What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 365 added, 246 removed, 619 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2023

June 30, 2023

December 31, 2022

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50,000,000 shares authorized;

25,504,378 and 25,353,119 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

25,561,994 and 25,353,119 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

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For the three months ended

For the six months ended

Licensing revenue

$ 5,500  

$ 5,000  

$ 5,500  

$ 5,000  

Product sales and royalties

11,801  

Total net revenues

11,997  

17,301  

Cost of sales:

2 unchanged sentences

Total cost of sales

13,028  

Operating expenses:

1 unchanged sentence

General and administrative

10,019  

10,059  

Total operating expenses

(Loss) income from operations

Other (expense) income:

11,679  

12,367  

Income (loss) from operations

( 1,340 )  

Other income (expense):

Interest and other expense, net

(Loss) income before income tax expense

( 124 )  

( 218 )  

( 250 )  

Total other income (expense)

( 218 )  

Income (loss) before income tax expense

( 1,558 )  

Income tax expense

Net (loss) income

Net (loss) income per share, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

Net income (loss)

$ 4,559  

$ ( 1,558 )  

$ 1,899  

Net income (loss) per share, basic

$ 0.18  

$ ( 0.06 )  

$ 0.07  

Weighted average number of common shares outstanding, basic

25,593  

25,126  

25,560  

24,915  

Net income (loss) per share, diluted

$ 0.18  

$ ( 0.06 )  

$ 0.07  

Weighted average number of common shares outstanding, diluted

25,983  

25,126  

25,949  

24,915  

The accompanying notes are an integral part of these condensed financial statements.

1 unchanged sentence

Condensed Statements of Stockholders ’

For the three months ended March 31, 2023 and 2022

For the three months ended June 30, 2023 and 2022

(in thousands, except share amounts)

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Total Stockholders’

Balances at March 31, 2023

Stock-based compensation

Employee stock purchase plan

Balances at June 30, 2023

Additional Paid-in

Total Stockholders’

Balances at March 31, 2022

Stock-based compensation

Employee stock purchase plan

Warrant exercises

Warrant extensions

Balances at June 30, 2022

The accompanying notes are an integral part of these condensed financial statements.

Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders ’

For the six months ended June 30, 2023 and 2022

(in thousands, except share amounts)

Additional Paid-in

Total Stockholders’

Balances at December 31, 2022

Stock-based compensation

Employee stock purchase plan

Stock option exercises

Shares withheld related to net share settlement of stock option exercises

Balances at March 31, 2023

Balances at June 30, 2023

Additional Paid-in

2 unchanged sentences

Stock-based compensation

Balances at March 31, 2022

Employee stock purchase plan

Warrant exercises

Warrant extensions

Balances at June 30, 2022

The accompanying notes are an integral part of these condensed financial statements.

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(In thousands)

Three months ended

March 31, 2023

March 31, 2022

Six months ended

June 30, 2023

June 30, 2022

Cash flows from operating activities

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Net income (loss)

$ 1,899  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock-based compensation

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Accounts receivable

( 1,232 )  

( 259 )  

Prepaid expenses and other assets

1 unchanged sentence

Accrued liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities

Purchases of product license rights

Purchases of property and equipment

2 unchanged sentences

Repayment of long-term debt

( 385 )  

Proceeds from employee stock purchase plan and stock option exercises

Payment of tax withholding related to net share settlement of stock option exercises

( 181 )  

Net cash used in financing activities

( 295 )  

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period

16,305  

14,406  

Cash and cash equivalents at end of period

$ 21,566  

$ 17,046  

Supplemental disclosures of cash flow information

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Cash paid for income taxes

Supplemental disclosures of non-cash investing activities:

Payable for product license fee

The accompanying notes are an integral part of these condensed financial statements.

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The Company currently has three commercial rare disease products, ALKINDI SPRINKLE®

for the treatment of adrenocortical insufficiency, Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and Betaine Anhydrous for the treatment of homocystinuria and has four  additional product candidates in late-stage development.

The Company is developing dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning, ZENEO®

hydrocortisone autoinjector for the treatment of adrenal crisis, ET- 400, and ET- 600.

In addition, the Company is entitled to royalties or milestone payments from four  FDA-approved products and one product candidate under development that the Company developed and out-licensed.

The products are EPRONTIA™, Cysteine Hydrochloride, Zonisade®, Biorphen®, and Lamotrigine for Oral Suspension.

for the treatment of pediatric adrenocortical insufficiency, Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and Betaine Anhydrous for the treatment of homocystinuria.

The Company has four  additional product candidates in late-stage development: dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning, ZENEO®

hydrocortisone autoinjector for the treatment of adrenal crisis, ET- 400 for the treatment of adrenocortical insufficiency, and ET- 600 for the treatment of diabetes insipidus.

Note 2 —

Liquidity Considerations

The Company currently believes its existing cash and cash equivalents of $ 14,708  as of March 31, 2023 along with revenues from approved products and additional milestone payments expected to be paid in 2023 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report.

This estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage its spending.

The Company believes its existing cash and cash equivalents of $ 21,566  as of June 30, 2023  in addition to revenues from approved products and milestone payments expected to be paid in 2023 , will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report.

This estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage spending.

The Company could use its available capital resources sooner than currently expected.

Accordingly, the Company could seek to obtain additional capital through equity financings, the issuance of debt or other arrangements.

However, there can be no assurance that the Company will be able to raise additional capital if needed or under acceptable terms, if at all.

However, the Company cannot make assurances that it will be able to raise additional capital if needed or under acceptable terms.

The sale of additional equity may dilute existing stockholders and newly issued stock could contain senior rights and preferences compared to currently outstanding common shares.

The Company’s existing long-term debt obligation contains covenants and limits the Company’s ability to pay dividends or make other distributions to stockholders.

If the Company experiences delays in product sales growth, completing its product development and obtaining regulatory approval for its other product candidates and is unable to obtain such additional financing, operations might need to be scaled back or discontinued.

If the Company experiences delays in product development or sales growth, obtaining regulatory approval for its other product candidates, or is unable to secure such additional financing, it might need to scale back or discontinue operations.

Eton Pharmaceuticals, Inc.

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Unaudited Interim Financial Information

The accompanying interim condensed financial statements are unaudited and have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the periods ended March 31, 2023 and 2022 .

The financial data and other information disclosed in these notes related to the three -month periods ended March 31, 2023 and 2022 are also unaudited.

The results for the three -month periods ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023 , any other interim periods or any future year or period.

The accompanying interim condensed financial statements are unaudited and have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2023 , and the results of its operations and its cash flows for the periods ended June 30, 2023 and 2022 .

The financial data and other information disclosed in these notes related to the three -month and six -month periods ended June 30, 2023 and 2022 are also unaudited.

The results for the three -month and six -month periods ended June 30, 2023 , are not necessarily indicative of results to be expected for the year ending December 31, 2023 , any other interim periods, or any future year or period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these financial statements include, but are not limited to, provisions for uncollectible receivables, chargebacks and sales returns, valuation of inventories, useful lives of assets and the impairment of property and equipment and intangible assets, deferred tax assets, the accrual of research and development expenses and the valuation of stock options and warrants, and restricted stock units.

Significant estimates and assumptions reflected in these financial statements include, but are not limited to, provisions for uncollectible receivables, chargebacks and sales returns, Medicaid program rebates, valuation of inventories, useful lives of assets, and the impairment of property and equipment and intangible assets, deferred tax assets, the accrual of research and development expenses and the valuation of stock options and warrants, and restricted stock units (“RSUs”).

Estimates are periodically reviewed in light of changes in circumstances, facts, and experience.

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treasury bills or high-grade money market funds.

As of March 31, 2023 , the Company’s cash is in a non-interest bearing account as well as a government money market fund.

As of June 30, 2023 , the Company’s cash is in a non-interest-bearing account and a government money market fund.

From time to time, amounts deposited with its bank exceed federally insured limits.

