation preference and accrued and unpaid
distributions through the date of payment. In the event we have insufficient funds to make payments in full to holders of the
shares of the Series I Preferred Stock and any other class or series of our capital stock ranking senior to or on parity with
the Series I Preferred Stock as to liquidation, such funds will be distributed ratably among such holders and such holders may
not realize the full amount of their liquidation preference.
The
market price of the Series I Preferred Stock could be substantially affected by various factors.
The
market price of the Series I Preferred Stock could be subject to wide fluctuations in response to numerous factors. The price
of the Series I Preferred Stock that will prevail in the market after this offering may be higher or lower than the offering price
depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.
These
factors include, but are not limited to, the following:
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prevailing interest
rates, increases in which may have an adverse effect on the market price of the Series I Preferred Stock;
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trading prices of
similar securities;
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our history of timely
dividend payments;
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the annual yield
from dividends on the Series I Preferred Stock as compared to yields on other financial instruments;
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general economic
and financial market conditions;
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government action
or regulation;
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the financial condition,
performance and prospects of us and our competitors;
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changes in financial
estimates or recommendations by securities analysts with respect to us or our competitors in our industry;
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our issuance of
additional preferred equity or debt securities; and
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actual or anticipated
variations in quarterly operating results of us and our competitors.
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As
a result of these and other factors, investors who purchase the Series I Preferred Stock in this offering may experience a decrease,
which could be substantial and rapid, in the market price of the Series I Preferred Stock, including decreases unrelated to our
operating performance or prospects.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus, the documents we have filed with the SEC that are incorporated by reference
in this prospectus supplement and accompanying prospectus and any free writing prospectus that we have authorized for use in connection
with this offering contain “forward-looking statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act, concerning our business, operations and financial performance and condition. In some
cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” believe,”
“contemplate,” “continue,” “could,” “due,” “estimate,” “expect,”
“goal,” “intend,” “may,” “objective,” “plan,” “predict,”
“potential,” “positioned,” “seek,” “should,” “target,” “will,”
“would” and other similar expressions that are predictions of or indicate future events and future trends, or the
negative of these terms or other comparable terminology.
These
forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation the risks
described in “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated
by reference herein. These risks are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment.
We
believe that it is important to communicate our future expectations to our investors. However, there may be events in the future
that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations
we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations,
estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions
and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties and other factors
that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus supplement,
the accompanying prospectus, the documents we have filed with the SEC that are incorporated by reference in this prospectus supplement
and accompanying prospectus, and any free writing prospectus that we have authorized for use in connection with this offering
may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among
other things, those listed under the heading “Risk Factors” beginning on page S-10 of this prospectus
supplement and elsewhere in the accompanying prospectus and those included in our Annual Report on Form 10-K for the fiscal
year ended June 30, 2019 (as supplemented by our Quarterly Reports on form 10-Q) and other documents we periodically file with
the SEC that are incorporated by reference in this prospectus supplement and accompanying prospectus. We urge you to consider
these factors carefully in evaluating the forward-looking statements. We assume no obligation to update or revise these forward-looking
statements for any reason, even if new information becomes available in the future, except as may be required under applicable
law.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance
or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation
to update publicly any forward-looking statements for any reason after the date of this prospectus supplement to conform these
statements to actual results or to changes in our expectations.
You
should read this prospectus supplement, the accompanying prospectus, the documents we have filed with the SEC that are incorporated
by reference in this prospectus supplement and accompanying prospectus and any free writing prospectus that we have authorized
for use in connection with this offering completely and with the understanding that our actual future results, levels of activity,
performance and events and circumstances may be materially different from what we expect. We qualify all of the forward-looking
statements in the foregoing documents by these cautionary statements.
USE
OF PROCEEDS
We
estimate that the net proceeds from the sale of the Series I Preferred Stock in this offering after deducting the underwriting
discount and estimated offering costs and expenses payable by us, will be approximately $ million (or $ million
if the underwriters fully exercise their option to purchase additional shares). We intend to use the net proceeds, if any, from
this offering for working capital and other general corporate purposes.
We
have not allocated any specific portion of the net proceeds to any particular purpose, and our management will have the discretion
to allocate the proceeds as it determines. Furthermore, the amount and timing of our actual expenditures will depend on numerous
factors, including the cash used in or generated by our operations, the pace of the integration of acquired businesses, the level
of our sales and marketing activities and the attractiveness of any additional acquisitions or investments. See “Risk Factors
– Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways
which may not yield a significant return.” on page S-10.
CAPITALIZATION
The table below sets forth our cash and
cash equivalents and capitalization as of December 31, 2019 on:
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an actual basis;
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on an pro forma as adjusted basis
to reflect the issuance of the Series I Preferred Stock in this offering, and receipt of the estimated $ million net
proceeds therefrom.
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You should consider this table in conjunction
with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and our financial statements and related notes incorporated by reference into this prospectus supplement and the other financial
information included elsewhere in this prospectus supplement or incorporated by reference in this prospectus supplement and the
accompanying prospectus.
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As of December 31, 2019
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Actual
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Pro
Forma(*)
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Pro Forma
As Adjusted
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(in thousands, except share data)
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Cash and cash equivalents
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5,511
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1
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Total long-term liabilities
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41,438
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—
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41,438
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Stockholders’ equity
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Preferred Stock, $0.001 par value: 50,000,000 shares authorized
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Convertible Preferred Stock, Series D – 400,000 shares issued and outstanding at December 31, 2019 (unaudited)
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—
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—
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|
—
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Convertible Preferred Stock, Series F – 10,000 shares issued and outstanding at December 31, 2019 (Unaudited)
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—
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—
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—
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Convertible Preferred Stock, Series G - 9,805,845 shares issued and outstanding at December 31, 2019 (unaudited)
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1
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—
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1
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Preferred Stock, Series I – no shares issued and outstanding, actual, shares outstanding, pro forma and pro forma as adjusted
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—
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Common Stock, par value $.0001; 100,000,000 shares authorized; shares issued and outstanding 20,733,052 as of December 31, 2019 (unaudited)
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2
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—
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|
2
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Additional paid-in capital (unaudited)
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128,620
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|
—
|
|
|
|
128,620
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Accumulated deficit (unaudited)
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(111,533
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)
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—
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(111,533
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)
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Total stockholders’ equity
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17,090
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Total capitalization
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58,528
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(*)
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Capitalization table assumes an estimated approximately
$ million, net of offering costs, raised from the Series I Preferred Stock offering and may not reflect actual net amounts
raised from this transaction.
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Based on 20,733,052 shares of our common
stock outstanding as of December 31, 2019, and excludes as of that date:
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1,482
shares of our common Stock issuable upon exercise of outstanding stock options under
our 2015 Stock Option and Incentive Plan at a weighted average exercise price of $328.00
per share, of which 1,482 are exercisable;
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26,459,663
shares of our Common Stock issuable upon exercise of outstanding warrants with a weighted
average exercise price of $3.06 per share; and
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DIVIDEND
POLICY
We
have never declared or paid cash dividends on our common stock, and we currently do not plan to declare dividends on shares of
our common stock in the foreseeable future. We expect to retain all future earnings, if any, for use in the operation and expansion
of our business. The payment of cash dividends in the future, if any, will be at the discretion of our Board of Directors and
will depend upon such factors as any other factors our board deems relevant. Holders of Series I Preferred Stock will have certain
dividend rights. See “Description of the Series I Preferred Stock.”
DESCRIPTION
OF THE SERIES I PREFERRED STOCK
The
description of certain terms of the 11% Series I Cumulative Redeemable Perpetual Preferred Stock (“Series I Preferred
Stock”) in this prospectus and the accompanying prospectus does not purport to be complete and is in all respects subject
to, and qualified in its entirety by references to the relevant provisions of our certificate of incorporation, the certificate
of designations establishing the terms of our Series I Preferred Stock, our bylaws and Delaware corporate law. Copies of our certificate
of incorporation, certificate of designations, bylaws and all amendments thereto, are available from us upon request.
General
Pursuant to our certificate of
incorporation, as amended, we are currently authorized to designate and issue up to 50,000,000 shares of preferred stock, par
value $0.001 per share, in one or more classes or series and, subject to the limitations prescribed by our certificate of
incorporation, as amended, and Delaware corporate law, with such rights, preferences, privileges and restrictions of each
class or series of preferred stock, including dividend rights, voting rights, terms of redemption, liquidation preferences
and the number of shares constituting any class or series as our Board of Directors may determine, without any vote or action
by our shareholders. As of February 28, 2020, we had 12,213,747 shares of preferred stock outstanding. Assuming all of the
shares of Series I Preferred Stock offered hereunder are issued, we will have available for issuance shares of Series I
Preferred Stock and an additional shares authorized but undesignated and unissued shares of preferred stock. The Series
I Preferred Stock offered hereby, when issued, delivered and paid for in accordance with the terms of the underwriting
agreement, will be fully paid and nonassessable. Our Board of Directors may, without the approval of holders of the Series I
Preferred Stock or our common stock, designate additional series of authorized preferred stock ranking junior to or on parity
with the Series I Preferred Stock or designate additional shares of the Series I Preferred Stock and authorize the issuance
of such shares. Designation of preferred stock ranking senior to the Series I Preferred Stock will require approval of the
holders of Series I Preferred Stock, as described below in “Voting Rights.”
The
registrar, transfer agent and dividend and redemption price disbursing agent in respect of the Series I Preferred Stock is Direct
Transfer, LLC, subsidiary of Issuer Direct Corporation, located at One Glenwood Avenue, Suite 1001 Raleigh, NC, 27603.
Listing
We
have applied to list our Series I Preferred Stock on The Nasdaq Capital Market under the symbol “AYTUP.”
No
Maturity, Sinking Fund or Mandatory Redemption
The
Series I Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. Shares of
the Series I Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase them. We
are not required to set aside funds to redeem the Series I Preferred Stock.
Ranking
The
Series I Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon our
liquidation, dissolution or winding up:
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(1)
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senior
to all classes or series of our common stock and to all other equity
securities issued by us including, as of March 2, 2020 our outstanding Series F Preferred Stock and Series G Preferred and any
shares of Series H Stock that may be issued other than equity securities referred to in clauses (2) and (3) below;
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(2)
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on
a parity with all equity securities issued by us with terms specifically providing that those equity securities rank on a
parity with the Series I Preferred Stock with respect to rights to the payment of dividends and the distribution of assets
upon our liquidation, dissolution or winding up;
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(3)
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junior
to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series
I Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation,
dissolution or winding up (please see the section entitled “—Voting Rights” below); and
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(4)
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effectively
junior to all of our existing and future indebtedness (including indebtedness convertible to our common stock or preferred
stock) and to any indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our
subsidiaries.
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Holders
of shares of the Series I Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, out of
our funds legally available for the payment of dividends, cumulative cash dividends at the rate of 11% per annum on the
$17.50 per share liquidation preference of the Series I Preferred Stock (equivalent to $1.925 per annum per share).
Cumulative dividends on the Series I Preferred Stock will accrue daily commencing on the date of issuance and will be payable
monthly in arrears on the 15th day of each month provided that if any dividend payment date is not a business day, as defined
in the certificate of designation, then the dividend that would otherwise have been payable on that dividend payment date
may be paid on the next succeeding business day and no interest, additional dividends or other sums will accrue on the amount
so payable for the period from and after that dividend payment date to that next succeeding business day. Any dividend
payable on the Series I Preferred Stock, including dividends payable for any partial dividend period, will be computed on the
basis of a 360-day year consisting of twelve 30-day months; provided that for partial dividend periods, dividend payments
will be pro rated, unless otherwise provided in the applicable securities offering and sale documents. .Dividends will be
payable to holders of record as they appear in our stock records for the Series I Preferred Stock at the close of business on
the applicable record date, which will be the close of business on the last day of the preceding month, whether or not a
business day, immediately preceding the month in which the applicable dividend payment date falls. As a result, holders of
shares of Series I Preferred Stock will not be entitled to receive dividends on a dividend payment date if such shares were
not issued and outstanding on the applicable dividend record date.
No
dividends on shares of Series I Preferred Stock shall be authorized by our Board of Directors or paid or set apart for payment
by us at any time when the terms and provisions of any agreement of ours, including any agreement relating to our indebtedness,
prohibit the authorization, payment or setting apart for payment thereof or provide that the authorization, payment or setting
apart for payment thereof would constitute a breach of the agreement or a default under the agreement, or if the authorization,
payment or setting apart for payment shall be restricted or prohibited by law. You should review the information appearing above
under “Risk Factors— We could be prevented from paying cash dividends on the Series I Preferred Stock due to prescribed
legal requirements” and “Risk Factors— Our cash available for distributions may not be sufficient to pay distributions
on the Series I Preferred Stock at expected levels, and we cannot assure you of our ability to pay distributions in the future.