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Accounts receivable are recorded at the invoiced amount and are non-interest bearing.

Accounts receivable are recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees, chargebacks and returns and allowances.

The total for these reserves amounted to $ 176  and $ 262  as of March 31, 2023 and December 31, 2022 , respectively.

The Company considers historical collection rates and current financial status of its customers, as well as macroeconomic and industry-specific factors when evaluating potential credit losses.

Accounts receivable are recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees, chargebacks, returns, and allowances.

The total for these reserves amounted to $ 186  and $ 262  as of June 30, 2023 and December 31, 2022 , respectively.

The Company considers historical collection rates and the current financial status of its customers, as well as macroeconomic and industry-specific factors when evaluating potential credit losses.

Historically, the Company's accounts receivable balances have been highly concentrated with a select number of customers, consisting primarily of specialty pharmacies and large wholesale pharmaceutical distributors. Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

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The Company reviews its inventories for potential excess or obsolete issues on an ongoing basis and will record a write-down if an impairment is identified.

Inventories at March 31, 2023 and December 31, 2022 consist solely of purchased finished goods.

At March 31, 2023 and December 31, 2022 inventories are shown net of reserves for its ALKINDI SPRINKLE®

Inventories at June 30, 2023 and December 31, 2022 , consist solely of purchased finished goods.

At June 30, 2023 and December 31, 2022 , inventories are shown net of reserves for its ALKINDI SPRINKLE®

of $ 76  and $ 62 , respectively, due to the risk of expiry before this entire stock of inventories is sold.

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The Company capitalizes payments it makes for licensed products when the payment relates to an FDA-approved product, and the cost is recoverable based on expected future cash flows from the product.

The cost is amortized on a straight-line basis over the estimated useful life of the product commencing on the approval date in accordance with Accounting Standards Codification (“ASC”) 350 —

Intangibles - Goodwill and Other.

The cost is amortized on a straight-line basis over the estimated useful life of the product commencing on the approval date in accordance with Accounting Standards Codification (“ASC”) 350,  Intangibles — Goodwill and Other.

In November 2021, the Company purchased the rights for its Carglumic Acid product for $ 3,250 , and that cost is being amortized over ten years.

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In September 2022, the Company purchased the rights for its Betaine Anhydrous product for $ 2,000 and that cost is being amortized over five years.

The intangible assets, net on the Company’s balance sheet reflected $ 2,177  of accumulated amortization as of March 31, 2023 .

The Company recorded $ 181  and $ 131 , respectively, of amortization expense for the three months ended March 31, 2023  and 2022.

The table below shows the estimated remaining amortization for these products for each of the five years from 2023 to 2027 and thereafter.

The intangible assets, net on the Company’s balance sheet, reflected $ 2,358  of accumulated amortization as of June 30, 2023 .

The Company recorded $ 181  and $ 362 , respectively, of amortization expense for the 

three and six months ended June 30, 2023 . The table below shows the estimated remaining amortization for these products for each of the five years from 2023 to 2027 and thereafter.

Remainder of 2023

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If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the Company’s statements of operations for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

No impairment was recognized during the three months ended March 31, 2023 and 2022.

No impairment was recognized during the 

six months ended June 30, 2023 and 2022 .

Debt Issuance Costs and Debt Discount and Detachable Debt-Related Warrants

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The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method.

Debt discounts related to the relative fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and accreted over the expected term of the debt to interest expense using the effective interest method.

Debt discounts related to the relative fair value of warrants issued in conjunction with the debt are also recorded as a reduction to the debt balance and accreted over the expected term of the debt-to-interest expense using the effective interest method.

Eton Pharmaceuticals, Inc.

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Summary of Significant Accounting Policies (continued)

The Company accounts for leases in accordance with ASC Topic 842 —

The Company accounts for leases in accordance with ASC Topic 842,  Leases.

The Company reviews all relevant facts and circumstances of a contract to determine if it is a lease whereby the terms of the agreement convey the right to control the direct use and receive substantially all the economic benefits of an identified asset for a period of time in exchange for consideration.

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Operating leases are reflected on the balance sheets as operating lease right-of-use assets, current accrued liabilities, and long-term operating lease liabilities.

The Company does not have any finance leases as of March 

31, 2023  and 2022.

The Company does not have any finance leases as of June 30, 2023 and 2022 .

The Company commences recognizing operating lease expense when the lessor makes the underlying asset available for use by the Company and the operating lease expense is recognized on a straight-line basis over the term of the lease.

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These programs could be adversely affected by a significant interruption in the manufacturing process.

The Company is also subject to credit risk from its accounts receivable related to product sales as it extends credit based on an evaluation of the customer’s financial condition, and collateral is not required.

The Company is also subject to credit risk from its accounts receivable related to product sales as it extends credit based on an evaluation of the customer’s financial condition, and collateral is

not required.

Management monitors its exposure to accounts receivable by periodically evaluating the collectability of the account receivable based on a variety of factors, including the length of time the receivables are past due, the financial health of the customer and historical experience.

Based upon the review of these factors, the Company did not record an allowance for doubtful accounts at 

31, 2023  or 2022.

The accounts receivable balance at March 31, 2023 and product sales revenue recognized during the period ended March 

31, 2023  consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE®

Based upon the review of these factors, the Company did

not record an allowance for doubtful accounts at 

June 30, 2023 and 2022 .

The accounts receivable balance at 

June 30, 2023 and product sales revenue recognized during the

six -month period ended

June 30, 2023 , consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE®

and Carglumic Acid products.

The accounts receivable balance at March 31, 2022 and product sales revenue recognized during the period ended March 

31, 2022  consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE®

The accounts receivable balance at

June 30, 2022  and product sales revenue recognized during the

six -month period ended 

June 30, 2022 , consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE®

and Carglumic Acid products as well as sales to and amounts due from AmerisourceBergen Corporation, Cardinal Health Services, and McKesson Corporation for sales of the Company’s Biorphen product.

AnovoRx sales made up 96.3 % of total net revenues recognized in the period ended March 31, 2023 and 95.1 % of net accounts receivable as of March 31, 2023, and 68.5 % of total net revenues recognized in the period ended March 31, 2022 and 79.8 % of net accounts receivable as of December 

AnovoRx sales made up

63.5 % of total net revenues recognized in the

six -month period ended 

June 30, 2023 and

84.2 % of net accounts receivable as of

June 30, 2023 , and

39.4 % of total net revenues recognized in the

six -month period ended 

June 30, 2022 , and

79.8 % of net accounts receivable as of 

December 31, 2022 .

Revenue Recognition for Contracts with Customers

The Company accounts for contracts with its customers in accordance with ASC 606 —

Revenue from Contracts with Customers.

The Company accounts for contracts with its customers in accordance with ASC 606,  Revenue from Contracts with Customers.

ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations to assess whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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Summary of Significant Accounting Policies (continued)

The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

The Company recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

Any amounts received prior to revenue recognition will be recorded as deferred revenue.

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Significant Financing Component – In determining the transaction price, the Company will adjust consideration for the effects of the time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees will be more than one year.

The Company sells its rare disease products to one pharmacy distributor customer which provides order fulfilment and inventory storage/distribution services.

The Company may sell products in the U.S.

to wholesale pharmaceutical distributors, who then sell the product to hospitals and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments represent performance obligations under each purchase order.

The Company uses a third -party logistics ( “3PL”

) vendor to process and fulfill orders and has concluded it is the principal in the sales to wholesalers because it controls access to the 3PL vendor services rendered and directs the 3PL vendor activities.

The Company has no significant obligations to wholesalers to generate pull-through sales.

For its rare disease products, the Company bills at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sell products at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs.

Because of the shelf life of the product and the Company’s lengthy return period, there may be a significant period of time between when the product is shipped and when it issues credits on returned product. 

The Company sells its rare disease products to one pharmacy distributor customer which provides order fulfillment and inventory storage/distribution services.

The Company has sold products in the U.S.

to wholesale pharmaceutical distributors, who then sold the product to hospitals and other end-user customers.

Sales to wholesalers were made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments represented performance obligations under each purchase order.

The Company used a third -party logistics ( “3PL”

) vendor to process and fulfill orders and concluded it is the principal in the sales to wholesalers because it controlled access to the 3PL vendor services rendered and directed the 3PL vendor activities.

The Company had 

no significant obligations to wholesalers to generate pull-through sales.

For its rare disease products, the Company bills at the initial product list price, which is subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements that are recorded as a reduction of net revenues at the date of sale/shipment.

Selling prices initially billed to wholesalers were subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sold products at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs.

The Company estimates the transaction price when it receives each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler/distributor arising from all of the above factors.

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When estimating these adjustments to the transaction price, the Company reduces it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known.

The Company stores its rare disease product inventory at its pharmacy distributor customer location, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

The Company recognizes revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location.

At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership and have an enforceable obligation to pay the Company.

They also have the ability to direct sales of product to their customers on terms and at prices they negotiate.

The Company stores its rare disease product inventory at its pharmacy distributor customer location, and records sales when stock is pulled and shipped to fulfill specific patient orders.

The Company recognized revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location.

At that time, the wholesalers take control of the product and take title, bear the risk of loss of ownership and have an enforceable obligation to pay the Company.

The wholesalers also have the ability to direct sales of products to their customers on terms and at prices they negotiate.

Although wholesalers have product return rights, the Company does not believe they have a significant incentive to return the product. 

Upon recognition of revenue from product sales, the estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, state Medicaid, and GPO fees are included in sales reserves, accrued liabilities and net accounts receivable.

The Company monitors actual product returns, chargebacks, discounts and fees subsequent to the sale.

The Company monitors actual product returns, chargebacks, discounts, and fees after the sale.

If these amounts end up differing from its estimates, it will make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings in the period of adjustment.

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Cost of Product Sales

Cost of product sales consists of the profit-sharing and royalty fees with the Company’s product licensing and development partners, the purchase costs for finished products from third -party manufacturers, freight and handling/storage costs from the Company’s 3PL logistics service providers, and amortization expense of certain intangible assets.

The cost of sales for profit-sharing and royalty fees and costs for purchased finished products and the associated inbound freight expense are recorded when the associated product sale revenue is recognized in accordance with the terms of shipment to customers while outbound freight and handling/storage fees charged by the 3PL service provider are expensed as they are incurred.

Cost of product sales consists of the profit-sharing and royalty fees with the Company’s product licensing and development partners, the purchase costs for finished products from third -party manufacturers, freight and handling/storage from the Company’s 3PL logistics service providers, and amortization expense of certain intangible assets.

The costs of sales for profit-sharing, royalty fees, purchased finished products, and the associated inbound freight expense are recorded when the associated product sale revenue is recognized in accordance with the terms of shipment to customers while outbound freight and handling/storage fees charged by the 3PL service provider are expensed as they are incurred.

Intangible assets are amortized on a straight-line basis over the estimated useful life of the product.

Cost of product sales also reflects any write-downs or reserve adjustments for the Company’s inventories.

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Research and development (“R&D”) expenses include both internal R&D activities and external contracted services.

Internal R&D activity expenses include salaries, benefits and stock-based compensation and other costs to support the Company’s R&D operations.

Internal R&D activity expenses include salaries, benefits, stock-based compensation, and other costs to support the Company’s R&D operations.

External contracted services include product development efforts such as certain product licensor milestone payments, clinical trial activities, manufacturing and control-related activities, and regulatory costs.

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Basic net income (loss) per share of common stock is computed by dividing net income (loss) attributable to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as unvested restricted stock, stock options and warrants that are outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as unvested restricted stock, stock options, RSUs and warrants that are outstanding during the period.

Common stock equivalents are excluded from the computation when their inclusion would be anti-dilutive.

For the three -month periods ended March 31, 2023  and 

March 31, 2022 , common stock equivalents of 5,441,568  and 5,110,852 , respectively, are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive.

Included in the basic and diluted net income (loss) per share calculation are RSUs awarded to employees or directors that have vested, but the issuance and delivery of the shares of common stock are deferred until the director retires from service as a director.

For the three -month period ended June 30, 2023, common stock equivalents were 390,176 and excluded 

4,887,018  shares that were anti-dilutive.

For the six -month period ended June 30, 2023, common stock equivalents were 389,531 and excluded 

4,887,018  shares that were anti-dilutive.

For the 

three -month and six -month periods ended June 30, 2022 , common stock equivalents of 

5,557,881  and 5,335,601 , respectively, are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive. Included in the basic and diluted net income (loss) per share calculation are RSUs awarded to employees or directors that have vested, but the issuance and delivery of the shares of common stock are deferred until the director retires from service as a director.

Stock-Based Compensation

The Company accounts for stock-based compensation under the provisions of ASC —

718 Compensation —

Stock Compensation.

The Company accounts for stock-based compensation under the provisions of ASC 

718, Compensation — Stock Compensation.

The guidance under ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant and record expense over the related service periods, which are generally the vesting period of the equity awards.

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The expected term of stock options granted is based on vesting periods and the contractual life of the options.

Expected volatilities are based on comparable companies’

historical volatility along with a limited weighting included for the Company’s own volatility, which management believes represents the most accurate basis for estimating expected future volatility under the current conditions.

Expected volatility is based on the Company's own volatility, along with a limited weighting of comparable companies’

historical volatilities, which management believes represents the most accurate basis for estimating expected future volatility under the current conditions.

The Company accounts for forfeitures as they occur.

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Impact of Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") 

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 

2016 - 13, “Measurement of Credit Losses on Financial Instruments.”

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Based on the composition of the Company’s accounts receivable, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of March 31, 2023, using its expected credit loss evaluation process described above, resulted in no provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Specifically, the Company’s estimate of expected credit losses as of June 30, 2023 , using its expected credit loss evaluation process described above, resulted in no provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Eton Pharmaceuticals, Inc.

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Property and equipment, net

Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 13  and $ 21 , respectively.

Depreciation expense for the 

three months ended June 30, 2023 and 2022 was $ 10  and $ 18 , respectively. 

Depreciation expense for the 

six months ended June 30, 2023 and 2022 was $ 23 and $ 39 , respectively.

Note 5 —

Long-Term Debt

On November 13, 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Holdings Corporation (“SWK”) which provided for up to $ 10,000  in financing.

The Company received proceeds of $ 5,000  at closing and was able to borrow an additional $ 5,000  upon the FDA approval of a second product developed by the Company, excluding its EM- 100/Alaway Preservative-Free eye allergy product (“EM- 100”

In March 2020, in conjunction with the Company’s ALKINDI SPRINKLE®

product licensing agreement (see Note 11 ) and the Company’s March 2020 sale of additional shares of its common stock, the Company and SWK amended the SWK Credit Agreement.

The amendment provided the Company with the option to immediately draw $ 2,000  and the ability to borrow an additional $ 3,000  based upon the FDA approval of EM- 100 and ALKINDI SPRINKLE®

which subsequently occurred in September 2020.

Accordingly, the Company borrowed an additional $ 2,000  on August 11, 2020.

In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Holdings Corporation (“SWK”) which provided for up to $ 10,000  in financing.

The Company received proceeds of $ 5,000  at closing and borrowed an additional $ 5,000  upon the FDA approval of a second product developed by the Company. In March 2020, the Company and SWK amended the SWK Credit Agreement, and the Company borrowed an additional $ 2,000 in August 

The term of the SWK Credit Agreement is for five years, and borrowings bear interest at a rate of LIBOR 3 -month plus 

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Borrowings under the SWK Credit Agreement are secured by the Company’s assets.

The SWK Credit Agreement contains customary default provisions and covenants which include limits on additional indebtedness.

The SWK Credit Agreement contains customary default provisions and covenants which limit additional indebtedness.