We may use borrowed funds or funds from other sources to pay distributions, which may adversely impact our operations” for
information as to, among other things, other circumstances under which we may be unable to pay dividends on the Series I Preferred
Stock.
Notwithstanding
the foregoing, dividends on the Series I Preferred Stock will accumulate whether or not we have earnings, whether or not there
are funds legally available for the payment of those dividends and whether or not those dividends are declared by our Board of
Directors. No interest, or sum in lieu of interest, will be payable in respect of any dividend payment or payments on the Series
I Preferred Stock that may be in arrears, and holders of the Series I Preferred Stock will not be entitled to any dividends in
excess of full cumulative dividends described above. Any dividend payment made on the Series I Preferred Stock shall first be
credited against the earliest accumulated but unpaid dividend due with respect to those shares.
Future
distributions on our common stock and preferred stock, including the Series I Preferred Stock will be at the discretion of our
Board of Directors and will depend on, among other things, our results of operations, cash flow from operations, financial condition
and capital requirements, any debt service requirements and any other factors our Board of Directors deems relevant. Accordingly,
we cannot guarantee that we will be able to make cash distributions on our preferred stock or what the actual distributions will
be for any future period.
Except
as provided in the next paragraph, unless full cumulative dividends on all shares of Series I Preferred Stock have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for
payment for all past dividend periods, no dividends (other than in shares of common stock or in shares of any series of preferred
stock that we may issue ranking junior to the Series I Preferred Stock as to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding up) shall be declared or paid or set aside for payment upon shares of our common
stock or preferred stock that we may issue ranking junior to, or on a parity with, the Series I Preferred Stock as to the payment
of dividends or the distribution of assets upon liquidation, dissolution or winding up. Nor shall any other distribution be declared
or made upon shares of our common stock or preferred stock that we may issue ranking junior to, or on a parity with, the Series
I Preferred Stock as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up. Also,
any shares of our common stock or preferred stock that we may issue ranking junior to or on a parity with the Series I Preferred
Stock as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be redeemed,
purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption
of any such shares) by us (except by conversion into or exchange for our other capital stock that we may issue ranking junior
to the Series I Preferred Stock as to the payment of dividends and the distribution of assets upon liquidation, dissolution or
winding up); provided, however, that the foregoing shall not prevent the purchase or acquisition by us of shares of Series I Preferred
Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series I Preferred
Stock.
When
dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series I Preferred Stock
and the shares of any other series of preferred stock that we may issue ranking on a parity as to the payment of dividends with
the Series I Preferred Stock, all dividends declared upon the Series I Preferred Stock and any other series of preferred stock
that we may issue ranking on a parity as to the payment of dividends with the Series I Preferred Stock shall be declared pro rata
so that the amount of dividends declared per share of Series I Preferred Stock and such other series of preferred stock that we
may issue shall in all cases bear to each other the same ratio that accrued dividends per share on the Series I Preferred Stock
and such other series of preferred stock that we may issue (which shall not include any accrual in respect of unpaid dividends
for prior dividend periods if such preferred stock does not have a cumulative dividend) bear to each other. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series I Preferred Stock
that may be in arrears.
Liquidation
Preference
In
the event of our voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series I Preferred
Stock will be entitled to be paid out of the assets we have legally available for distribution to our shareholders, subject
to the preferential rights of the holders of any class or series of our capital stock we may issue ranking senior to the
Series I Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a
liquidation preference of $17.50 per share, plus an amount equal to any accumulated and unpaid dividends to, but not
including, the date of payment, before any distribution of assets is made to holders of our common stock or any other class
or series of our capital stock we may issue that ranks junior to the Series I Preferred Stock as to liquidation
rights.
In
the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of Series I Preferred Stock and the corresponding
amounts payable on all shares of other classes or series of our capital stock that we may issue ranking on a parity with the Series
I Preferred Stock in the distribution of assets, then the holders of the Series I Preferred Stock and all other such classes or
series of capital stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
Holders
of Series I Preferred Stock will be entitled to written notice of any such liquidation, dissolution or winding up no fewer than
30 days and no more than 60 days prior to the payment date. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Series I Preferred Stock will have no right or claim to any of our remaining assets.
The consolidation or merger of us with or into any other corporation, trust or entity or of any other entity with or into us,
or the sale, lease, transfer or conveyance of all or substantially all of our property or business, shall not be deemed a liquidation,
dissolution or winding up of us (although such events may give rise to the special optional redemption to the extent described
below).
Redemption
The
Series I Preferred Stock is not redeemable by us prior to , 2025, except as described below under “—Special Optional
Redemption.”
Optional
Redemption. On and after , 2025, we may, at our option, upon not less than 30 nor more than 60 days’ written notice,
redeem the Series I Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of
$17.50 per share, plus any accumulated and unpaid dividends thereon to, but not including, the date fixed for redemption.
If we elect to redeem any shares of Series I Preferred Stock as described in this “Optional Redemption” section, we
may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the
proceeds from the issuance of other equity securities or any other specific source.
Special
Optional Redemption.
Upon
the occurrence of a Change of Control (as defined below), we may, at our option, upon not less than 30 nor more than 60 days’
written notice, redeem the Series I Preferred Stock, in whole or in part, within 120 days after the first date on which such Change
of Control occurred, for cash at a redemption price of $17.50 per share, plus any accumulated and unpaid dividends thereon
to, but not including, the redemption date. If we elect to redeem any shares of Series I Preferred Stock as described in this
“Special Optional redemption” section, we may use any available cash to pay the redemption price, and we will not
be required to pay the redemption price only out of the proceeds from the issuance of other equity securities or any other specific
source.
A
“Change of Control” is deemed to occur when the following have occurred and are continuing:
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the
acquisition by any person, including any syndicate or group deemed to be a “person”
under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of purchases, mergers
or other acquisition transactions of our stock entitling that person to exercise more
than 50% of the total voting power of all our stock entitled to vote generally in the
election of our directors (except that such person will be deemed to have beneficial
ownership of all securities that such person has the right to acquire, whether such right
is currently exercisable or is exercisable only upon the occurrence of a subsequent condition);
and
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following
the closing of any transaction referred to above, neither we nor the acquiring or surviving
entity has a class of common securities (or American Depositary Receipts representing
such securities) listed on the NYSE, the NYSE American or Nasdaq, or listed or quoted
on an exchange or quotation system that is a successor to the NYSE, the NYSE American
or Nasdaq.
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Redemption
Procedures. In the event we elect to redeem Series I Preferred Stock, the notice of redemption will be mailed by us postage
prepaid to each holder of record of Series I Preferred Stock called for redemption at such holder’s address as it appears
on our stock transfer records, not less than 30 nor more than 60 days prior to the redemption date, and will state the following:
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the
number of shares of Series I Preferred Stock to be redeemed;
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the
place or places where certificates (if any) for the Series I Preferred Stock are to be
surrendered for payment of the redemption price;
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that
dividends on the shares to be redeemed will cease to accumulate on the redemption date;
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whether
such redemption is being made pursuant to the provisions described above under “—Optional
Redemption” or “—Special Optional Redemption”; and
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if
applicable, that such redemption is being made in connection with a Change of Control
and, in that case, a brief description of the transaction or transactions constituting
such Change of Control.
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If
less than all of the Series I Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also
specify the number of shares of Series I Preferred Stock held by such holder to be redeemed. No failure to give such notice or
any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of
Series I Preferred Stock except as to the holder to whom notice was defective or not given.
Holders
of Series I Preferred Stock to be redeemed shall surrender the Series I Preferred Stock at the place designated in the notice
of redemption and shall be entitled to the redemption price and any accumulated and unpaid dividends payable upon the redemption
following the surrender. If notice of redemption of any shares of Series I Preferred Stock has been given and if we have irrevocably
set aside the funds necessary for redemption in trust for the benefit of the holders of the shares of Series I Preferred Stock
so called for redemption, then from and after the redemption date (unless default shall be made by us in providing for the payment
of the redemption price plus accumulated and unpaid dividends, if any), dividends will cease to accumulate on those shares of
Series I Preferred Stock, those shares of Series I Preferred Stock shall no longer be deemed outstanding and all rights of the
holders of those shares will terminate, except the right to receive the redemption price plus accumulated and unpaid dividends,
if any, payable upon redemption. If any redemption date is not a business day, then the redemption price and accumulated and unpaid
dividends, if any, payable upon redemption may be paid on the next business day and no interest, additional dividends or other
sums will accumulate on the amount payable for the period from and after that redemption date to that next business day. If less
than all of the outstanding Series I Preferred Stock is to be redeemed, the Series I Preferred Stock to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional shares) or by any other equitable method we determine.
In
connection with any redemption of Series I Preferred Stock, we shall pay, in cash, any accumulated and unpaid dividends to, but
not including, the redemption date, unless a redemption date falls after a dividend record date and prior to the corresponding
dividend payment date, in which case each holder of Series I Preferred Stock at the close of business on such dividend record
date shall be entitled to the dividend payable on such shares on the corresponding dividend payment date notwithstanding the redemption
of such shares before such dividend payment date. Except as provided in this paragraph, we will make no payment or allowance for
unpaid dividends, whether or not in arrears, on shares of the Series I Preferred Stock to be redeemed.
Unless
full cumulative dividends on all shares of Series I Preferred Stock have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment for all past dividend periods,
no shares of Series I Preferred Stock shall be redeemed unless all outstanding shares of Series I Preferred Stock are simultaneously
redeemed and we shall not purchase or otherwise acquire directly or indirectly any shares of Series I Preferred Stock (except
by exchanging it for our capital stock ranking junior to the Series I Preferred Stock as to the payment of dividends and distribution
of assets upon liquidation, dissolution or winding up); provided, however, that the foregoing shall not prevent the purchase or
acquisition by us of shares of Series I Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding shares of Series I Preferred Stock.
Subject
to applicable law, we may purchase shares of Series I Preferred Stock in the open market, by tender or by private agreement. Any
shares of Series I Preferred Stock that we acquire may be retired and reclassified as authorized but unissued shares of preferred
stock, without designation as to class or series, and may thereafter be reissued as any class or series of preferred stock.
Voting
Rights
Holders
of the Series I Preferred Stock do not have any voting rights, except as set forth below or as otherwise required by law.
On
each matter on which holders of Series I Preferred Stock are entitled to vote, each share of Series I Preferred Stock will be
entitled to one vote. In instances described below where holders of Series I Preferred Stock vote with holders of any other class
or series of our preferred stock as a single class on any matter, the Series I Preferred Stock and the shares of each such other
class or series will have one vote for each $17.50 of liquidation preference (excluding accumulated dividends) represented
by their respective shares.
So
long as any shares of Series I Preferred Stock remain outstanding, we will not, without the affirmative vote or consent of the
holders of at least two-thirds of the shares of the Series I Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting (voting together as a class with all other series of parity preferred stock that we may issue
upon which like voting rights have been conferred and are exercisable), (a) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking senior to the Series I Preferred Stock with respect to payment
of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any of our authorized capital
stock into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase
any such shares; or (b) unless redeeming all Series I Preferred Stock in connection with such action, amend, alter, repeal or
replace our certificate of incorporation or the certificate of designations designating the Series I Preferred Stock, including
by way of a merger, consolidation or otherwise in which we may or may not be the surviving entity, so as to materially and adversely
affect and deprive holders of Series I Preferred Stock of any right, preference, privilege or voting power of the Series I Preferred
Stock (each, an “Event”). An increase in the amount of the authorized preferred stock, including the Series I Preferred
Stock, or the creation or issuance of any other series of preferred stock that we may issue, or any increase in the amount of
authorized shares of such series, in each case ranking on a parity with or junior to the Series I Preferred Stock with respect
to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed an Event
and will not require us to obtain two-thirds of the votes entitled to be cast by the holders of the Series I Preferred Stock and
all such other similarly affected series, outstanding at the time (voting together as a class).
Notwithstanding
the foregoing, if an Event set forth in the preceding paragraph materially and adversely affects the right, preference, privilege
or voting power of the Series I Preferred Stock but not all series of parity preferred stock that we may issue upon which voting
rights have been conferred and are exercisable, the affirmative vote or consent of the holders of at least two-thirds of the shares
of Series I Preferred Stock and all other similarly affected series outstanding at the time (voting together as a class) given
in person or proxy, either in writing or at a meeting, shall be required in lieu of the vote or consent that would otherwise be
required by the preceding paragraph.