In March 2020, SWK provided a waiver for the Company to obtain loans with the Small Business Association.

In February 2021, the Company notified SWK that it will not require additional borrowing capacity under the SWK Credit Agreement and terminated the additional borrowing capacity with SWK.

In connection with the initial $ 5,000  borrowed in November 2019, the Company issued warrants to SWK to purchase 

In February 2021, the Company notified SWK that it would 

not require additional borrowing capacity under the SWK Credit Agreement and terminated the additional borrowing capacity with SWK.

In connection with the initial $ 5,000  borrowed under the SWK Credit Agreement, the Company issued warrants to SWK to purchase 

51,239  shares of the Company’s common stock with an exercise price of $ 5.86  per share.

The relative fair value of these 

51,239  warrants was $ 226  and was estimated using BSM with the following assumptions:

The relative fair value of these warrants was $ 226  and was estimated using BSM with the following assumptions:

fair value of the Company’s common stock at issuance of $ 5.75  per share; 

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The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to change in connection with stock splits, dividends, reclassifications and other conditions.

On April 5, 2022, the Company and SWK entered into an amendment to the SWK Credit Agreement which allowed for a deferral of loan principal payments until May 2023 and reduced the interest rate to LIBOR 3 -month plus 

In April 2022, the Company and SWK further amended the SWK Credit Agreement to allow for a deferral of loan principal payments until May 2023 and reduce the interest rate to LIBOR 3 -month plus 

8.0 %, subject to a stated LIBOR floor rate of 

In accordance with the change, the Company has classified $ 1,339  as principal due in the next 12 months and the remainder classified as long-term debt in its balance sheet at March 31, 

Because LIBOR was intended to be phased out by the end of 2021, future borrowings under our Credit Agreement could be subject to reference rates other than LIBOR.

However, the cessation date has been deferred to June 30, 2023 and we do not expect the planned discontinuation of LIBOR to have a material impact on interest payments incurred under the SWK Credit Agreement.

The Company is in discussions with SWK regarding an alternate reference rate.

Interest expense of $ 265  was recorded during the three months ended March 31, 2023 , which included $ 29  of debt discount amortization.

Interest expense of $ 247  was recorded during the three months ended March 31, 2022 , which included $ 36  of debt discount amortization.

As of March 31, 2023 , $ 251  of accrued interest is included in accrued liabilities.

The table below reflects the future payments for the SWK loan principal and interest as of March 31, 2023 .

In accordance with the change, the Company has classified $ 1,540  as principal due in the next 12 months, and the remainder classified as long-term debt in its balance sheet at June 30, 2023 .

Because LIBOR was phased out as of June 30, 2023, future borrowings under the SWK Credit Agreement could be subject to reference rates other than LIBOR.

However, synthetic LIBOR rates will continue to be published through September 2024, and we do not expect the discontinuation of LIBOR to have a material impact on interest payments incurred under the SWK Credit Agreement.

The Company is in discussions with SWK regarding an amendment to the Credit Agreement which will include an alternate reference rate.

Interest expense of $ 538  was recorded during the six months ended June 30, 2023 , which included $ 61  of debt discount amortization.

Interest expense of $ 466  was recorded during the six months ended June 30, 2022 , which included $ 66  of debt discount amortization.

As of June 30, 2023 , $ 281  of accrued interest is included in accrued liabilities.

The table below reflects the future payments for the SWK loan principal and interest as of June 30, 2023 .

Remainder of 2023

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The Company has 50,000,000 authorized shares of $ 0.001 par value common stock under its Amended and Restated Certificate of Incorporation.

During the three months ended March 31, 2023 , the Company issued 202,126  shares of its common stock resulting from cash and non-cash stock option exercises under its 2018 Equity Incentive Plan (see Note 8 ). 

The Company withheld 50,867  shares for payroll tax obligations totaling $ 181  for the three months ended March 31, 2023.

The Company did not have any stock issuance activity for the three months ended March 31, 2022 .

During the six months ended June 30, 2023 , the Company issued 202,126  shares of its common stock resulting from cash and non-cash stock option exercises under its 2018 Equity Incentive Plan (see Note 8 ). 

The Company withheld 

50,867  shares for payroll tax obligations totaling $ 181 for the 

six months ended June 30, 2023 .

In June 2023, the Company issued 57,616  shares of its common stock to employees in accordance with its Employee Stock Purchase Plan (“ESPP”). During the six months ended June 30, 2022, a holder of the Company’s common stock warrants exercised 

600,000  warrants on a cashless basis and the Company issued 

598,448  shares of its common stock in connection with the warrant exercise.

The intrinsic value of the warrant exercise was $ 2,268 .

In June 2022, the Company issued 

47,585  shares of its common stock to employees in accordance with its ESPP.

Note 7 —

Common Stock Warrants

The Company’s outstanding warrants to purchase shares of its common stock at March 31, 2023 are summarized in the table below.

The Company’s outstanding warrants to purchase shares of its common stock at June 30, 2023 are summarized in the table below.

Description of Warrants

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These rights are provided under the terms of a registration rights agreement between the Company and the investors.

On June 26, 2022, 467,242 warrants from the 2017 preferred stock offering with an exercise price of $ 3.00 were set to expire.

Prior to the expiration, the Company entered into an agreement with warrant holders, whereby it modified the terms of the warrants to extend the expiration date until December 26, 2022 in exchange for the Company retaining the option of a cashless exercise provision.

No other terms were modified.

Due to this modification, the Company incurred a modification expense of $ 244 that is included in general and administrative (“G&A”) expense on the Condensed Statements of Operations for the six months ended June 30, 2022 .

Eton Pharmaceuticals, Inc.

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Share-Based Payment Awards

The Company’s board of directors and stockholders approved the Eton Pharmaceuticals, Inc.

2017 Equity Incentive Plan in May 2017 ( the “2017 Plan”), which authorized the issuance of up to 5,000,000 shares of the Company’s common stock.

In conjunction with the Company’s IPO in November 2018, the Company’s stockholders and board of directors approved the 2018 Equity Incentive Plan (as amended in December 2020, the “2018 Plan”) which succeeded the 2017 Plan.

The Company has granted restricted stock awards (“RSAs”), stock options and restricted stock units (“RSUs”) for its common stock under the 2017 Plan and 2018 Plan as detailed in the tables below.

There were 516,298  shares available for future issuance under the 2018 Plan as of March 31, 2023 .

Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards under the 2018 Plan.

The Company adopted the Eton Pharmaceuticals, Inc.

2017 Equity Incentive Plan (the “2017 Plan”), which authorized the issuance of up to 5,000,000 shares of the Company’s common stock, and in 2018 it adopted the 2018 Equity Incentive Plan (as amended in December 2020, the “2018 Plan”).

The Company has granted restricted stock awards (“RSAs”), stock options and RSUs for its common stock under the 2017 Plan and 2018 Plan as detailed in the tables below.

There were 628,485  shares available for future issuance under the 2018 Plan as of June 30, 2023 .

Share awards that are expired, terminated, surrendered, or canceled without having been fully exercised will be available for future awards under the 2018 Plan.

In addition, the 2018 Plan provides that commencing January 1, 2019 and through January 1, 2028, the share reserve will be increased annually by 4 % of the total number of shares of common stock outstanding as of the preceding December 31, subject to a reduction at the discretion of the Company’s board of directors.

The exercise price for stock options granted is not less than the fair value of common stock as determined by the board of directors as of the date of grant.

The exercise price for stock options granted is no  less than the fair value of common stock as determined by the board of directors as of the date of grant.

The Company uses the closing stock price on the date of grant as the exercise price.

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Options typically have a ten -year life, except for options to purchase 50,000 shares of the Company’s common stock granted to product consultants in July 2017 that expired, unexercised, in July 2022.

For the three months ended March 31, 2023 and 2022 , the Company’s total stock-based compensation expense was $ 872  and $ 1,083 , respectively.

Of these amounts, $ 818  and $ 995  was recorded in general and administrative expenses, respectively, and $ 54  and $ 88  was recorded in research and development expenses, respectively.

The Company’s previous CFO had 

474,295  employee stock options with an exercise price range of $ 1.37  to $ 8.61  which were set to expire three months after his retirement date of May 31, 2022, however, the Company extended the expiration date to April 10, 2023.

Of these options, 365,858 options were exercised in January and March 2023, with the remainder expiring in April 2023.

No other terms were modified.

Due to this modification, the Company incurred a modification expense of approximately $ 72  that is included in general and administration expense on the Condensed Statements of Operations for the three and six -month periods ended June 30, 2022.

For the three months ended June 30, 2023 and 2022 , the Company’s total stock-based compensation expense was $ 785  and $ 1,300 , respectively.

Of these amounts, $ 715  and $ 1,216  were recorded in G&A expenses, respectively, and $ 70  and $ 84  were recorded in research and development expenses, respectively.

For the six months ended June 30, 2023 and 2022 , the Company’s total stock-based compensation expense was $ 1,657  and $ 2,383 , respectively.

Of these amounts, $ 1,534  and $ 2,211  were recorded in G&A expenses, respectively, and $ 123  and $ 172  were recorded in research and development expenses, respectively.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2023 :

The following table summarizes stock option activity during the six months ended June 30, 2023 :

Outstanding as of December 31, 2022

8 unchanged sentences

$ 5.48  

Outstanding as of March 31, 2023

4,992,025  

$ 4.68  

$ 2,140  

Exerciseable as of March 31, 2023

Outstanding as of June 30, 2023

4,879,838  

$ 4.61  

Exercisable as of June 30, 2023

2,999,621  

Vested and expected to vest at March 31, 2023

$ 4.91  

Vested and expected to vest at June 30, 2023

4,879,838  

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Share-Based Payment Awards (continued)

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock at March 31, 2023 for those stock options that had strike prices lower than the fair value of the Company’s common stock.

Stock-based compensation related to stock options was $ 778  and $ 1,038  for the three months ended March 31, 2023  and 2022, respectively.

As of March 31, 2023 , there was a total of $ 5,473  of unrecognized compensation costs related to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the three -months ended 

March 31, 2023 was $ 2.29  per share.

In the three -month period ended March 31, 2023 , there were 

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock at June 30, 2023 for those stock options that had strike prices lower than the fair value of the Company’s common stock.

Stock-based compensation related to stock options was $ 698  and $ 1,476  for the three and six months ended June 30, 2023 , respectively.

Stock-based compensation related to stock options was $ 958  and $ 1,997  for the 

three and six months ended June 30, 2022 , respectively.

As of June 30, 2023 , there was a total of $ 4,777  of unrecognized compensation costs related to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the 

six months ended June 30, 2023  was $ 2.29  per share.

In the 

six months ended June 30, 2023 , there were 

five  stock option exercises which totaled 402,308  shares at a weighted average exercise price of $ 2.22  per share with an intrinsic value of $ 601 .

There were no stock option exercises during the 

three -month period ended March 31, 2022 .

six -month period ended June 30, 2022 .

Restricted Stock Units (RSUs)

The following table summarizes restricted stock unit activity during the three months ended March 31, 2023 :

The following table summarizes restricted stock unit activity during the six months ended June 30, 2023 :

Number of Units

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$ 2.63  

Outstanding and unvested as of March 31, 2023

Outstanding and unvested as of June 30, 2023

365,606  

$ 2.63  

Stock-based compensation related to RSUs was $ 58  for the three months ended March 31, 2023 .

As of March 31, 2023 , there was $ 789  of unrecognized stock-based compensation expense related to unvested RSUs which will be recognized over a weighted average period of 3.3  years.

Stock-based compensation related to RSUs was $ 60  and $ 118 for the three and six months ended June 30, 2023 .

As of June 30, 2023 , there was $ 729  of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of 3.0  years.

Employee Stock Purchase Plan

The Company’s 2018 Employee Stock Purchase Plan (the “ESPP”) provides for an initial reserve of 150,000 shares and this reserve is automatically increased on January 1 of each year by the lesser of 1 % of the outstanding common shares at December 31 of the preceding year or 150,000 shares, subject to reduction at the discretion of the Company’s board of directors.

As of March 31, 2023 , there were 710,296  shares available for issuance under the ESPP.

The annual offerings consist of two stock purchase periods, with the first purchase period ending in June and the second purchase period ending in December.

The Company’s 2018 Employee Stock Purchase Plan (“ESPP”) provides for an initial reserve of 150,000 shares, and this reserve is automatically increased on January 1 of each year by the lesser of 1 % of the outstanding common shares at December 31 of the preceding year or 150,000 shares, subject to reduction at the discretion of the Company’s board of directors.

As of June 30, 2023 , there were 652,680  shares available for issuance under the ESPP.

The annual offerings consist of two stock purchase periods, with the first purchase period ending in June and the second ending in December.

The terms of the ESPP permit employees of the Company to use payroll deductions to purchase stock at a price per share that is at least the lesser of ( 1 ) 85 % of the fair market value of a share of common stock on the first date of an offering or ( 2 ) 85 % of the fair market value of a share of common stock on the date of purchase.

After the initial offering period ended, subsequent twelve -month offering periods automatically commence over the term of the ESPP on the day that immediately follows the conclusion of the preceding offering, each consisting of two purchase periods approximately six months in duration.

In accordance with the June and December stock purchase periods for the ESPP, there were no share issuances in the first three months of 2023 and 2022 .

After the offering period ends, subsequent twelve -month offering periods automatically commence over the term of the ESPP on the day that immediately follows the conclusion of the preceding offering, each consisting of two purchase periods approximately six months in duration.

The terms of the ESPP provide a restart feature if the Company's stock price is lower at the end of a six -month period within the twelve -month offering period than it was at the beginning of the twelve -month offering period.

For the six months ended June 30, 2023 and 2022 , there were 

57,616 and 

47,585 share issuances, respectively, under the ESPP.

The weighted average grant date fair value of share awards in the first  

three months of 2023 and 2022 was $ 1.11  and $ 1.37 , respectively.

Employees contributed $ 107  and $ 108  via payroll deductions during the three months ended March 31, 2023 and 2022 , respectively.

The Company recorded an expense of $ 36  and $ 45  related to the ESPP in the three months ended March 31, 2023 and 2022 , respectively.

As of March 31, 2023 and December 31, 2022 , the accompanying condensed balance sheets include $ 130  and $ 23 , respectively, in accrued liabilities for remaining employee ESPP contributions.

six months of 2023 and 2022 was $ 1.14  and $ 1.32 , respectively.

Employees contributed $ 133  and $ 128  via payroll deductions during the six months ended June 30, 2023 and 2022 , respectively.

The Company recorded an expense of $ 63  and $ 70  related to the ESPP in the six months ended June 30, 2023 and 2022 , respectively.

The Company recorded an expense of $ 27  and $ 25  related to the ESPP in the three months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022 , the accompanying condensed balance sheets include $ 16  and $ 23 , respectively, in accrued liabilities for remaining employee ESPP contributions.

Eton Pharmaceuticals, Inc.

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The Company paid Eyemax $ 250  upon execution of the Eyemax Agreement, which was recorded as a component of R&D expense.

Under the terms of the original agreement, the Company would pay Eyemax $ 250  upon FDA approval and $ 500  upon the first commercial sale of the product and pay Eyemax a royalty of 

Under the terms of the Eyemax Agreement, the Company would pay Eyemax $ 250  upon FDA approval, $ 500  upon the first commercial sale of the product, and a royalty of 

10 % on the net sales of all products. The Eyemax Agreement was for an initial term of 

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After the Company has retained the full Recovery Amount, it is entitled to retain half of all royalty and non-royalty transaction revenue.