The
foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of Series I Preferred Stock shall have been redeemed or called for redemption
upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
Except
as expressly stated in the certificate of designations or as may be required by applicable law, the Series I Preferred Stock do
not have any relative, participating, optional or other special voting rights or powers and the consent of the holders thereof
shall not be required for the taking of any corporate action.
Information
Rights
During
any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series I Preferred Stock are
outstanding, we will use our best efforts to (i) make available on our website copies of the Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act
if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies
of such reports to any holders or prospective holder of Series I Preferred Stock. We will use our best effort to mail (or otherwise
provide) the information to the holders of the Series I Preferred Stock within 15 days after the respective dates by which a periodic
report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with
the SEC, if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be
required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.
No
Conversion Rights
The
Series I Preferred Stock is not convertible into our common stock or any other security.
No
Preemptive Rights
No
holders of the Series I Preferred Stock will, as holders of Series I Preferred Stock, have any preemptive rights to purchase or
subscribe for our common stock or any other security.
Change
of Control
Provisions
in our certificate of incorporation, as amended, including the certificate of designations establishing the terms of the Series
I Preferred Stock, and bylaws may make it difficult and expensive for a third party to pursue a tender offer, change in control
or takeover attempt, which is opposed by management and the Board of Directors.
Book-Entry
Procedures
DTC
acts as securities depository for our outstanding Series I Preferred Stock. With respect to the Series I Preferred Stock offered
hereunder, we will issue one or more fully registered global securities certificates in the name of DTC’s nominee, Cede &
Co. These certificates will represent the total aggregate number of shares of Series I Preferred Stock. We will deposit these
certificates with DTC or a custodian appointed by DTC. We will not issue certificates to you for the shares of Series I Preferred
Stock that you purchase, unless DTC’s services are discontinued as described below.
Title
to book-entry interests in the Series I Preferred Stock will pass by book-entry registration of the transfer within the records
of DTC in accordance with its procedures. Book-entry interests in the securities may be transferred within DTC in accordance with
procedures established for these purposes by DTC. Each person owning a beneficial interest in shares of the Series I Preferred
Stock must rely on the procedures of DTC and the participant through which such person owns its interest to exercise its rights
as a holder of the Series I Preferred Stock.
DTC
has advised us that it is a limited-purpose trust company organized under the New York Banking Law, a member of the Federal Reserve
System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing
agency” registered under the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (“Direct
Participants”) deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions,
such as transfers and pledges in deposited securities through electronic computerized book-entry changes in Direct Participants’
accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. Access to the DTC system
is also available to others such as securities brokers and dealers, including the placement agents, banks and trust companies
that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect
Participants”). The rules applicable to DTC and its Direct and Indirect Participants are on file with the SEC.
When
you purchase shares of Series I Preferred Stock within the DTC system, the purchase must be by or through a Direct Participant.
The Direct Participant will receive a credit for the Series I Preferred Stock on DTC’s records. You will be considered to
be the “beneficial owner” of the Series I Preferred Stock. Your beneficial ownership interest will be recorded on
the Direct and Indirect Participants’ records, but DTC will have no knowledge of your individual ownership. DTC’s
records reflect only the identity of the Direct Participants to whose accounts shares of Series I Preferred Stock are credited.
You
will not receive written confirmation from DTC of your purchase. The Direct or Indirect Participants through whom you purchased
the Series I Preferred Stock should send you written confirmations providing details of your transactions, as well as periodic
statements of your holdings. The Direct and Indirect Participants are responsible for keeping an accurate account of the holdings
of their customers like you.
Transfers
of ownership interests held through Direct and Indirect Participants will be accomplished by entries on the books of Direct and
Indirect Participants acting on behalf of the beneficial owners.
Conveyance
of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
We
understand that, under DTC’s existing practices, in the event that we request any action of the holders, or an owner of
a beneficial interest in a global security, such as you, desires to take any action that a holder is entitled to take under our
certificate of incorporation (including the certificate of designations designating the Series I Preferred Stock), DTC would authorize
the Direct Participants holding the relevant shares to take such action, and those Direct Participants and any Indirect Participants
would authorize beneficial owners owning through those Direct and Indirect Participants to take such action or would otherwise
act upon the instructions of beneficial owners owning through them.
Any
redemption notices with respect to the Series I Preferred Stock will be sent to Cede & Co. If less than all of the outstanding
shares of Series I Preferred Stock are being redeemed, DTC will reduce each Direct Participant’s holdings of shares of Series
I Preferred Stock in accordance with its procedures.
In
those instances where a vote is required, neither DTC nor Cede & Co. itself will consent or vote with respect to the shares
of Series I Preferred Stock. Under its usual procedures, DTC would mail an omnibus proxy to us as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants whose accounts
the shares of Series I Preferred Stock are credited to on the record date, which are identified in a listing attached to the omnibus
proxy.
Dividends
on the Series I Preferred Stock are made directly to DTC’s nominee (or its successor, if applicable). DTC’s practice
is to credit participants’ accounts on the relevant payment date in accordance with their respective holdings shown on DTC’s
records unless DTC has reason to believe that it will not receive payment on that payment date.
Payments
by Direct and Indirect Participants to beneficial owners will be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in bearer form or registered in “street name.” These
payments will be the responsibility of the participant and not of DTC, us or any agent of ours.
DTC
may discontinue providing its services as securities depositary with respect to the Series I Preferred Stock at any time by giving
reasonable notice to us. Additionally, we may decide to discontinue the book-entry only system of transfers with respect to the
Series I Preferred Stock. In that event, we will print and deliver certificates in fully registered form for the Series I Preferred
Stock. If DTC notifies us that it is unwilling to continue as securities depositary, or it is unable to continue or ceases to
be a clearing agency registered under the Exchange Act and a successor depositary is not appointed by us within 90 days after
receiving such notice or becoming aware that DTC is no longer so registered, we will issue the Series I Preferred Stock in definitive
form, at our expense, upon registration of transfer of, or in exchange for, such global security.
According
to DTC, the foregoing information with respect to DTC has been provided to the financial community for informational purposes
only and is not intended to serve as a representation, warranty or contract modification of any kind.
Global
Clearance and Settlement Procedures
Initial
settlement for the Series I Preferred Stock will be made in immediately available funds. Secondary market trading among DTC’s
participants occurs in the ordinary way in accordance with DTC’s rules and will be settled in immediately available funds
using DTC’s Same-Day Funds Settlement System.
CERTAIN
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain
U.S. federal income tax considerations that may be applicable to “U.S. holders” and “non-U.S. holders”
(each as defined below) with respect to the purchase, ownership and disposition of the Series I Preferred Stock offered by this
prospectus. This discussion only applies to purchasers who purchase and hold the Series I Preferred Stock as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”) (generally property held
for investment). This discussion does not describe all of the tax consequences that may be relevant to each purchaser or holder
of the Series I Preferred Stock in light of his, her or its particular circumstances. We have not sought a ruling from the Internal
Revenue Service with respect to the statements made and conclusions reached in this summary, and there can be no assurance that
the Internal Revenue Service or a court will agree with these statements and conclusions.
This discussion is based upon provisions
of the Code, the Treasury regulations thereunder, rulings and judicial decisions all as of the date hereof. These authorities may
change, perhaps retroactively, which could result in U.S. federal income tax consequences different from those summarized below.
This discussion does not address all aspects of U.S. federal income taxation (such as the alternative minimum tax and federal net
investment income tax) and does not describe any foreign, state, local or other tax considerations that may be relevant to a purchaser
or holder of the Series I Preferred Stock in light of their particular circumstances. In addition, this discussion does not describe
the U.S. federal income tax consequences applicable to a purchaser or a holder of the Series I Preferred Stock who is subject to
special treatment under U.S. federal income tax laws (including, a corporation that accumulates earnings to avoid U.S. federal
income tax, a pass-through entity or an investor in a pass-through entity, a tax-exempt entity, pension or other employee benefit
plans, financial institutions or broker-dealers, persons holding the Series I Preferred Stock as part of a hedging or conversion
transaction, straddle, or other integrated transaction, an insurance company, a holder with a functional currency other than the
U.S. dollar, former U.S. citizens or former long-term U.S. residents, a controlled foreign corporation, a passive foreign investment
company, a holder subject to special tax accounting rules, a holder which owns, directly, indirectly or by attribution, 10% or
more of the total combined voting power or value of our outstanding shares). Except as discussed below, this discussion does not
address tax reporting requirements. We cannot assure you that a change in law will not significantly alter the tax considerations
that we describe in this discussion.
If a partnership (or any other entity treated
as a partnership for U.S. federal income tax purposes) holds the Series I Preferred Stock, the U.S. federal income tax treatment
of a partner of that partnership generally will depend upon the status of the partner and the activities of the partnership. If
you are a partnership or a partner of a partnership holding the Series I Preferred Stock, you should consult your own tax advisors
as to the particular U.S. federal income tax consequences of acquiring, holding and disposing of the Series I Preferred Stock.
Prospective investors should
consult their own tax advisors concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of
the Series I Preferred Stock, as well as any tax consequences arising under the laws of any state, local, foreign, or other tax
jurisdiction and the possible effects of changes in U.S. federal or other tax laws.
U.S. Holders
Subject to the qualifications
set forth above, the following discussion summarizes certain U.S. federal income tax considerations that may relate to the purchase,
ownership and disposition of the Series I Preferred Stock by “U.S. holders.” You are a “U.S. holder” if
you are a beneficial owner of Series I Preferred Stock and you are for U.S. federal income tax purposes:
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an
individual citizen or resident of the United States;
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a
corporation (or other entity treated as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof or
the District of Columbia;
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an
estate the income of which is subject to U.S. federal income taxation regardless of its
source; or
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a
trust if it (i) is subject to the primary supervision of a court within the United States
and one or more United States persons have the authority to control all substantial decisions
of the trust or (ii) has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
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Distributions in General.
If distributions are made with respect to the Series I Preferred Stock, such distributions will be treated as dividends to the
extent of our current or accumulated earnings and profits as determined under the Code. Any portion of a distribution that exceeds
such earnings and profits will first be applied to reduce a U.S. holder’s tax basis in the Series I Preferred Stock on a
share-by-share basis (but not below zero), and the excess will be treated as gain from the disposition of the Series I Preferred
Stock, the tax treatment of which is discussed below under “Certain Material U.S. Federal Income Tax Considerations - U.S.
Holders: Disposition of Series I Preferred Stock, Including Redemptions.”
Dividends received by individual holders of the Series I Preferred
Stock will be subject to a reduced maximum tax rate of 20% if such dividends are treated as “qualified dividend income”
for U.S. federal income tax purposes. Dividends paid to non-corporate U.S. holders will generally be treated as qualified dividend
income if paid with respect to Series I Preferred Stock that is held for more than 60 days during the 121 day period beginning
on the date which is 60 days before the date on which the Series I Preferred Stock becomes ex-dividend (or where the dividend is
attributable to a period or periods in excess of 366 days, Series I Preferred Stock that is held for more than 90 days during the
181 day period beginning on the date which is 90 days before the date on which the Series I Preferred Stock becomes ex-dividend).
The reduced rate does not apply to the extent that the individual shareholder elects to treat the qualified dividend income as
“investment income,” which may be offset against investment expenses Individual shareholders should consult their own
tax advisors regarding the implications of these rules in light of their particular circumstances.
Dividends received by corporate shareholders
generally will be eligible for the dividends-received deduction. Generally, this deduction is allowed if the underlying stock is
held for at least 46 days during the 91 day period beginning on the date 45 days before the ex-dividend date of the stock, and
for cumulative preferred stock with an arrearage of dividends attributable to a period in excess of 366 days, the holding period
is at least 91 days during the 181 day period beginning on the date 90 days before the ex-dividend date of the stock. Corporate
shareholders of the Series I Preferred Stock should also consider the effect of Section 246A of the Code, which reduces the dividends-received
deduction allowed to a corporate shareholder that has incurred indebtedness that is “directly attributable” to an investment
in portfolio stock such as preferred stock. If a corporate shareholder receives a dividend on the Series I Preferred Stock that
is an “extraordinary dividend” within the meaning of Section 1059 of the Code, the shareholder in certain instances
must reduce its basis in the Series I Preferred Stock by the amount of the “nontaxed portion” of such “extraordinary
dividend” that results from the application of the dividends-received deduction. If the “nontaxed portion” of
such “extraordinary dividend” exceeds such corporate shareholder’s basis, any excess will be taxed as gain as
if such shareholder had disposed of its Series I Preferred Stock in the year the “extraordinary dividend” is paid.