The Company has realized $ 1,818  of the non-royalty and royalty revenue as of March 

The Company has realized $ 1,833  of the non-royalty and royalty revenue as of June 30, 

The Amended Agreement also contains customary representations, warranties, covenants, and indemnities by the parties.

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or if the product’s U.S market share falls below a specified target percentage.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of March 31, 2023 or December 31, 2022 .

Effective March 24, 2023, Bausch Health has discontinued sales of Alaway®

Preservative Free.

Bausch Health discontinued sales of Alaway®

Preservative Free effective March 24, 2023.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of June 30, 2023 or December 31, 2022 .

Eton Pharmaceuticals, Inc.

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The Company recognizes a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, including operating leases, and separates lease components from non-lease components related to its office space lease. 

The Company’s operating lease cost as presented in the “General and Administrative”

captions in the condensed statements of operations was $ 23  for the three months ended 

March 31, 2023 and $ 21  for the three months ended March 31, 2022 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 19  for the three months ended March 31, 2023  and $ 20  for the three -month period ended March 31, 2022 .

The ROU asset amortization was $ 19  for the 

three -month period ended March 31, 2023 and $ 20  for the three -month period ended March 31, 2022  and is reflected within depreciation and amortization on the Company’s condensed statements of cash flows.

As of March 31, 2023 , the weighted-average remaining lease term was 2.0  years, and the weighted-average incremental borrowing rate was 8.6 %.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of March 31, 2023 (in thousands).

The Company’s operating lease cost as presented as G&A in the condensed statements of operations was $ 46  for the six  months ended 

June 30, 2023 , and $ 21  for the six  months ended June 30, 2022 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 37  for the six months ended June 30, 2023 , and $ 44  for the six months ended June 30, 2022 .

The ROU asset amortization was $ 20  and $ 39 for the 

three and six -month periods ended June 30, 2023 , respectively, and $ 21  and $ 41  for the three and six -month periods ended June 30, 2022 , respectively, and is reflected within depreciation and amortization on the Company’s condensed statements of cash flows.

As of June 30, 2023 , the weighted-average remaining lease term was 1.75  years, and the weighted-average incremental borrowing rate was 8.6 %.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2023 (in thousands).

Classification

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Total operating lease liabilities

The Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of March 31, 2023 is as indicated below:

The Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of June 30, 2023 , is as indicated below:

Undiscounted lease payments

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The Company has entered into various agreements in addition to those discussed above which are described below.

The three oral solution pediatric neurology product candidates discussed below, Topiramate, Zonisamide and Lamotrigine were developed by the Company and its various product candidate development partners and the Company subsequently sold all its rights and interests in these three products to Azurity in 2021.

The Company has recognized $ 22,000 in milestone revenues to date from these three products and may receive up to $ 20,000 in additional milestone revenues related to FDA product approvals and the future sales levels for the products.

Azurity has assumed royalty or profit share obligations owed to development partners as well as additional milestone payments based on sales volume targets. Azurity will assume royalty or profit share obligations owed to development partners as well as additional milestone payments based on sales volume targets.

The three oral solution pediatric neurology product candidates discussed below, Topiramate, Zonisamide, and Lamotrigine were developed by the Company and its various product candidate development partners, and the Company subsequently sold certain rights and interests in these three products to Azurity in 2021, but retained rights to certain royalties.

The Company has recognized $ 27,500 in milestone revenues to date from these three products.

Azurity has assumed royalty or profit share obligations owed to development partners as well as additional milestone payments based on sales volume targets.

In June 2023, the Company amended its asset purchase agreement with Azurity, and sold the royalty interests it received back to Azurity for total consideration of $ 5,500 which was recognized as license revenue for the three and six months ended June 30, 2023.

During the years ended December 31, 2021 and 2020, the Company worked with Tulex Pharmaceuticals, Inc.

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The Company recognized a $ 5,000 milestone revenue at launch which was reflected in accounts receivable on the Company’s balance sheet at December 31, 2021 and subsequently collected in January 2022.

On January 23, 2019, the Company entered into a Licensing and Supply Agreement (the “Agreement”) with Liquimeds Worldwide (“LMW”) for Zonisamide oral liquid, a development stage product candidate (“ET- 104”

In January 2019, the Company entered into a Licensing and Supply Agreement (the “Agreement”) with Liquimeds Worldwide (“LMW”) for Zonisamide oral liquid, a development stage product candidate (“ET- 104”

Pursuant to the terms of the Agreement, the Company was to be responsible for regulatory and marketing activities and LMW was responsible for development and manufacturing of ET- 104.

The Company paid $ 650 to Azurity upon issuance of patent covering ET- 104 listed in the FDA’s Orange Book in November 2022 and will pay $ 500 in the event that product sales in excess of $ 10,000 were achieved within a calendar year.

On June 12, 2019, the Company entered into an Exclusive Licensing and Supply Agreement (the “ET- 105 License Agreement”) with Aucta Pharmaceuticals, Inc.

The Company paid $ 650 to Azurity upon issuance of patent covering ET- 104 listed in the FDA’s Orange Book in November 2022.

In June 2019, the Company entered into an Exclusive Licensing and Supply Agreement (the “ET- 105 License Agreement”) with Aucta Pharmaceuticals, Inc.

(“Aucta”) for marketing rights in the United States to Lamotrigine, an oral suspension product candidate for use as an adjunct therapy for partial seizures, primary generalized tonic-clonic seizures, and generalized seizures of Lennox-Gastaut syndrome in patients two years of age and older.

Pursuant to the terms of the ET- 105 License Agreement, the Company was to be responsible for marketing activities and Aucta will be responsible for development, manufacturing, and regulatory activities related to obtaining regulatory approval.

The Company paid Aucta a licensing payment of $ 2,000 in August 2019 upon receiving an acceptance for review letter from the FDA and will pay $ 2,450 upon FDA approval and commercial sales of the product candidate and another $ 1,000 upon issuance of an Orange-book listed patent.

If Aucta successfully completes a Lamotrigine product line extension product, Eton will pay $ 1,500 upon FDA acceptance of the product filing.

Aucta will be entitled to receive milestone payments from the Company of up to $ 3,000 based on commercial success of the product, including $ 1,000 when net sales exceed $ 10 million in a calendar year, and $ 2,000 when net sales exceed $ 20 million in a calendar year.

On March 27, 2020, the Company entered into an Exclusive Licensing and Supply Agreement (the “Alkindi License Agreement”) with Diurnal for marketing ALKINDI SPRINKLE®

Pursuant to the terms of the ET- 105 License Agreement, the Company was responsible for marketing activities and Aucta will be responsible for development, manufacturing, and regulatory activities related to obtaining regulatory approval.

In March 2020, the Company entered into an Exclusive Licensing and Supply Agreement (the “Alkindi License Agreement”) with Diurnal for marketing ALKINDI SPRINKLE®

in the United States.

ALKINDI SPRINKLE®’s New Drug Application (NDA) was approved by the FDA on September 29, 2020 as a replacement therapy for pediatric patients with adrenocortical insufficiency.

In September 2020, ALKINDI SPRINKLE®’s New Drug Application (NDA) was approved by the FDA as a replacement therapy for pediatric patients with adrenocortical insufficiency.

For the initial licensing milestone fee, the Company paid Diurnal $ 3,500 in cash and issued 379,474 shares of its common stock to Diurnal, which were valued at $ 1,264 based on the Company’s closing stock price of $ 3.33 on March 26, 2020.

The Company will also pay Diurnal $ 2,500 if the product obtains orphan drug exclusivity status from the FDA.

On June 15, 2021, the Company acquired U.S.

In June 2021, the Company acquired U.S.

and Canadian rights to Crossject’s ZENEO®

1 unchanged sentence

The Company paid Crossject $ 500 upon signing, $ 500 in March 2022 upon a completion of a successful technical batch and could pay up to $ 3,500 in additional development milestones and up to $ 6,000 in commercial milestones, as well as a 10 % royalty on net sales.

On October 28, 2021, the Company acquired the U.S.

In October 2021, the Company acquired the U.S.

marketing rights to Carglumic Acid Tablets.

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Of the $ 5,000 received at closing, $ 250 was held in escrow to address potential indemnity claims during the 12 -month period following the effective date of the agreement.

In addition, 10 % of any additional payments paid by Dr.

In addition, 10 % of any additional payments by Dr.

Reddy’s during the 12 -month period following the effective date will be held in escrow and subsequently released to Eton upon expiration of the 12 -month period following the effective date.

In accordance with the terms of the agreement, $ 812 of Sintetica profit share receivables were expensed as cost of goods sold in the twelve months ended December 31, 2022.

On September 13, 2022, the Company acquired an FDA-approved ANDA for Betaine Anhydrous for oral solution.

The ANDA was approved by the FDA on January 28, 2022.

In September 

2022, the Company acquired an FDA-approved ANDA for Betaine Anhydrous for oral solution.

The ANDA was approved by the FDA in January 2022.

The Company paid $ 2,000 to the seller upon signing and could pay up to $ 1,000 in commercial milestones based on future product sales.

The Company will retain 65 % of the product profits with the balance being distributed to the licensor.

On March 14, 2023, the Company acquired rare disease endocrinology product candidate ET- 600 from Tulex.

The Company will pay $ 450 to Tulex upon successful manufacturing of registration batches, $ 200 upon acceptance by the FDA of the NDA for the product, $ 250 upon 

In March 2023, the Company acquired rare disease endocrinology product candidate ET- 600 from Tulex.

The Company paid $ 450 to Tulex in July 2023, which was accrued for as of June 30, 2023, as a result of successful manufacturing of registration batches.

The Company will pay $ 200 upon acceptance by the FDA of the NDA for the product, $ 250 upon 

first commercial sale of the product, and tiered royalties of 12.5 % to 

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The Company believes the fair value of the indemnification rights and agreements is minimal.

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of March 31, 2023 or December 31, 2022.

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of June 30, 2023 or 

December 31, 2022 .

Note 12 —

Subsequent Events

The Company has evaluated subsequent events through the filing date of this Form 10 -Q and has determined that no subsequent events have occurred that would require recognition in the condensed financial statements or disclosure in the notes thereto.

On July 12, 2023 the Company issued 91,402 ordinary shares in connection with the vesting of restricted stock units.

The Company has evaluated subsequent events through the filing date of the Form 10 -Q and has determined that no additional subsequent events have occurred that would require recognition in the condensed financial statements or disclosure in the notes thereto, except as disclosed in the notes herein.

Management ’

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In evaluating our business, you should carefully consider other matters set forth in our SEC filings, including the Risk Factors set forth in Part I, Item 1A of our 2022 10-K.

We are an innovative pharmaceutical company focused on developing, acquiring, and commercializing innovative products to address unmet needs in patients suffering from rare diseases. The Company currently has three commercial rare disease products, ALKINDI SPRINKLE®

for the treatment of adrenocortical insufficiency, Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and Betaine Anhydrous for the treatment of homocystinuria, and has four additional product candidates in late-stage development.

The Company is developing dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning, ZENEO®

hydrocortisone autoinjector for the treatment of adrenal crisis, ET-400, and ET-600.

In addition, the Company is entitled to royalties or milestone payments from four FDA-approved products and one product candidate under development that the Company developed and out-licensed.

The products are EPRONTIA®, Cysteine Hydrochloride, Zonisade®, Biorphen®, and Lamotrigine Oral Suspension.

Results of Operations

For the three months ended March 31, 2023, we had $5,304 in total revenue from product sales and royalties that generated a gross profit of $3,346.

We had total revenue from product sales and royalties of $2,176 for the three-month period ended March 31, 2022 that generated a gross profit of $1,327 for the period.

Eton is an innovative pharmaceutical company focused on developing, acquiring, and commercializing innovative products to address unmet needs in patients suffering from rare diseases.

The Company currently has three commercial rare disease products, ALKINDI SPRINKLE®

The Company has four additional product candidates in late-stage development: dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning, ZENEO®

hydrocortisone autoinjector for the treatment of adrenal crisis, ET-400, an innovative patent, and ET-600 for the treatment of an endocrinology condition.

Results of Operations (dollars in thousands)

For the three months ended June 30, 2023, we had $11,997 in total revenue that generated a gross profit of $9,682.

We had total revenue of $7,358 for the three-month period ended June 30, 2022 that generated a gross profit of $4,613 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE®

and Carglumic Acid products.

For the six months ended June 30, 2023, we had $17,301 in total revenue that generated a gross profit of $13,028.

We had total revenue of $9,534 for six months ended June 30, 2022 that generated a gross profit of $5,940 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE®

and Carglumic Acid products.

Research and Development Expenses

For the three months ended March 31, 2023, we incurred $535 of research and development (“R&D”) expenses as compared to the $1,618 for the same period in 2022.

The decrease was primarily due to a $500 fee to Crossject in 2022 upon execution of the agreement for ZENEO hydrocortisone autoinjector, and decreased development costs for our other new product candidates.

For the three months ended June 30, 2023, we incurred $1,125 of research and development (“R&D”) expenses as compared to the $690 for the same period in 2022.

The increase was primarily due to a $450 fee due to Tulex as a result of successful manufacturing of registration batches of product candidate ET-600.

For the six months ended June 30, 2023, we incurred $1,660 of research and development (“R&D”) expenses as compared to the $2,308 for the same period in 2022.

The decrease was primarily due to decreased expenses associated with products sold to Dr.

Reddy's in June 2022.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of employee compensation expenses, legal and professional fees, product marketing expenses, distribution expenses, business insurance, travel expenses and general office expenses.

For the three-month periods ended March 31, 2023 and 2022, we incurred $5,345 and $4,796, respectively, of G&A expenses.

The increase in G&A expenses was mainly due to incremental employee related expenses related to our sales force expansion.

G&A expenses consist primarily of employee compensation expenses, legal and professional fees, product marketing expenses, distribution expenses, business insurance, travel expenses, and general office expenses.

For the three-month periods ended June 30, 2023 and 2022, we incurred $4,674 and $5,263, respectively, of G&A expenses.

The decrease in G&A expenses was mainly due to decreased FDA fees and legal fees associated with products sold to Dr.

Reddy's in June 2022.

For the six months ended June 30, 2023 and 2022, we incurred $10,019 and $10,059, respectively, of G&A expenses.

The slight decrease in G&A expenses included incremental employee-related expenses related to our sales force expansion offset by decreased FDA fees and legal fees associated with products sold to Dr.

Reddy's in June 2022.

Other Income and Expenses

For the three-month and six-month periods ended June 30, 2023, we recorded $800 of other income in accordance with a break-up fee received as the result of participating in an asset acquisition auction process where the Company was not ultimately named the winning bidder.

Liquidity and Capital Resources

As of March 31, 2023, we had total assets of $23.9 million, including cash and cash equivalents of $14.7 million and we had working capital of $11.6 million.

We had previously capitalized our operations from the June 2017 private placement of approximately $20.1 million of Series A preferred stock which converted into shares of our common stock concurrent with our IPO in November 2018 and also the IPO which provided us with net proceeds of $22.0 million.

As of June 30, 2023, we had total assets of $30.9 million, including cash and cash equivalents of $21.6 million and working capital of $16.7 million.

We had previously capitalized our operations from the June 2017 private placement of approximately $20.1 million of Series A preferred stock which converted into shares of our common stock concurrent with our IPO in November 2018, which provided us with net proceeds of $22.0 million.

In addition, we entered into a Credit Agreement with SWK Holdings in November 2019, whereby we drew a $5.0 million loan amount at closing and an additional $2.0 million in August 2020.

In March and April 2020, we received net proceeds of approximately $7.8 million from the sale of shares of our common stock, and in October 2020, we received net proceeds of approximately $21.0 million from a public offering of our common stock at an offering price of $7.00 per share.