Each domestic corporate holder of the Series I Preferred Stock is urged to consult with its own tax advisors with respect to the
eligibility for and the amount of any dividends received deduction and the application of Code Section 1059 to any dividends it
may receive on the Series I Preferred Stock.
Constructive Distributions on Series
I Preferred Stock. A distribution by a corporation of its stock made with respect to its preferred stock is treated as
a distribution of property to which Section 301 of the Code applies. If a corporation issues preferred stock that may be redeemed
at a price higher than its issue price, the excess (a “redemption premium”) is treated under certain circumstances
as a constructive distribution (or series of constructive distributions) of additional preferred stock. The constructive distribution
of property equal to the redemption premium would accrue without regard to the holder’s method of accounting for U.S. federal
income tax purposes at a constant yield determined under principles similar to the determination of original issue discount (“OID”)
pursuant to Treasury regulations under Sections 1271 through 1275 of the Code (the “OID Rules”). The constructive distributions
of property would be treated for U.S. federal income tax purposes as actual distributions of the Series I Preferred Stock that
would constitute a dividend, return of capital or capital gain to the holder of the stock in the same manner as cash distributions
described under “Certain Material U.S. Federal Income Tax Considerations - U.S. Holders: Distributions in General.”
The application of principles similar to those applicable to debt instruments with OID to a redemption premium for the Series I
Preferred Stock is uncertain.
We have the right to call the Series I
Preferred Stock for redemption on or after [ ] (the “call option”), and have the option to redeem the Series I Preferred
Stock upon any Change of Control (the “contingent call option”). If the redemption price of the Series I Preferred
Stock exceeds the issue price of the Series I Preferred Stock upon any redemption pursuant to our call option or contingent call
option, the excess will be treated as a redemption premium that may result in certain circumstances in a constructive distribution
or series of constructive distributions to U.S. holders of additional Series I Preferred Stock.
Each of the call option and contingent
call option should not require constructive distributions of the redemption premium, if based on all of the facts and circumstances
as of the issue date, a redemption pursuant to the call option or contingent call option is not more likely than not to occur.
The Treasury regulations provide that an issuer’s right to redeem will not be treated as more likely than not to occur if:
(i) the issuer and the holder of the stock are not related within the meaning of Section 267(b) or Section 707(b) of the Code
(substituting “20%” for the phrase “50%); (ii) there are no plans, arrangements, or agreements that effectively
require or are intended to compel the issuer to redeem the stock; and (iii) exercise of the right to redeem would not reduce the
yield on the stock determined using principles applicable to the determination of OID under the OID Rules. Although the redemption
right is not within the safe harbor described in the preceding sentence, we do not believe that a redemption pursuant to the call
option or contingent call option should be treated as more likely than not to occur based on all of the facts and circumstances.
Accordingly, no U.S. holder of the Series I Preferred Stock should be required to recognize constructive distributions of the
redemption premium because of our call option or the contingent call option.
Disposition of Series I Preferred
Stock, Including Redemptions. Upon any sale, exchange, redemption (except as discussed below) or other disposition of the
Series I Preferred Stock, a U.S. holder will recognize capital gain or loss equal to the difference between the amount realized
by the U.S. holder and the U.S. holder’s adjusted tax basis in the Series I Preferred Stock. Such capital gain or loss will
be long-term capital gain or loss if the U.S. holder’s holding period for the Series I Preferred Stock is longer than one
year. If an individual U.S. holder received qualified dividend income from an “extraordinary dividend” on the Series
I Preferred Stock, any loss recognized by such individual shareholder on a subsequent disposition of the Series I Preferred Stock
will be treated as long-term capital loss to the extent of such “extraordinary dividend” irrespective of such shareholder’s
holding period for the Series I Preferred Stock. A U.S. holder should consult its own tax advisors with respect to applicable tax
rates and netting rules for capital gains and losses. Certain limitations exist on the deduction of capital losses by both corporate
and non-corporate taxpayers.
A payment made in redemption of Series
I Preferred Stock may be treated as a dividend, rather than as payment in exchange for the Series I Preferred
Stock, unless the redemption:
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is
“not essentially equivalent to a dividend” with respect to a U.S. holder
under Section 302(b)(1) of the Code;
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is
a “substantially disproportionate” redemption with respect to a U.S. holder
under Section 302(b)(2) of the Code;
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results
in a “complete redemption” of a U.S. holder’s stock interest in the
company under Section 302(b)(3) of the Code; or
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is
a redemption of stock held by a non-corporate shareholder that results in a partial liquidation
of the company under Section 302(b)(4) of the Code.
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In
determining whether any of these tests has been met, a U.S. holder must take into account not only shares of the Series I Preferred
Stock and the common stock that the U.S. Holder directly and indirectly owns, but also shares of stock that the U.S. holder constructively
owns within the meaning of Section 318 of the Code.
A redemption payment will be treated as
“not essentially equivalent to a dividend” if it results in a “meaningful reduction” in a U.S. holder’s
aggregate stock interest in the company, which will depend on the U.S. holder’s particular facts and circumstances at such
time.
Satisfaction of the “complete redemption”
and “substantially disproportionate” exceptions is dependent upon compliance with the objective tests set forth in
Section 302(b)(3) and Section 302(b)(2) of the Code, respectively. A redemption will result in a “complete redemption”
if either all of the shares of our stock actually and constructively owned by a U.S. holder are exchanged in the redemption or
all of the shares of our stock actually owned by the U.S. holder are exchanged in the redemption and the U.S. holder is eligible
to waive, and the U.S. holder effectively waives, the attribution of shares of our stock constructively owned by the U.S. holder
in accordance with the procedures described in Section 302(c)(2) of Code. A redemption does not qualify for the “substantially
disproportionate” exception if the stock redeemed is only non-voting stock, and for this purpose, stock which does not have
voting rights until the occurrence of an event is not voting stock until the occurrence of the specified event. Accordingly, any
redemption of the Series I Preferred Stock generally will not qualify for this exception because the voting rights are limited
as provided in the “Description of Series I Preferred Stock-Voting Rights.”
For purposes of the “redemption from
non-corporate shareholders in a partial liquidation” test, a distribution will be treated as in partial liquidation of a
corporation if the distribution is not essentially equivalent to a dividend (determined at the corporate level rather than the
shareholder level) and the distribution is pursuant to a plan and occurs within the taxable year in which the plan was adopted
or within the succeeding taxable year. For these purposes, a distribution is generally not essentially equivalent to a dividend
if the distribution results in a corporate contraction. The determination of what constitutes a corporate contraction is factual
in nature, and has been interpreted under case law to include the termination of a business or line of business.
If the redemption payment is treated as
a dividend, the rules discussed above in “Certain Material U.S. Federal Income Tax Considerations - U.S. Holders: Distributions
in General” apply. Under proposed Treasury regulations, if any amount received by a U.S. holder in redemption of Series I
Preferred Stock is treated as a distribution with respect to such holder’s Series I Preferred Stock, but not as a dividend,
such amount will be allocated to all shares of the Series I Preferred Stock held by such holder immediately before the redemption
on a pro rata basis. The amount applied to each share will reduce such holder’s adjusted tax basis in that share and any
excess after the basis is reduced to zero will result in taxable gain. If such holder has different bases in shares of the Series
I Preferred Stock, then the amount allocated could reduce a portion of the basis in certain shares while reducing all of the basis,
and giving rise to taxable gain, in other shares. Thus, such holder could have gain even if such holder’s aggregate adjusted
tax basis in all shares of the Series I Preferred Stock held exceeds the aggregate amount of such distribution.
The proposed Treasury regulations permit
the transfer of basis in the redeemed shares of the Series I Preferred Stock to the holder’s remaining, unredeemed Series
I Preferred Stock (if any), but not to any other class of stock held, directly or indirectly, by the holder. Any unrecovered basis
in the Series I Preferred Stock would be treated as a deferred loss to be recognized when certain conditions are satisfied. The
proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final
Treasury regulations. There can, however, be no assurance as to whether, when and in what particular form such proposed Treasury
regulations are ultimately finalized.
Information Reporting and Backup
Withholding. Information reporting and backup withholding may apply with respect to payments of dividends on the Series
I Preferred Stock and to certain payments of proceeds on the sale or other disposition of the Series I Preferred Stock. Certain
non-corporate U.S. holders may be subject to U.S. backup withholding on payments of dividends on the Series I Preferred Stock and
certain payments of proceeds on the sale or other disposition of the Series I Preferred Stock unless the beneficial owner thereof
furnishes the payor or its agent with a taxpayer identification number, certified under penalties of perjury, and certain other
information, or otherwise establishes, in the manner prescribed by law, an exemption from backup withholding. U.S. backup withholding
tax is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against
a U.S. holder’s U.S. federal income tax liability, which may entitle the U.S. holder to a refund, provided the U.S. holder
timely furnishes the required information to the Internal Revenue Service.
Non-U.S. Holders. Subject to the
qualifications set forth above under the caption “Certain U.S. Federal Income Tax Considerations,” the following discussion
summarizes certain U.S. federal income tax consequences of the purchase, ownership and disposition of the Series I Preferred Stock
by certain “Non-U.S. holders.” You are a “Non-U.S. holder” if you are a beneficial owner of the Series
I Preferred Stock and you are not a “U.S. holder.”
Distributions on the Series I Preferred
Stock. If distributions are made with respect to the Series I Preferred Stock, such distributions will be treated as dividends
to the extent of our current and accumulated earnings and profits as determined under the Code and may be subject to withholding
as discussed below. Any portion of a distribution that exceeds our current and accumulated earnings and profits will first be applied
to reduce the Non-U.S. holder’s basis in the Series I Preferred Stock (but not below zero) and, to the extent such portion
exceeds the Non-U.S. holder’s basis, the excess will be treated as gain from the disposition of the Series I Preferred Stock,
the tax treatment of which is discussed below under “Certain Material U.S. Federal Income Tax Considerations - Non-U.S. Holders:
Disposition of Series I Preferred Stock, Including Redemptions.”
Dividends paid to a Non-U.S. holder of the Series I Preferred
Stock will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the Non-U.S. holder
within the United States (and, where required by an applicable income tax treaty, are attributable to a permanent establishment
maintained by the Non-U.S. holder in the United States) are not subject to the withholding tax, provided that certain certification
and disclosure requirements are satisfied including completing Internal Revenue Service Form W-8ECI (or other applicable form).
Instead, such dividends are subject to U.S. federal income tax on a net income basis in the same manner as if the Non-U.S. holder
were a United States person as defined under the Code, unless an applicable income tax treaty provides otherwise. Any such effectively
connected dividends received by a foreign corporation may be subject to an additional “branch profits tax” equal to
30% of its effectively connected earnings and profits (subject to certain adjustments) or such lower rate as may be specified by
an applicable income tax treaty. A Non-U.S. holder of the Series I Preferred Stock who wishes to claim the benefit of an applicable
treaty rate and avoid backup withholding, as discussed below, for dividends will be required to (i) complete Internal Revenue Service
Form W-8BEN or Form W-8BEN-E (or other applicable form) and certify under penalty of perjury that such holder is not a United States
person as defined under the Code and is eligible for treaty benefits, or (ii) if the Series I Preferred Stock is held through certain
foreign intermediaries, satisfy the relevant certification requirements of applicable Treasury regulations. A Non-U.S. holder of
the Series I Preferred Stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.
Disposition of Series I Preferred
Stock, Including Redemptions. Subject to the remainder of this this discussion, any gain realized by a Non-U.S. holder
on the disposition of the Series I Preferred Stock will not be subject to U.S. federal income or withholding tax unless:
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the gain is effectively connected with a trade or business of the Non-U.S. holder in the United
States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S.
holder in the United States);
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the Non-U.S. holder is an individual who is present in the United States for 183 days or more in
the taxable year of disposition, and certain other conditions are met; or
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we are or have been a USRPHC for U.S. federal income tax purposes.
We do not believe that we are a USRPHC and we do not anticipate becoming one in the future. No
assurances can be provided by us that we will not become a USRPHC in the future.
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A Non-U.S. holder with gain described in
the first bullet point immediately above will generally be subject to tax on the net gain derived from the disposition under regular
graduated U.S. federal income tax rates in the same manner as if the Non-U.S. holder were a United States person as defined under
the Code, and if it is a corporation, may also be subject to the branch profits tax equal to 30% of its effectively connected earnings
and profits (subject to certain adjustments) or at such lower rate as may be specified by an applicable income tax treaty.
An individual Non-U.S. holder described
in the second bullet point immediately above will be subject to a flat 30% tax (or at such reduced rate as may be provided by an
applicable treaty) on the gain derived from the disposition, which may be offset by U.S. source capital losses, even though the
individual is not considered a resident of the United States.
If a Non-U.S. holder is subject to U.S.
federal income tax on any sale, exchange, redemption (except as discussed below), or other disposition of the Series I Preferred
Stock, such a Non-U.S. holder will recognize capital gain or loss equal to the difference between the amount realized by the Non-U.S.
holder and the Non-U.S. holder’s adjusted tax basis in the Series I Preferred Stock. Such capital gain or loss will be long-term
capital gain or loss if the Non-U.S. holder’s holding period for the Series I Preferred Stock is longer than one year. A
Non-U.S. holder should consult its own tax advisors with respect to applicable tax rates and netting rules for capital gains and
losses. Certain limitations exist on the deduction of capital losses by both corporate and Non-corporate taxpayers. If a Non-U.S.
holder is subject to U.S. federal income tax on any disposition of the Series I Preferred Stock, a redemption of shares of the
Series I Preferred Stock will be a taxable event. If the redemption is treated as a sale or exchange, instead of a dividend, a
Non-U.S. holder generally will recognize long-term capital gain or loss, if the Non-U.S. holder’s holding period for such
Series I Preferred Stock exceeds one year, equal to the difference between the amount of cash received and fair market value of
property received and the Non-U.S. holder’s adjusted tax basis in the Series I Preferred Stock redeemed, except that to the
extent that any cash received is attributable to any accrued but unpaid dividends on the Series I Preferred Stock, which generally
will be subject to the rules discussed above in “Certain Material U.S. Federal Income Tax Considerations - Non-U.S. Holders:
Distributions on the Series I Preferred Stock.” A payment made in redemption of the Series I Preferred Stock may be treated
as a dividend, rather than as payment in exchange for the Series I Preferred Stock, in the same circumstances discussed above under
“Certain Material U.S. Federal Income Tax Considerations–U.S. Holders: Disposition of Series I Preferred Stock, Including
Redemptions.” Each Non-U.S. holder of the Series I Preferred Stock should consult its own tax advisors to determine whether
a payment made in redemption of the Series I Preferred Stock will be treated as a dividend or as payment in exchange for the Series
I Preferred Stock.
Under proposed Treasury regulations, if
any amount received by a U.S. holder in redemption of Series I Preferred Stock is treated as a distribution with respect to such
holder’s Series I Preferred Stock, but not as a dividend, such amount will be allocated to all shares of the Series I Preferred
Stock held by such holder immediately before the redemption on a pro rata basis. The amount applied to each share will reduce such
holder’s adjusted tax basis in that share and any excess after the basis is reduced to zero will result in taxable gain.
If such holder has different bases in shares of the Series I Preferred Stock, then the amount allocated could reduce a portion
of the basis in certain shares while reducing all of the basis, and giving rise to taxable gain, in other shares. Thus, such holder
could have gain even if such holder’s aggregate adjusted tax basis in all shares of the Series I Preferred Stock held exceeds
the aggregate amount of such distribution.
The proposed Treasury regulations permit
the transfer of basis in the redeemed shares of the Series I Preferred Stock to the holder’s remaining, unredeemed Series
I Preferred Stock (if any), but not to any other class of stock held, directly or indirectly, by the holder. Any unrecovered basis
in the Series I Preferred Stock would be treated as a deferred loss to be recognized when certain conditions are satisfied. The
proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final
Treasury regulations. There can, however, be no assurance as to whether, when and in what particular form such proposed Treasury
regulations are ultimately finalized.
Information reporting and backup withholding.
We must report annually to the Internal Revenue Service and to each Non-U.S. holder the amount of dividends paid to such Non-U.S.
holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information
returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the
Non-U.S. holder resides under the provisions of an applicable income tax treaty. A Non-U.S. holder will not be subject to backup
withholding on dividends paid to such Non-U.S. holder as long as such Non-U.S. holder certifies under penalty of perjury that it
is a Non-U.S. holder (and the payor does not have actual knowledge or reason to know that such Non-U.S. holder is a United States
person as defined under the Code), or such Non-U.S. holder otherwise establishes an exemption. Depending on the circumstances,
information reporting and backup withholding may apply to the proceeds received from a sale or other disposition of the Series
I Preferred Stock unless the beneficial owner certifies under penalty of perjury that it is a Non-U.S. holder (and the payor does
not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or
such owner otherwise establishes an exemption. U.S. backup withholding tax is not an additional tax. Any amounts withheld under
the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. holder’s U.S. federal income tax liability
provided the required information is timely furnished to the Internal Revenue Service.
Foreign Account Tax Compliance Act.
Sections 1471 through 1474 of the Code (provisions which are commonly referred to as “FATCA”), generally impose a 30%
withholding tax on dividends on Series I Preferred Stock paid to or through: (i) a foreign financial institution (as that term
is defined in Section 1471(d)(4) of the Code) unless that foreign financial institution enters into an agreement with the U.S.
Treasury Department to collect and disclose information regarding U.S. account holders of that foreign financial institution (including
certain account holders that are foreign entities that have U.S. owners) and satisfies other requirements; and (ii) specified other
foreign entities unless such an entity certifies that it does not have any substantial U.S. owners or provides the name, address
and taxpayer identification number of each substantial U.S. owner and such entity satisfies other specified requirements.
FATCA withholding also potentially applies
to payments of gross proceeds from the sale or other disposition Series I Preferred Stock. Proposed regulations, however, would
eliminate FATCA withholding on such payments, and the U.S. Treasury Department has indicated that taxpayers may rely on this aspect
of the proposed regulations until final regulations are issued.
Non-U.S. holders typically will be required
to furnish certifications (generally on the applicable IRS Form W-8) or other documentation to provide the information required
by FATCA or to establish compliance with or an exemption from withholding under FATCA. FATCA withholding may apply where payments
are made through a non-U.S. intermediary that is not FATCA compliant, even where the holder satisfies the holder’s own FATCA
obligations.
The United States and a number of other
jurisdictions have entered into intergovernmental agreements to facilitate the implementation of FATCA. Any applicable intergovernmental
agreement may alter one or more of the FATCA information reporting and withholding requirements. You are encouraged to consult
with your own tax advisor regarding the possible implications of FATCA on your investment in shares of Series I Preferred Stock,
including the applicability of any intergovernmental agreements.
UNDERWRITING
H.C.
Wainwright & Co., LLC (“H.C. Wainwright”) is acting as representative of the underwriters named below. Subject
to the terms and conditions stated in the underwriting agreement, dated , 2020, each underwriter named below has severally, and
not jointly, agreed to purchase from us, and we have agreed to sell to that underwriter, the number of shares of Series I Preferred
Stock set forth opposite that underwriter’s name in the table below.
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Underwriters
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Number of
Shares
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H.C.
Wainwright & Co., LLC
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Total
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The
underwriting agreement provides that the underwriters must buy all of the shares of our Series I Preferred Stock offered hereby
if they buy any of them. Our shares of Series I Preferred Stock, however, are offered subject to a number of conditions, including:
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receipt
and acceptance of our shares by the underwriters; and
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the
underwriters’ right to reject orders in whole or in part.
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In
connection with this offering, the underwriters or securities dealers may distribute prospectuses electronically.
We
expect that delivery of the Series I Preferred Stock will be made against payment therefor on or about , 2020, which will be the
second business day following the trade date of the Series I Preferred Stock (such settlement cycle being herein referred to as
“T + 2”). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle
in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade
Series I Preferred Stock on the date of pricing or the next business day will be required, by virtue of the fact that the Series
I Preferred Stock initially will settle T + 2, to specify an alternate settlement cycle at the time of any such trade to prevent
a failed settlement. Purchasers of the Series I Preferred Stock who wish to trade the Series I Preferred Stock on the date of
pricing of the Series I Preferred Stock or the next business day should consult their own advisor.
Underwriting
Discounts and Commissions
The
representative has advised us that the underwriters propose initially to offer the shares of Series I Preferred Stock to the public
at the public offering price set forth on the cover page of this prospectus supplement and to certain dealers at the public offering
price minus a concession not in excess of $ per
share. Sales of shares made outside of the United States may be made by affiliates of the underwriters. If all the shares
are not sold at the public offering price, the representatives may change the offering price and the other selling terms. Upon
execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the
terms stated therein. The following table shows the public offering price, underwriting discount and proceeds, before expenses,
that we will pay to the underwriters in connection with this offering. The information assumes either no exercise or full exercise
by the underwriters of their option to purchase additional shares of Series I Preferred Stock to cover over-allotments, if any.
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Public Offering Price
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Underwriting Discount (10%)
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Proceeds to Us, before expenses
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Certain expenses associated with this offering, exclusive of
the underwriting discount and the expenses set forth in the next sentence, are estimated to be approximately $ and will
be payable by us. In addition to the underwriting discount, we will pay H.C. Wainwright (i) a management fee equal to 1% of the
gross proceeds raised in the offering, (ii) $40,000 for non-accountable expenses, (iii) up to $100,000 for the fees and expenses
of its legal counsel and other out-of-pocket expenses, and (iv) the costs associated with the use of a third-party electronic
road show service.
Over-Allotment
Option
We
have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus supplement, to purchase up
to additional shares of Series I Preferred Stock at the public offering price listed on the cover page of this prospectus
supplement, less underwriting discounts and commissions. To the extent the option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase about the same percentage of the additional Series I Preferred Stock as the number
listed next to the underwriter’s name in the preceding table bears to the total number of Series I Preferred Stock listed
next to the names of all underwriters in the preceding table.
No
Sales of Similar Securities
We
have agreed that, for a period of 90 days from the date of this prospectus supplement, we will not, without the prior written
consent of the representative on behalf of the underwriters, issue, offer, pledge, sell, contract to sell, or otherwise dispose
of any shares of Series I Preferred Stock or any shares of preferred stock ranking on parity with or senior to the Series I Preferred
Shares or any securities convertible into or exercisable or exchangeable for shares of Series I Preferred Stock or shares of preferred
stock ranking on parity with or senior to the Series I Preferred Stock; enter into any swap or other arrangement that transfers
any of the economic consequences of ownership of the Series I Preferred Stock or such parity or senior preferred stock; file any
registration statement relating to the offering of any shares of Series I Preferred Stock or any shares of preferred stock ranking
on parity with or senior to the Series I Preferred Stock; or publicly announce an intention to effect any such transaction.
Right
of First Refusal
Subject to the closing of this offering,
until six months from the closing date of this offering, H.C. Wainwright shall have a right of first refusal to act as sole and
exclusive investment banker, sole and exclusive book-runner, sole and exclusive financial advisor, sole and exclusive underwriter
and/or sole and exclusive placement, for us, or any of our successors or subsidiaries, on terms customary to H.C. Wainwright during
such six month period.
Indemnification
We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act or to contribute
to payments the underwriters may be required to make in respect of any of those liabilities.
Price
Stabilization; Short Positions and Penalty Bids
In
order to facilitate the offering of the Series I Preferred Stock, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the Series I Preferred Stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option to
purchase additional shares. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing
shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider,
among other things, the open market price of shares compared to the price available under the option. The underwriters may also
sell shares in excess of the option, creating a naked short position. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the Series I Preferred Stock in the open market after pricing that could adversely
affect investors who purchase in this offering. The underwriters may also impose a penalty bid. This occurs when a particular
underwriter repays to the representative a portion of the underwriting discount received by it because the representative has
repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. These stabilizing
transactions, short sales, purchases to cover positions created by short sales, the imposition of penalty bids and syndicate covering
transactions may have the effect of raising or maintaining the market price of our Series I Preferred Stock or preventing or retarding
a decline in the price of our Series I Preferred Stock. As a result of these activities, the price thereof may be higher than
otherwise might exist in the open market. Neither we nor the underwriters make any representation that the underwriters will engage
in these transactions, or make any representation with respect to the effect of any such transactions. As an additional means
of facilitating this offering, the underwriters may bid for, and purchase, Series I Preferred Stock in the open market to stabilize
the price of the Series I Preferred Stock. These activities may raise or maintain the market price of the Series I Preferred Stock
above independent market levels or prevent or retard a decline in the market price of the Series I Preferred Stock. The underwriters
are not required to engage in these activities and may end any of these activities at any time.
Electronic
Distribution
A
prospectus supplement and accompanying base prospectus in electronic format may be made available on the Internet sites or through
other online services maintained by the underwriters participating in this offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed
to place orders online. The underwriters may agree with us to allocate a specific number of shares of Series I Preferred Stock
for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on
the same basis as other allocations. Other than the prospectus supplement and accompanying base prospectus in electronic format,
the information on any underwriter’s website and any information contained in any other website maintained by an underwriter
is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.
Listing
We
have applied to list our Series I Preferred Stock on The NASDAQ Capital Market under the symbol “AYTUP.”
Transfer
Agent
The
transfer agent for our Series I Preferred Stock to be issued in this offering is Direct Transfer, LLC, subsidiary of Issuer Direct
Corporation, located at One Glenwood Avenue, Suite 1001 Raleigh, NC, 27603.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus supplement and accompanying prospectus will be passed upon by Dorsey &
Whitney LLP, Salt Lake City, Utah. Certain legal matters in connection with this offering will be passed upon for the underwriter
by Sichenzia Ross Ference LLP.
EXPERTS
The
consolidated financial statements of Aytu BioScience, Inc. at June 30, 2019 and 2018, and for each of the two years in the period
ended June 30, 2019 have been audited by Plante & Moran, PLLC (successor to EKS&H LLLP), independent registered public
accounting firm. Such financial statements have been incorporated herein by reference in reliance on the report of such firm given
upon their authority as experts in accounting and auditing.
The
abbreviated financial statements of the Pediatrics Product Portfolio of Cerecor Inc. at September 30, 2019 and December 31, 2018,
and for the nine-month period ended September 30, 2019 and for the year ended December 31, 2018, incorporated by reference in
Aytu BioScience, Inc.’s Current Report on Form 8-K/A dated January 10, 2020 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by reference therein, and incorporated herein by reference.
Such abbreviated financial statements are incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The
financial statements of Innovus incorporated by reference in Aytu BioScience Inc.’s Current Report on Form 8-K dated February
14, 2020 have been audited by Hall & Company, an independent registered public accounting firm, as stated in their reports.
Such financial statements have been incorporated by reference in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and other reports, proxy statements and other information with the SEC. Our SEC filings are available to
the public at the SEC’s website at http://www.sec.gov. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
and Current Reports on Form 8-K, including any amendments to those reports, and other information that we file with or furnish
to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act can also be accessed free of charge on our website, www.aytubio.com.
We have not incorporated by reference into this prospectus supplement or the accompanying prospectus the information on our website,
and you should not consider it to be a part of this prospectus supplement or the accompanying prospectus. These filings will be
available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We
have filed with the SEC a registration statement under the Securities Act relating to the offering of these securities. The registration
statement, including the exhibits attached thereto, contains additional relevant information about us and the securities. This
prospectus supplement and the accompanying prospectus do not contain all of the information set forth in the registration statement.
You can obtain a copy of the registration statement from the SEC’s website at http://www.sec.gov. The registration statement
and the documents referred to below under “Information Incorporated by Reference” are also available on our website,
www.aytubio.com. We have not incorporated by reference into this prospectus supplement or the accompanying prospectus the information
on our website, and you should not consider it to be a part of this prospectus supplement or the accompanying prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
SEC allows us to incorporate by reference into this prospectus supplement and the accompanying prospectus certain information
we file with it, which means that we can disclose important information by referring you to those documents. The information incorporated
by reference is considered to be a part of this prospectus supplement and the accompanying prospectus, and information that we
file later with the SEC will automatically update and supersede information contained in this prospectus supplement and the accompanying
prospectus. We incorporate by reference the documents listed below that we have previously filed with the SEC (excluding any portions
of any Form 8-K that are not deemed “filed” pursuant to the General Instructions of Form 8-K):
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Definitive Proxy Statement on Schedule 14A filed with the SEC on December 23, 2019;
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Annual Report on Form 10-K for the fiscal year ended June 30, 2019;
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our
Current Reports on Form 8-K filed with the SEC on August 2, 2019, September 18, 2019, October 15, 2019, on October 15, 2019
(as amended and filed with the SEC on January 10, 2020), November 4, 2019 (as amended and filed with the SEC on November 4, 2019, November 7, 2019), November 12, 2019, November 26, 2019, December 2, 2019, December 11, 2019, January 15, 2020, January 24, 2020, February 13, 2020, February 14, 2020 (as amended on February 26, 2020) and February 21, 2020; and
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the
description of our Common Stock contained in our Registration Statement on Form 8-A, as filed with the SEC on October 17, 2017, including any amendment or report filed for the purpose of updating such description.
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We
also incorporate by reference any future filings (other than Current Reports furnished under Items 2.02 or 7.01 of Form 8-K and
exhibits filed on such form that are related to such items unless such Form 8-K expressly provides to the contrary) made with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement
and prior to effectiveness of the registration statement, excluding, in each case, information deemed furnished and not filed.
Any
statements contained in a previously filed document incorporated by reference into this prospectus supplement and the accompanying
prospectus is deemed to be modified or superseded for purposes of this prospectus supplement and the accompanying prospectus to
the extent that a statement contained in this prospectus supplement and the accompanying prospectus, or in a subsequently filed
document also incorporated by reference herein, modifies or supersedes that statement.
This
prospectus supplement and the accompanying prospectus may contain information that updates, modifies or is contrary to information
in one or more of the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. You should
rely only on the information incorporated by reference or provided in this prospectus supplement and the accompanying prospectus.
We have not authorized anyone else to provide you with different information. You should not assume that the information in this
prospectus supplement or the accompanying prospectus is accurate as of any date other than the date of this prospectus supplement
or the accompanying prospectus or the date of the documents incorporated by reference in this prospectus supplement and the accompanying
prospectus.
We
will provide to each person, including any beneficial owner, to whom this prospectus supplement and the accompanying prospectus
is delivered, upon written or oral request, at no cost to the requester, a copy of any and all of the information that is incorporated
by reference in this prospectus supplement and the accompanying prospectus.
Requests
for such documents should be directed to:
Aytu
BioScience, Inc.
373 Inverness Parkway, Suite 206
Englewood, Colorado 80112
Attention: Corporate Secretary
Phone:
(720) 437-6580
You
may also access the documents incorporated by reference in this prospectus supplement and accompanying prospectus, at no cost
to you, through our website at www.aytubio.com. Except for the specific incorporated documents listed above, no information available
on or through our website shall be deemed to be incorporated in this prospectus supplement and accompanying prospectus or the
registration statement of which they forms a part.
PROSPECTUS
$100,000,000
Common
Stock
Preferred
Stock
Warrants
Units
We
may from time to time, in one or more offerings at prices and on terms that we will determine at the time of each offering, sell
common stock, preferred stock, warrants, or a combination of these securities, or units, for an aggregate initial offering price
of up to $100,000,000. This prospectus describes the general manner in which our securities may be offered using this prospectus.
Each time we offer and sell securities, we will provide you with a prospectus supplement that will contain specific information
about the terms of that offering. Any prospectus supplement may also add, update, or change information contained in this prospectus.
You should carefully read this prospectus and the applicable prospectus supplement as well as the documents incorporated or deemed
to be incorporated by reference in this prospectus before you purchase any of the securities offered hereby.
This
prospectus may not be used to offer and sell securities unless accompanied by a prospectus supplement.
Our
common stock is currently traded on the NASDAQ Capital Market under the symbol “AYTU.” On November 21, 2017, the last
reported sales price for our common stock was $2.60 per share. We will apply to list any shares of common stock sold by us under
this prospectus and any prospectus supplement on the NASDAQ Capital Market. The prospectus supplement will contain information,
where applicable, as to any other listing of the securities on the NASDAQ Capital Market or any other securities market or exchange
covered by the prospectus supplement.
The
securities offered by this prospectus involve a high degree of risk. See “Risk Factors” beginning on page 6, in addition
to Risk Factors contained in the applicable prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We
may offer the securities directly or through agents or to or through underwriters or dealers. If any agents or underwriters are
involved in the sale of the securities their names, and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the information set forth, in an accompanying prospectus
supplement. We can sell the securities through agents, underwriters or dealers only with delivery of a prospectus supplement describing
the method and terms of the offering of such securities. See “Plan of Distribution.”
This
prospectus is dated December 1, 2017
Table
of Contents
You
should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We
have not authorized anyone to provide you with information different from that contained or incorporated by reference into this
prospectus. If any person does provide you with information that differs from what is contained or incorporated by reference in
this prospectus, you should not rely on it. No dealer, salesperson or other person is authorized to give any information or to
represent anything not contained in this prospectus. You should assume that the information contained in this prospectus or any
prospectus supplement is accurate only as of the date on the front of the document and that any information contained in any document
we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the
time of delivery of this prospectus or any prospectus supplement or any sale of a security. These documents are not an offer to
sell or a solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using a “shelf”
registration process. Under this shelf registration process, we may sell any combination of the securities described in this prospectus
in one or more offerings up to a total dollar amount of proceeds of $100,000,000. This prospectus describes the general manner
in which our securities may be offered by this prospectus. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus or in documents incorporated by reference in this prospectus. The prospectus supplement
that contains specific information about the terms of the securities being offered may also include a discussion of certain U.S.
Federal income tax consequences and any risk factors or other special considerations applicable to those securities. To the extent
that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus or in documents
incorporated by reference in this prospectus, you should rely on the information in the prospectus supplement. You should carefully
read both this prospectus and any prospectus supplement together with the additional information described under “Where
You Can Find More Information” before buying any securities in this offering.
Unless
the context otherwise requires, references to “we,” “our,” “us,” “Aytu BioScience”
or the “Company” in this prospectus mean Aytu BioScience, Inc., a Delaware corporation.
We
own or have rights to various U.S. federal trademark registrations and applications, and unregistered trademarks and servicemarks,
including Fiera, Natesto, ProstaScint, MiOXSYS, RedoxSYS, Luoxis, Vyrix and Nuelle. All other trade names, trademarks and service
marks appearing in this prospectus are the property of their respective owners. We have assumed that the reader understands that
all such terms are source-indicating. Accordingly, such terms, when first mentioned in this prospectus, appear with the trade
name, trademark or service mark notice and then throughout the remainder of this prospectus without trade name, trademark or service
mark notices for convenience only and should not be construed as being used in a descriptive or generic sense.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents and information incorporated by reference in this prospectus include forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. These statements are based on our management’s beliefs and assumptions
and on information currently available to our management. Such forward-looking statements include those that express plans, anticipation,
intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact.
All
statements in this prospectus and the documents and information incorporated by reference in this prospectus that are not historical
facts are forward-looking statements. We may, in some cases, use terms such as “anticipates,” “believes,”
“could,” “estimates,” “expects,” “intends,” “may,” “plans,”
“potential,” “predicts,” “projects,” “should,” “will,” “would”
or similar expressions or the negative of such items that convey uncertainty of future events or outcomes to identify forward-looking
statements.
Forward-looking
statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake
no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change,
except as may be required by applicable law. Although we believe that the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
PROSPECTUS
SUMMARY
This
summary highlights certain information about us and this offering contained elsewhere in this prospectus. Because it is only a
summary, it does not contain all of the information that you should consider before investing in shares of our common stock and
it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere
in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including
“Risk Factors” beginning on page 6, and the financial statements and related notes included in this prospectus.
ABOUT
AYTU BIOSCIENCE, INC.
Overview
We
are a commercial-stage specialty healthcare company focused on acquiring, developing and commercializing novel products in the
field of urology. We have multiple urology-focused products on the market, and we seek to build a portfolio of novel therapeutics
that serve large medical needs in the field of urology. We are concentrating on hypogonadism, prostate cancer, male infertility
and, recently, female sexual wellbeing and intimacy and plan to expand into other urological indications for which we believe
there are significant medical needs.
We
acquired exclusive U.S. rights to Natesto ® (testosterone) nasal gel, a novel formulation of testosterone delivered
via a discreet, easy-to-use nasal gel, and we launched Natesto in the United States with our direct sales force in late summer
2016. Natesto is approved by the U.S. Food and Drug Administration, or FDA, for the treatment of hypogonadism (low testosterone)
in men and is the only testosterone replacement therapy, or TRT, delivered via a nasal gel. Natesto offers multiple advantages
over currently available TRTs and competes in a $2.0 billion market. Importantly, as Natesto is delivered via the nasal mucosa
and not the skin, there is no risk of testosterone transference to others, a known potential side effect and black box warning
associated with all other topically applied TRTs, including the market leader AndroGel ® .
Outside
the U.S. we market MiOXSYS ® , a novel in vitro diagnostic device that is currently CE marked (which generally
enables it to be sold within the European Economic Area) and for which we intend to initiate a final clinical study to enable
FDA clearance in the U.S. Our MiOXSYS system is a novel, point-of-care semen analysis system with the potential to become a standard
of care in the diagnosis and management of male infertility. Male infertility is a prevalent and underserved condition and oxidative
stress is widely implicated in its pathophysiology. MiOXSYS was developed from our core oxidation-reduction potential research
platform known as RedoxSYS ® . We are advancing MiOXSYS toward FDA clearance.
We
currently market ProstaScint ® (capromab pendetide), the only radioimaging agent indicated to detect the prostate
specific membrane antigen, or PSMA, in the assessment and staging of prostate cancer. ProstaScint is approved by the FDA for use
in both newly diagnosed, high-risk prostate cancer patients and patients with recurrent prostate cancer.
On
May 5, 2017, we acquired Nuelle, Inc, or Nuelle, a women’s sexual health company. This transaction expanded our product
portfolio with the addition of the Fiera ® personal care device for women. Fiera was recently launched in the U.S.
and is a proprietary, revenue-generating product scientifically proven to enhance physical arousal and sexual desire in the millions
of adult women around the world impacted by changes in sexual desire. This acquisition adds a novel, commercial-stage product
in a complementary adjacency readily accessible by our U.S.-based commercial infrastructure. Nuelle was previously a portfolio
company of leading venture capital firm New Enterprise Associates.
In
the future we will look to acquire additional urology products, including existing products we believe can offer distinct commercial
advantages. Our management team’s prior experience has involved identifying clinical assets that can be re-launched to increase
value, with a focused commercial infrastructure specializing in urology.
Natesto®
(testosterone) nasal gel.
On
April 22, 2016, we entered into an agreement to acquire the exclusive U.S. rights to Natesto (testosterone) nasal gel from Acerus
Pharmaceuticals Corporation, or Acerus, which rights we acquired on July 1, 2016. Natesto is a patented, FDA-approved testosterone
replacement therapy, or TRT, and is the only nasally-administered formulation of testosterone available in the United States.
Natesto is a discreet, easy-to-administer nasal gel that may be appropriate for men with active lifestyles as Natesto is small,
portable, Transportation Security Administration, or TSA-compliant, and easy to use. Importantly, Natesto is not applied directly
to the patient’s skin as other topically applied TRTs are. Rather, it is delivered directly into the nasal mucosa via a
proprietary nasal applicator. Thus, Natesto does not carry a black box warning related to testosterone transference to a man’s
female partner or children — as other topically (primarily gels and solutions) administered TRTs do by virtue of their delivery
directly onto the skin. We launched Natesto in the U.S. in late summer 2016 with our direct sales force, and we are positioning
Natesto as the ideal treatment solution for men with active, busy lifestyles who suffer from hypogonadism.
MiOXSYS®.
MiOXSYS
is a rapid in vitro diagnostic semen analysis test used in the quantitative measurement of static oxidation-reduction potential,
or sORP, in human semen. MiOXSYS is a CE marked system and is an accurate, easy to use, and fast infertility assessment tool.
It is estimated that 72.4 million couples worldwide experience infertility problems. In the United States, approximately 10% of
couples are defined as infertile. Male infertility is responsible for between 40 – 50% of all infertility cases and affects
approximately 7% of all men. Male infertility is often unexplained (idiopathic), and this idiopathic infertility is frequently
associated with increased levels of oxidative stress in the semen. As such, having a rapid, easy-to-use diagnostic platform to
measure oxidative stress should provide a practical way for male infertility specialists to improve semen analysis and infertility
assessments without having to refer patients to outside clinical laboratories.
Male
infertility is prevalent and underserved, and oxidative stress is widely implicated in its pathophysiology. The global male infertility
market is expected to grow to over $300 million by 2020 with a CAGR of nearly 5% from 2014 to 2020. Oxidative stress is broadly
implicated in the pathophysiology of idiopathic male infertility, yet very few diagnostic tools exist to effectively measure oxidative
stress levels in men. However, antioxidants are widely available and recommended to infertile men. With the introduction of the
MiOXSYS System, we believe for the first time there will be an easy and effective diagnostic tool to assess the degree of oxidative
stress and potentially enable the monitoring of patients’ responses to antioxidant therapy as a treatment regimen for infertility.
The MiOXSYS System received CE marking in Europe in January 2016 and obtained Health Canada Class II Medical Device approval in
March 2016. We expect to advance MiOXSYS into clinical trials in the United States in order to enable 510k clearance.
ProstaScint®
(capromab pendetide).
We
became a commercial stage company by virtue of our acquisition of ProstaScint in May 2015 and are generating sales of this FDA-approved
prostate cancer imaging agent. As prostate cancer is a condition commonly diagnosed and treated by urologists, ProstaScint complements
our urology-focused product portfolio and pipeline. Prostate cancer is the most common cancer among men in the United States,
with an estimated 241,000 annual cases (as of 2012). Further, more than 2.2 million men were alive in 2006 with some history of
prostate cancer, and over 30,000 U.S. men die each year from the disease. The effect of prostate cancer on healthcare economics
is substantial, which makes the need for accurate disease staging critical for treatment and management strategies. The U.S. market
for the diagnosis and screening of prostate cancer is expected to total $17.4 billion by 2017, a compound annual growth rate,
or CAGR, of 7.5% since 2012. At June 30, 2017, the ProstaScint asset was impaired based upon sales projections that we intend
to only sell this product through mid-fiscal 2019, when this product expires.
Fiera
® Personal Care Device
The
Fiera Personal Care Device is the first hands-free wearable product for women, specifically designed to increase interest in,
and physical readiness for sex, naturally. The product does so by creating a physically aroused state via the genitals. Co-created
with healthcare professionals, Fiera is a small, discreet, fast-acting, and hands-free product that is designed to be used in
advance of physical intimacy to help women feel ready and in the mood for sex. Fiera uses gentle suction coupled with stimulation
to enhance blood flow to the genitals, increase lubrication, and ultimately get a woman ready for partnered intimacy in as little
as 5 minutes.
With
the acquisition of Nuelle, Inc., Aytu is expanding into the women’s sexual health and wellness market. Sexual wellness is
inclusive of female sexual dysfunction which is a term that describes various sexual problems, such as low desire or interest,
diminished arousal, orgasmic difficulties, and dyspareunia. Female sexual dysfunction is considered common, with an estimated
prevalence of 43% from the U.S. National Health and Social Life Survey and similar estimates from other large, population-based
surveys in the United States and the United Kingdom. In a study of over 31,000 women in the United States it was determined that
44% of women report a sexual problem. Specifically, the most common sexual problem is low desire, with a prevalence of 39%; followed
by low arousal (26%) and orgasm difficulties (21%). Additionally, the incidence of sexual dysfunction is expected to increase
through 2020 to effect more than 124 million women worldwide.
Fiera
has been well studied and tested by health care professionals, and consumers and is scientifically proven to enhance arousal and
interest in women of all ages, including pre- and post-menopausal women. Recent consumer study results in women ages 25 –
75 showed that after 4 weeks of using Fiera:
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96%
looked forward to being intimate with their partner;
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93%
felt excited and ready for sex;
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89%
of women felt more “in the mood”;
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87%
felt as ready for sex as their partner did;
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86%
of women felt a stronger emotional connection with their partner;
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85%
reported their orgasm felt pleasurable and intense;
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85%
thought about sex more often; and
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85%
engaged in sexual activity more often and felt satisfied in her relationship.
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Previous
studies also showed that 87% of women felt increased desire and 67% felt increased lubrication.
Key
elements of our business strategy include:
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Expand
the commercialization of Natesto in the U.S. for the treatment of hypogonadism with our direct sales force. We launched Natesto
in late summer 2016 and are targeting high prescribing TRT prescribers with a primary emphasis on urologists and male health
practitioners.
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Expand
the commercialization in the U.S. of Fiera, through professional promotion using our existing sales force.
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Establish
MiOXSYS as a leading in vitro diagnostic device in the assessment of male infertility.
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Continue
the commercialization of FDA-approved ProstaScint for the staging of both newly diagnosed high-risk and recurrent prostate
cancer patients.
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Acquire
additional marketed products and late-stage development assets within our core urology focus that can be efficiently marketed
through our growing commercial organization.
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Develop
a pipeline of urology products, with a focus on identifying novel products with sufficient clinical proof of concept that
require modest internal R&D expense.
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We
plan to augment our core in-development and commercial assets through efficient identification of complementary therapeutics,
devices, and diagnostics related to urological disorders. We intend to seek assets that are near commercial stage or already generating
revenues. Further, we intend to seek to acquire products through asset purchases, licensing, co-development, or collaborative
commercial arrangements (co-promotions, co-marketing, etc.).
Our
management team has extensive experience across a wide range of business development activities and have in-licensed or acquired
products from large, mid-sized, and small enterprises in the United States and abroad. Through an assertive product and business
development approach, we expect that we will build a substantial portfolio of complementary urology products.
Corporate
Information
We
were incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado.
Vyrix
Pharmaceuticals, Inc., or Vyrix, was incorporated under the laws of the State of Delaware on November 18, 2013 and was wholly
owned by Ampio Pharmaceuticals, Inc. (NYSE American: AMPE), or Ampio, immediately prior to the completion of the Merger (defined
below). Vyrix was previously a carve-out of the sexual dysfunction therapeutics business, including the late-stage men’s
health product candidates, Zertane and Zertane-ED, from Ampio, that carve-out was announced in December 2013. Luoxis Diagnostics,
Inc., or Luoxis, was incorporated under the laws of the State of Delaware on January 24, 2013 and was majority owned by Ampio
immediately prior to the completion of the Merger. Luoxis was initially focused on developing and advancing the RedoxSYS System.
The MiOXSYS System was developed following the completed development of the RedoxSYS System.
On
March 20, 2015, Rosewind formed Rosewind Merger Sub V, Inc. and Rosewind Merger Sub L, Inc., each a wholly-owned subsidiary formed
for the purpose of the Merger, and on April 16, 2015, Rosewind Merger Sub V, Inc. merged with and into Vyrix and Rosewind Merger
Sub L, Inc. merged with and into Luoxis, and Vyrix and Luoxis became subsidiaries of Rosewind. Immediately thereafter, Vyrix and
Luoxis merged with and into Rosewind with Rosewind as the surviving corporation (herein referred to as the Merger). Concurrent
with the closing of the Merger, Rosewind abandoned its pre-merger business plans, and we now solely pursue the specialty healthcare
market, focusing on urological related conditions, including the business of Vyrix and Luoxis. When we discuss our business in
this prospectus, we include the pre-Merger business of Luoxis and Vyrix.
On
June 8, 2015, we (i) reincorporated as a domestic Delaware corporation under Delaware General Corporate Law and changed our name
from Rosewind Corporation to Aytu BioScience, Inc., and (ii) effected a reverse stock split in which each common stock holder
received one share of common stock for each 12.174 shares outstanding. At our annual meeting of shareholders held on May 24, 2016,
our shareholders approved (1) an amendment to our Certificate of Incorporation to reduce the number of authorized shares of common
stock from 300.0 million to 100.0 million, which amendment was effective on June 1, 2016, and (2) an amendment to our Certificate
of Incorporation to affect a reverse stock split at a ratio of 1-for-12 which became effective on June 30, 2016. At our special
meeting of shareholders held on July 26, 2017, our shareholders approved an amendment to our Certificate of Incorporation to affect
a reverse stock split at a ratio of 1-for-20 which became effective on August 25, 2017. All share and per share amounts in this
prospectus have been adjusted to reflect the effect of these three reverse stock splits (hereafter referred to collectively as
the “Reverse Stock Splits”).
Our
principal executive offices are located at 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112, and our phone number is
(720) 437-6580. Our corporate website address is http://aytubio.com. The information contained on, connected to or that can be
accessed via our website is not part of this prospectus. We have included our website address in this prospectus as an inactive
textual reference only and not as an active hyperlink.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully the risks,
uncertainties and other factors described in our most recent Annual Report on Form 10-K, as supplemented and updated by subsequent
quarterly reports on Form 10-Q and current reports on Form 8-K that we have filed or will file with the SEC, which are incorporated
by reference into this prospectus.
Our
business, affairs, prospects, assets, financial condition, results of operations and cash flows could be materially and adversely
affected by these risks. For more information about our SEC filings, please see “Where You Can Find More Information.”
USE
OF PROCEEDS
Unless
otherwise indicated in a prospectus supplement, we intend to use the net proceeds from the sale of the securities under this prospectus
for general corporate purposes, including and for general working capital purposes. We may also use a portion of the net proceeds
to acquire or invest in businesses and products that are complementary to our own, although we have no current plans, commitments
or agreements with respect to any acquisitions as of the date of this prospectus.
DESCRIPTION
OF CAPITAL STOCK
General
We
are authorized to issue up to 100.0 million shares of common stock, par value $0.0001 per share, and 50.0 million shares of preferred
stock, par value $0.0001 per share.
As
of November 21, 2017, a total of 4,897,638 shares of our common stock were issued and outstanding, and a total of 1,900
shares of our Series A Convertible Preferred Stock were issued and outstanding.
Common
Stock
The
holders of common stock are entitled to one vote per share. Our Certificate of Incorporation does not expressly prohibit cumulative
voting. The holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board
of Directors out of legally available funds. Upon liquidation, dissolution or winding-up, the holders of our common stock are
entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock have no preemptive,
subscription, redemption or conversion rights.
The
rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights
of the holders of any series of preferred stock, which may be designated solely by action of the Board of Directors and issued
in the future.
Preferred
Stock
Our
Certificate of Incorporation provides our Board of Directors with the authority to divide the preferred stock into series and
to fix and determine the rights and preferences of the shares of any series of preferred stock established to the full extent
permitted by the laws of the State of Delaware and the Certificate of Incorporation.
On
August 11, 2017, we filed a Certificate of Designation of Series A Convertible Preferred Stock with the Delaware Secretary of
State classifying and designating the rights, preferences and privileges of the Series A Preferred Stock, of which there are 10,000
shares authorized. As of August 15, 2017, a total of 2,250 shares of Series A Convertible Preferred Stock were issued and outstanding.
At any time, at the option of the holder, Series A Preferred Stock may be converted into a number of shares of common stock equal
to $1,000.00 divided by the conversion price, which is $3.00, subject to adjustment for stock splits, stock dividends and similar
corporate events. A holder will be prohibited from converting any Series A Preferred Stock if, as a result of such conversion,
the holder, together with its affiliates, would own more than 9.99% of the total number of shares of our common stock then issued
and outstanding. Except as otherwise expressly provided by law, the holders of shares of Series A Preferred Stock are entitled
to vote with the common stock, as if converted into shares of common stock, provided, however, that in no event will a holder
of shares of Series A Preferred Stock be entitled to vote a number of shares in excess of such holder’s Beneficial Ownership
Limitation.
Transfer
Agent and Registrar
The
transfer agent of our common stock is VStock Transfer. Their address is 18 Lafayette Place, Woodmere, NY 11598.
Listing
Our
common stock is currently traded on the NASDAQ Capital Market under the symbol “AYTU”.
DESCRIPTION
OF WARRANTS
We
may issue warrants for the purchase of preferred stock or common stock. Warrants may be issued independently or together with
any preferred stock or common stock, and may be attached to or separate from any offered securities. Each series of warrants will
be issued under a separate warrant agreement to be entered into between a warrant agent specified in the agreement and us. The
warrant agent will act solely as our agent in connection with the warrants of that series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of warrants. This summary of some provisions of the
securities warrants is not complete. You should refer to the securities warrant agreement, including the forms of securities warrant
certificate representing the securities warrants, relating to the specific securities warrants being offered for the complete
terms of the securities warrant agreement and the securities warrants. The securities warrant agreement, together with the terms
of the securities warrant certificate and securities warrants, will be filed with the Securities and Exchange Commission in connection
with the offering of the specific warrants.
The
applicable prospectus supplement will describe the following terms, where applicable, of the warrants in respect of which this
prospectus is being delivered:
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the
title of the warrants;
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the
aggregate number of the warrants;
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the
price or prices at which the warrants will be issued;
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the
designation, amount and terms of the offered securities purchasable upon exercise of the warrants;
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if
applicable, the date on and after which the warrants and the offered securities purchasable upon exercise of the warrants
will be separately transferable;
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the
terms of the securities purchasable upon exercise of such warrants and the procedures and conditions relating to the exercise
of such warrants;
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any
provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price
of the warrants;
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the
price or prices at which and currency or currencies in which the offered securities purchasable upon exercise of the warrants
may be purchased;
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the
date on which the right to exercise the warrants shall commence and the date on which the right shall expire;
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the
minimum or maximum amount of the warrants that may be exercised at any one time;
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information
with respect to book-entry procedures, if any;
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if
appropriate, a discussion of Federal income tax consequences; and
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any
other material terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of
the warrants.
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Warrants
for the purchase of common stock or preferred stock will be offered and exercisable for U.S. dollars only. Warrants will be issued
in registered form only.
Upon
receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the purchased
securities. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will
be issued for the remaining warrants.
Prior
to the exercise of any securities warrants to purchase preferred stock or common stock, holders of the warrants will not have
any of the rights of holders of the common stock or preferred stock purchasable upon exercise, including in the case of securities
warrants for the purchase of common stock or preferred stock, the right to vote or to receive any payments of dividends on the
preferred stock or common stock purchasable upon exercise.
DESCRIPTION
OF UNITS
As
specified in the applicable prospectus supplement, we may issue units consisting of shares of common stock, shares of preferred
stock or warrants or any combination of such securities.
The
applicable prospectus supplement will specify the following terms of any units in respect of which this prospectus is being delivered:
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the
terms of the units and of any of the common stock, preferred stock and warrants comprising the units, including whether and
under what circumstances the securities comprising the units may be traded separately;
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a
description of the terms of any unit agreement governing the units; and
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a
description of the provisions for the payment, settlement, transfer or exchange of the units.
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PLAN
OF DISTRIBUTION
We
may sell the securities offered through this prospectus (i) to or through underwriters or dealers, (ii) directly to purchasers,
including our affiliates, (iii) through agents, or (iv) through a combination of any these methods. The securities may be distributed
at a fixed price or prices, which may be changed, market prices prevailing at the time of sale, prices related to the prevailing
market prices, or negotiated prices. The prospectus supplement will include the following information:
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terms of the offering;
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the
names of any underwriters or agents;
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the
name or names of any managing underwriter or underwriters;
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the
purchase price of the securities;
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any
over-allotment options under which underwriters may purchase additional securities from us;
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the
net proceeds from the sale of the securities
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any
delayed delivery arrangements
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any
underwriting discounts, commissions and other items constituting underwriters’ compensation;
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any
initial public offering price;
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any
discounts or concessions allowed or reallowed or paid to dealers;
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any
commissions paid to agents; and
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any
securities exchange or market on which the securities may be listed.
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Sale
Through Underwriters or Dealers
Only
underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in the sale, the underwriters will acquire the securities for their own account, including through underwriting,
purchase, security lending or repurchase agreements with us. The underwriters may resell the securities from time to time in one
or more transactions, including negotiated transactions. Underwriters may sell the securities in order to facilitate transactions
in any of our other securities (described in this prospectus or otherwise), including other public or private transactions and
short sales. Underwriters may offer securities to the public either through underwriting syndicates represented by one or more
managing underwriters or directly by one or more firms acting as underwriters. Unless otherwise indicated in the prospectus supplement,
the obligations of the underwriters to purchase the securities will be subject to certain conditions, and the underwriters will
be obligated to purchase all the offered securities if they purchase any of them. The underwriters may change from time to time
any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.
If
dealers are used in the sale of securities offered through this prospectus, we will sell the securities to them as principals.
They may then resell those securities to the public at varying prices determined by the dealers at the time of resale. The prospectus
supplement will include the names of the dealers and the terms of the transaction.
Direct
Sales and Sales Through Agents
We
may sell the securities offered through this prospectus directly. In this case, no underwriters or agents would be involved. Such
securities may also be sold through agents designated from time to time. The prospectus supplement will name any agent involved
in the offer or sale of the offered securities and will describe any commissions payable to the agent. Unless otherwise indicated
in the prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases for the period of its
appointment.
We
may sell the securities directly to institutional investors or others who may be deemed to be underwriters within the meaning
of the Securities Act with respect to any sale of those securities. The terms of any such sales will be described in the prospectus
supplement.
Delayed
Delivery Contracts
If
the prospectus supplement indicates, we may authorize agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase securities at the public offering price under delayed delivery contracts. These contracts would provide
for payment and delivery on a specified date in the future. The contracts would be subject only to those conditions described
in the prospectus supplement. The applicable prospectus supplement will describe the commission payable for solicitation of those
contracts.
Continuous
Offering Program
Without
limiting the generality of the foregoing, we may enter into a continuous offering program equity distribution agreement with a
broker-dealer, under which we may offer and sell shares of our common stock from time to time through a broker-dealer as our sales
agent. If we enter into such a program, sales of the shares of common stock, if any, will be made by means of ordinary brokers’
transactions on the NASDAQ Capital Market at market prices, block transactions and such other transactions as agreed upon by us
and the broker-dealer. Under the terms of such a program, we also may sell shares of common stock to the broker-dealer, as principal
for its own account at a price agreed upon at the time of sale. If we sell shares of common stock to such broker-dealer as principal,
we will enter into a separate terms agreement with such broker-dealer, and we will describe this agreement in a separate prospectus
supplement or pricing supplement.
Market
Making, Stabilization and Other Transactions
Unless
the applicable prospectus supplement states otherwise, other than our common stock all securities we offer under this prospectus
will be a new issue and will have no established trading market. We may elect to list offered securities on an exchange or in
the over-the-counter market. Any underwriters that we use in the sale of offered securities may make a market in such securities,
but may discontinue such market making at any time without notice. Therefore, we cannot assure you that the securities will have
a liquid trading market.
Any
underwriter may also engage in stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Rule
104 under the Securities Exchange Act. Stabilizing transactions involve bids to purchase the underlying security in the open market
for the purpose of pegging, fixing or maintaining the price of the securities. Syndicate covering transactions involve purchases
of the securities in the open market after the distribution has been completed in order to cover syndicate short positions.
Penalty
bids permit the underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by the
syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the securities to be higher than it would be in the absence
of the transactions. The underwriters may, if they commence these transactions, discontinue them at any time.
General
Information
Agents,
underwriters, and dealers may be entitled, under agreements entered into with us, to indemnification by us against certain liabilities,
including liabilities under the Securities Act. Our agents, underwriters, and dealers, or their affiliates, may be customers of,
engage in transactions with or perform services for us, in the ordinary course of business.
LEGAL
MATTERS
The
validity of the issuance of the securities offered by this prospectus will be passed upon for us by Sichenzia Ross Ference Kesner
LLP, New York, New York.
EXPERTS
The
consolidated financial statements of Aytu BioScience, Inc. at June 30, 2017 and 2016, and for each of the two years in the period
ended June 30, 2017, included in this prospectus have been audited by EKS&H LLLP, independent registered public accounting
firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on
the authority of such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and special reports, along with other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s
Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the Public Reference Room.
This
prospectus is part of a registration statement on Form S-3 that we filed with the SEC to register the securities offered hereby
under the Securities Act of 1933, as amended. This prospectus does not contain all of the information included in the registration
statement, including certain exhibits and schedules. You may obtain the registration statement and exhibits to the registration
statement from the SEC at the address listed above or from the SEC’s internet site.
You
may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section
of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities. You may also request a copy of these filings, at no cost, by writing or telephoning
us at: 373 Inverness Parkway, Suite 206, Englewood, Colorado 80112, (720) 437-6580.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This
prospectus is part of a registration statement filed with the SEC. The SEC allows us to “incorporate by reference”
into this prospectus the information that we file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information
that we file later with the SEC will automatically update and supersede this information. The following documents are incorporated
by reference and made a part of this prospectus:
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our
Annual Report on Form 10-K for the fiscal year ended June 30, 2017, filed with the SEC on August 31, 2017.
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our
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017, filed with the SEC on November 9, 2017.
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our
Current Reports on Form 8-K filed with the SEC on July 27, 2017, August 16, 2017, August 29, 2017, October 3, 2017, and October 27, 2017, including our amended current report on Form 8-K filed on July 20, 2017.
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the
description of our common stock contained in our Registration Statement on Form 8-A filed with the SEC on October 17, 2017
(File No. 001-38247), including any amendment or report filed for the purpose of updating such description; and
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all
reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after
the date of this prospectus and prior to the termination of this offering.
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Notwithstanding
the foregoing, information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits,
is not incorporated by reference in this prospectus.
Any
statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference into this
prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained
in this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
We
will furnish without charge to you, on written or oral request, a copy of the Annual Report incorporated by reference, including
exhibits to the document. You should direct any requests for documents to Aytu BioScience, Inc., 373 Inverness Parkway, Suite
206, Englewood, Colorado 80112, (720) 437-6580.
Aytu
BioScience, Inc.
Shares
of 11% Series I Cumulative Redeemable Preferred Stock
$17.50 Per Share
Liquidation Preference $17.50 Per Share
Prospectus
Supplement
H.C. Wainwright & Co.
,
2020
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