In March and April 2020, we received net proceeds of approximately $7.8 million from the sale of shares of our common stock.

In October 2020, we received net proceeds of approximately $21.0 million from a public offering of our common stock at an offering price of $7.00 per share.

We believe that our existing funding and revenues from our approved products will be sufficient for at least the next twelve months of our operations.

However, our projected estimates for our product development spending, administrative expenses, and our working capital requirements could be inaccurate, or we may experience growth more quickly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations.

The following table sets forth a summary of our cash flows for the three-month periods ended March 31, 2023 and 2022:

Three months ended

March 31, 2023

March 31, 2022

Net cash (used in) provided by operating activities

The following table sets forth a summary of our cash flows for the six-month periods ended June 30, 2023 and 2022 (dollars in thousands):

Six months ended

June 30, 2023

June 30, 2022

Net cash provided by operating activities

Cash used in investing activities

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Change in cash and cash equivalents

The decrease in cash (used in) provided by operating activities was the result of a $5,000 milestone payment received from Azurity related to the December 2021 product launch for EPRONTIA®

in the period ended March 31, 2022.

The decrease in cash used in financing activities was due to a deferral of loan principal payments from April 2022 until May 2023 (see Note 5 of the accompanying condensed financial statements).

The increase in cash provided by operating activities was primarily due to increased sales and gross profit from sales of our Alkindi Sprinkle and Carglumic Acid products.

The decrease in cash used in investing activities was due to a $750 payment related to the approval of Rezipres, a product sold to Dr.

Reddy's in June 2022.

The increase in cash used in financing activities was primarily due to lower stock option net proceeds in the six months ended June 30, 2023.

Critical Accounting Policies

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Revenue Recognition

We account for contracts with our customers in accordance with Accounting Standards Codification (“ASC”) 606 —

Revenue from Contracts with Customers.

We account for contracts with our customers in accordance with ASC 606, Revenue from Contracts with Customers.

ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations to assess whether each promised good or service is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options.

We assess whether these options provide a material right to the customer and, if so, they are considered performance obligations.

We assess whether these options provide a material right to the customer, and if so, they are considered performance obligations.

The exercise of a material right is accounted for as a contract modification for accounting purposes.

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

We recognize as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time, this is based on the use of an output or input method.

Any amounts received prior to revenue recognition will be recorded as deferred revenue.

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to wholesale pharmaceutical distributors, who then sell the product to hospitals and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments of products represent performance obligations under each purchase order.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments of products represents performance obligations under each purchase order.

We use a third-party logistics (“3PL”) vendor to process and fulfill orders and have concluded it is the principal in the sales to wholesalers because it controls access to the 3PL vendor services rendered and directs the 3PL vendor activities.

We have no significant obligations to wholesalers to generate pull-through sales.

For our rare disease products, we bill at the initial product list prices which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

For our rare disease products, we bill at the initial product list price, which is subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements that are recorded as a reduction of net revenues at the date of sale/shipment.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when products are sold at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs.

Because of the shelf life of the product and the Company's lengthy return period, there may be a significant period of time between when the product is shipped and when it issues credits on returned product.

In addition, we pay fees to wholesalers for their distribution services, inventory reporting, and chargeback processing.

We pay GPOs fees for administrative services and for access to GPO members and concluded the benefits received in exchange for these fees are not distinct from our sales, and accordingly we apply these amounts to reduce revenues.

Wholesalers also have rights to return eligible, unsold product nearing or past the expiration date.

Because of product shelf life and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product.

We estimate the transaction price when we receive each purchase order, taking into account the expected reductions of the selling price initially billed to the wholesaler arising from all of the above factors.

We have developed estimates for future returns and chargebacks and the impact of the other discounts and fees we pay.

Our sales of rare disease products to our distributor are not subject to returns.

When estimating these adjustments to the transaction price, it is sufficiently reduced to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known.

We store our rare disease product inventory at our pharmacy distributor customer location and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

We may recognize revenue from other product sales and related cost of sales upon product delivery to the wholesaler location.

At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership, and have an enforceable obligation to pay us.

They also have the ability to direct sales of product to their customers on terms and at prices they negotiate.

Although wholesalers have product return rights, we do not believe they have a significant incentive to return the product to us.

We pay GPOs fees for administrative services and access to GPO members and concluded the benefits received in exchange for these fees are not distinct from our sales.

Accordingly we apply these amounts to reduce revenues.

Wholesalers also have rights to return eligible, unsold products nearing or past the expiration date.

We estimate the transaction price when we receive each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler/distributor arising from all of the above factors.

We have developed estimates for future returns and chargebacks and the impact of the other discounts and fees we pay, although rare disease product sales are not subject to returns.

We store our rare disease product inventory at our pharmacy distributor customer location and record sales when stock is pulled and shipped to fulfill specific patient orders.

We may recognize revenue and cost of sales from product sold to wholesalers upon delivery to the wholesaler location.

At that time, the wholesalers take control of the product and take title, bear the risk of loss of ownership, and have an enforceable obligation to pay us.

The wholesalers also have the ability to direct sales of products to their customers on terms and at prices they negotiate.

Although wholesalers have product return rights, we do not believe they have a significant incentive to return the product.

We monitor actual product returns, chargebacks, discounts and fees subsequent to the sale.

We monitor actual product returns, chargebacks, discounts, and fees after the sale.

If these amounts end up differing from our estimates, we will make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings in the period of adjustment.

Stock-Based Compensation

We account for stock-based compensation under the provisions of Accounting Standards Codification (“ASC”) –

718 Compensation –

We account for stock-based compensation under the provisions of ASC 718, Compensation –

Stock Compensation.

Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed.

At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes-Merton option-pricing model (“BSM”).

We estimate the fair value of stock-based option awards to our using the BSM.

We estimate the fair value of stock-based option awards to our using the Black-Scholes-Merton option-pricing model (“BSM”).

The BSM requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs.

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The expected term of stock options granted is based on vesting periods and the contractual life of the options.

Expected volatilities are based on comparable companies’

historical volatility along with a limited weighting included for our own volatility subsequent to our IPO, which we believe represents the most accurate basis for estimating expected future volatility under the current conditions.

Expected volatility is based on the Company's own volatility, along with a limited weighting of comparable companies’

historical volatilities, which management believes represents the most accurate basis for estimating expected future volatility under the current conditions.

We account for forfeitures as they occur.

Prior to our initial public offering in November 2018, the fair value of the shares of common stock underlying our stock-based awards was determined by our board of directors, with input from management.

We use the closing common stock price on the date of grant for the fair value of the common stock.

Because there had been no public market for our common stock prior to the IPO, our board of directors had determined the fair value of the common stock on the grant-date of the stock-based award by considering a number of objective and subjective factors, including enterprise valuations of our common stock performed by an unrelated third-party specialist, valuations of comparable companies, sales of our convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of our capital stock, and general and industry-specific economic outlook.

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R&D expenses include both internal R&D activities and external contracted services.

Internal R&D activity expenses include salaries, benefits and stock-based compensation and other costs to support our R&D operations.

Internal R&D activity expenses include salaries, benefits, stock-based compensation, and other costs to support our R&D operations.

External contracted services include product development efforts including certain product licensor milestone payments, clinical trial activities, manufacturing and control-related activities, and regulatory costs.

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Actual results could differ from our estimates.

Upfront payments and milestone payments made for the licensing of technology for products that are not yet approved by the FDA are expensed as R&D in the period in which they are incurred.

Upfront payments and milestone payments made for the licensing of products that are not yet approved by the FDA are expensed as R&D in the period in which they are incurred.

Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses and are expensed as the related goods are delivered or the services are performed.

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JOBS Act Transition Period

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), was enacted.

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company”

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We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act.

Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.

As an emerging growth company, subject to certain conditions, we may rely on certain of these exemptions, including without limitation: (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.

We will remain an emerging growth company until December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements