What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 192 added, 102 removed, 597 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2024

June 30, 2024

December 31, 2023

26 unchanged sentences

50,000,000 shares authorized;

25,690,562 and 25,688,062 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

25,745,802 and 25,688,062 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

11 unchanged sentences

For the three months ended

For the six months ended

Licensing revenue

$ — $ 5,500 $ — $ 5,500

Product sales and royalties

17,040 11,801

Total net revenues

9,074 11,997 17,040 17,301

Cost of sales:

1 unchanged sentence

Product sales and royalties

3,448 2,315 6,407 4,273

Total cost of sales

3,448 2,315 6,407 4,273

5,626 9,682 10,633 13,028

Operating expenses:

Research and development

2,970 1,125 3,621 1,660

General and administrative

5,591 4,674 10,747 10,019

Total operating expenses

Loss from operations

8,561 5,799 14,368 11,679

Income (loss) from operations

( 2,935 ) 3,883 ( 3,735 ) 1,349

Other income (expense):

Interest expense, net

( 52 ) ( 124 ) ( 63 ) ( 250 )

Total other income (expense)

Loss before income tax expense

( 52 ) 676 ( 63 ) 550

Income (loss) before income tax expense

( 2,987 ) 4,559 ( 3,798 ) 1,899

Income tax expense

Net loss per share, basic

Net income (loss)

$ ( 3,041 ) $ 4,559 $ ( 3,852 ) $ 1,899

Net income (loss) per share, basic

$ ( 0.12 ) $ 0.18 $ ( 0.15 ) $ 0.07

Weighted average number of common shares outstanding, basic

Net loss per share, diluted

25,778 25,593 25,771 25,560

Net income (loss) per share, diluted

$ ( 0.12 ) $ 0.18 $ ( 0.15 ) $ 0.07

Weighted average number of common shares outstanding, diluted

25,778 25,983 25,771 25,949

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

1 unchanged sentence

Condensed Statements of Stockholders ’ Equity

For the three months ended March 31, 2024 and 2023

For the three months ended June 30, 2024 and 2023

(in thousands, except share amounts)

1 unchanged sentence

Total Stockholders’

Balances at December 31, 2023

Balances at March 31, 2024

25,690,562 $ 26 $ 120,349 $ ( 104,881 ) $ 15,494

Stock-based compensation

— — 840 — 840

Employee stock purchase plan

55,240 — 169 — 169

Stock option exercises

— — — ( 3,041 ) ( 3,041 )

Balances at June 30, 2024

25,745,802 $ 26 $ 121,358 $ ( 107,922 ) $ 13,462

Additional Paid-in

Total Stockholders’

Balances at March 31, 2023

Stock-based compensation

Employee stock purchase plan

Balances at June 30, 2023

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders ’ Equity

For the six months ended June 30, 2024 and 2023

(in thousands, except share amounts)

Additional Paid-in

2 unchanged sentences

Stock-based compensation

Employee stock purchase plan

Stock option exercises

Balances at June 30, 2024

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

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

2 unchanged sentences

(In thousands)

Three months ended

March 31, 2024

March 31, 2023

Six months ended

June 30, 2024

June 30, 2023

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

$ ( 3,852 ) $ 1,899

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

Stock-based compensation

Depreciation and amortization

Non-cash lease expense

Debt discount amortization

1 unchanged sentence

Accounts receivable

( 1,462 ) ( 1,232 )

( 1,157 ) ( 259 )

Prepaid expenses and other assets

1 unchanged sentence

Accrued liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

( 1,218 ) 5,555

Cash flows from investing activities

4 unchanged sentences

Repayment of long-term debt

Proceeds from stock option exercises

( 770 ) ( 385 )

Proceeds from employee stock purchase plan and stock option exercises

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

Net cash used in financing activities

( 594 ) ( 294 )

Change in cash and cash equivalents

( 3,694 ) 5,261

Cash and cash equivalents at beginning of period

21,388 16,305

Cash and cash equivalents at end of period

$ 17,694 $ 21,566

Supplemental disclosures of cash flow information

1 unchanged sentence

Cash paid for income taxes

Supplemental disclosures of non-cash transactions in investing and financing activities

Right-of-use assets and liabilities obtained due to lease renewal

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

13 unchanged sentences

Note 2 — Liquidity Considerations

The Company believes its existing cash and cash equivalents of $ 16,655 as of March 31, 2024 in addition to revenues from approved products 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.

The Company believes its existing cash and cash equivalents of $ 17,694 as of June 30, 2024 in addition to revenues from approved products 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.

3 unchanged sentences

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 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.

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

Eton Pharmaceuticals, Inc.

5 unchanged sentences

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, 2024 , and the results of its operations and its cash flows for the periods ended March 31, 2024 and 2023 .

The financial data and other information disclosed in these notes related to the three -month periods ended March 31, 2024 and 2023 are also unaudited.

The results for the three -month periods ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 , 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, 2024 , and the results of its operations and its cash flows for the periods ended June 30, 2024 and 2023 .

The financial data and other information disclosed in these notes related to the three -month and six -month periods ended June 30, 2024 and 2023 are also unaudited.

The results for the three -month and six -month periods ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 , 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, Medicaid program rebates, valuation of inventories, useful lives of assets and the recoverability of long-lived assets, valuation of deferred tax assets, the accrual of research and development expenses and the valuation of stock options and warrants, and restricted stock units (“RSUs”).

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 recoverability of long-lived assets, valuation of deferred tax assets, the accrual of research and development expenses and milestones, and the valuation of stock options, warrants, and restricted stock units (“RSUs”).

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

9 unchanged sentences

treasury bills or high-grade money market funds.

As of March 31, 2024 , the Company’s cash is in a non-interest-bearing account and a government money market fund.

As of June 30, 2024 , 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.

2 unchanged sentences

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, returns, and allowances.

The total for these reserves amounted to $ 207 and $ 129 as of March 31, 2024 and December 31, 2023 , 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.

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

The total for these reserves amounted to $ 185 and $ 129 as of June 30, 2024 and December 31, 2023 , respectively.

The Company considers historical collection rates and the current financial status of its customers, as well as information from internal and external sources, macroeconomic and industry-specific factors, current conditions, and reasonable and supportable forecasts 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.

2 unchanged sentences

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, 2024 and December 31, 2023 , consist solely of purchased finished goods.

At March 31, 2024 and December 31, 2023 , inventories are shown net of reserves for ALKINDI SPRINKLE® of $ 66 and $ 76 , respectively, due to the risk of expiry before this entire stock of inventories is sold.

Inventories at June 30, 2024 and December 31, 2023 , consist solely of purchased finished goods.

At June 30, 2024 and December 31, 2023 , inventories are shown net of reserves for ALKINDI SPRINKLE® of $ 72 and $ 76 , respectively, due to the risk of expiry before this entire stock of inventories is sold.

Eton Pharmaceuticals, Inc.

3 unchanged sentences

Property and Equipment

Property and equipment are stated at cost.

Property and equipment are stated at cost less accumulated depreciation.

Depreciation of property and equipment is computed utilizing the straight-line method based on the following estimated useful lives:

10 unchanged sentences

In March 2024, the Company purchased the rights for its PKU GOLIKE® product which resulted in a $ 1,868 intangible asset that is being amortized over ten years.

The intangible assets, net on the Company’s balance sheet, reflected $ 1,506 of accumulated amortization as of March 31, 2024 .

The Company recorded $ 220 and $ 181 , respectively, of amortization expense for the three -month periods ended March 31, 2024 and 2023.

The intangible assets, net on the Company’s balance sheet, reflected $ 1,772 of accumulated amortization as of June 30, 2024 .

The Company recorded $ 267 and $ 487 , respectively, of amortization expense for the three and six -month periods ended June 30, 2024 .

The table below shows the estimated remaining amortization for these products for each of the five years from 2024 to 2028 and thereafter.

5 unchanged sentences

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 -month periods ended March 31, 2024 and 2023.

No impairment was recognized during the six months ended June 30, 2024 or 2023.

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

15 unchanged sentences

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 did not have any finance leases as of March 31, 2024 or December 31, 2023 .

The Company did not have any finance leases as of June 30, 2024 or December 31, 2023 .

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.

11 unchanged sentences

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 March 31, 2024 or 2023.

The accounts receivable balance at March 31, 2024 and 2023, and product sales revenue recognized during the three -month periods ended March 31, 2024 and 2023, primarily consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE® and Carglumic Acid products.

AnovoRx sales made up 97.7 % of total net revenues recognized in the three -month period ended March 31, 2024 and 94.8 % of net accounts receivable as of March 31, 2024 , and 96.3 % of total net revenues recognized in the three -month period ended March 31, 2023, and 97.4 % of net accounts receivable as of December 31, 2023 .

Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

Based upon the review of these factors, the Company did not record an allowance for credit losses at June 30, 2024 and 2023 .

The accounts receivable balance at June 30, 2024 and 2023 , and product sales revenue recognized during the six -month periods ended June 30, 2024 and 2023 , primarily consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE® and Carglumic Acid products.

AnovoRx sales made up 95.9 % of total net revenues recognized in the six -month period ended June 30, 2024 and 96.2 % of net accounts receivable as of June 30, 2024 , and 63.5 % of total net revenues recognized in the six -month period ended June 30, 2023 , and 97.4 % of net accounts receivable as of December 31, 2023 .

Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

Eton Pharmaceuticals, Inc.

41 unchanged sentences

Note 3 — Summary of Significant Accounting Policies (continued)

The Company stores its ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, Nisitinone, and PKU GOLIKE® inventory at its pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

The Company stores its ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, Nisitinone, and PKU GOLIKE® inventory at its pharmacy distributor customer locations, and revenue is recorded when stock is pulled and shipped to fulfill specific orders.

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

3 unchanged sentences

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.

As of June 30, 2024 and December 31, 2023, estimated state Medicaid liability was $ 7,142 and $ 3,627 , respectively.

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

15 unchanged sentences

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.

As part of the process of preparing the Company’s financial statements, the Company must estimate the actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes.

These differences result in deferred tax assets and liabilities, which are included within the balance sheets.

The Company must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, a valuation allowance must be established.

To the extent the Company establishes a valuation allowance or increase or decrease to this allowance in a period, the impact will be included in income tax expense in the statements of operations.

As of June 30, 2024 and December 31, 2023, the Company has established a 100 % valuation reserve against its deferred tax assets.

The Company recorded income tax expense of $ 54 and zero for the six -month periods ended June 30, 2024 and 2023, respectively.

Our effective tax rate was negative 1.8 % for the six -month period ended June 30, 2024 and zero for the six -month period ended June 30, 2023.The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes.

As of June 30, 2024 and December 31 2023, there were no unrecognized tax benefits included in the balance sheets that would, if recognized, affect the effective tax rate.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties in its balance sheets at June 30, 2024 and December 31, 2023, and has not recognized interest and penalties in the statement of operations for the six -month periods ended June 30, 2024 and 2023.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change (by value) in its equity ownership over a three -year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

Income (Loss) Per Share

2 unchanged sentences

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

For the three -month periods ended March 31, 2024 and 2023, common stock equivalents of 5,942,961 and 5,441,568 , respectively, are excluded from the calculation of diluted net loss per shares because the effect is anti-dilutive.

For the three -month periods ended June 30, 2024 and 2023, common stock equivalents excluded 6,636,723 and 4,887,018 , respectively, that were anti-dilutive.

For the six -month periods ended June 30, 2024 and 2023 , common stock equivalents excluded 6,284,721 and 4,887,018 , respectively, that were anti-dilutive.

Included in the basic and diluted net income (loss) per share calculation are RSUs awarded to 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.

6 unchanged sentences

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.

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 option-pricing model (“BSM”).

The Company estimates the fair value of stock-based option awards using the BSM.

The Company estimates the fair value of stock-based option awards using the Black-Scholes 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.

25 unchanged sentences

The standard is effective for public companies for annual periods after December 15, 2023 and in interim periods in 2025, with early adoption permitted.

The Company is currently assessing the impact of adopting this guidance on its consolidated financial statements.

The Company is continuing to assess the potential impacts of the amendments, and it does not expect this pronouncement to have a material effect on its financial statements as the Company only has one reportable segment.

In December 2023, the FASB issued ASU No.

2 unchanged sentences

The standard will be effective for public companies for annual periods beginning in 2025, with early adoption permitted.

The Company is currently assessing the impact of adopting this guidance on its consolidated financial statements.

The Company is currently assessing the impact of adopting this guidance on its financial statements.

Eton Pharmaceuticals, Inc.

8 unchanged sentences

accumulated depreciation

( 422 ) ( 395 )

Property and equipment, net

Depreciation expense for the three -month periods ended March 31, 2024 and 2023 was $ 14 and $ 13 , respectively.

Depreciation expense for the three -month periods ended June 30, 2024 and 2023 was $ 12 and $ 10 , respectively.

Depreciation expense for the six -month periods ended June 30, 2024 and 2023 was $ 26 and $ 23 , respectively.

Note 5 — Long-Term Debt

28 unchanged sentences

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 2.0 %.

In accordance with the change, the Company has classified $ 5,020 as principal due in the next 12 months in its balance sheet at March 31, 2024 .

In accordance with the change, the Company has classified $ 4,658 as principal due in the next 12 months in its balance sheet at June 30, 2024 .

Because LIBOR was phased out as of June 30, 2023, the Company amended the Credit Agreement in August 2023 to refer to the secured overnight financing rate ("Term SOFR"), with an interest rate of Term SOFR plus 8.26 %, subject to a stated Term SOFR floor rate of 5.0 %.

Interest expense of $ 238 was recorded during the three months ended March 31, 2024 , which included $ 25 of debt discount amortization.

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

As of March 31, 2024 , $ 354 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, 2024 .

Interest expense of $ 460 was recorded during the six months ended June 30, 2024 , which included $ 48 of debt discount amortization.

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

As of June 30, 2024 , $ 382 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, 2024 .

Remainder of 2024

8 unchanged sentences

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, 2024 , the Company issued 2,500 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan as amended in December 2020 ( see Note 8 ).

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.

During the six months ended June 30, 2024 , the Company issued 2,500 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan as amended in December 2020.

In June 2024 the Company issued 55,240 shares of its common stock to employees in accordance with its 2018 Employee Stock Purchase Plan (“ESPP”) (see Note 8 ).

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 ESPP (see Note 8 ).

Note 7 — Common Stock Warrants

The Company’s outstanding warrants to purchase shares of its common stock at March 31, 2024 are summarized in the table below.

The Company’s outstanding warrants to purchase shares of its common stock at June 30, 2024 are summarized in the table below.

Description of Warrants

1 unchanged sentence

SWK Warrants – Debt – Tranche #1

51,239 $ 5.86

SWK Warrants – Debt – Tranche #2

18,141 $ 6.62

69,380 $ 6.05

The holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under the Securities Act of 1933, as amended (the “Securities Act”) for their shares that are converted to common stock, including demand registration rights and piggyback registration rights.

7 unchanged sentences

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

There were 250,002 shares available for future issuance under the 2018 Plan as of March 31, 2024 .

There were 248,773 shares available for future issuance under the 2018 Plan as of June 30, 2024 .

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

6 unchanged sentences

however, the Company extended the expiration date to April 10, 2023.

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

Of these options, 365,858 options were exercised on a cashless basis in January and March 2023, and the remainder expired in April 2023.

No other terms were modified.

For the three -month periods ended March 31, 2024 and 2023, the Company’s total stock-based compensation expense was $ 821 and $ 872 , respectively.

For the six -month periods ended June 30, 2024 and 2023 , the Company’s total stock-based compensation expense was $ 1,661 and $ 1,657 , respectively.

Of these amounts, $ 1,459 and $ 1,534 were recorded in general and administrative (“G&A”) expenses, respectively, and $ 202 and $ 123 were recorded in research and development expenses, respectively.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2024 :

The following table summarizes stock option activity during the six months ended June 30, 2024 :

Outstanding as of December 31, 2023

3 unchanged sentences

Forfeited/Cancelled

Outstanding as of March 31, 2024

( 25,771 ) $ 4.38

Exercisable as of March 31, 2024

Outstanding as of June 30, 2024

6,282,073 $ 4.54 7.4 $ 634

Vested and expected to vest at March 31, 2024

Exercisable as of June 30, 2024

3,866,990 $ 4.72 6.5 $ 604

Vested and expected to vest at June 30, 2024

6,282,073 $ 4.54 7.4 $ 634

Eton Pharmaceuticals, Inc.

2 unchanged sentences

Note 8 — 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, 2024 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 $ 705 and $ 778 for the three -month periods ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 , there was a total of $ 7,129 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, 2024 was $ 2.94 per share.

In the three months ended March 31, 2024 , there was one stock option exercise which totaled 2,500 shares at a weighted average exercise price of $ 2.97 per share with an intrinsic value of $ 2 .

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, 2024 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 $ 727 and $ 698 for the three -month periods ended June 30, 2024 and 2023, respectively.

Stock based compensation related to stock options was $ 1,432 and $ 1,476 for the six -month periods ended June 30, 2024 and 2023 , respectively.

As of June 30, 2024 , there was a total of $ 6,409 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, 2024 was $ 2.93 per share.

In the six months ended June 30, 2024 , there was one stock option exercise which totaled 2,500 shares at a weighted average exercise price of $ 2.97 per share with an intrinsic value of $ 2 .

Restricted Stock Units (RSUs)

The following table summarizes restricted stock unit activity during the three months ended March 31, 2024 :

The following table summarizes restricted stock unit activity during the six months ended June 30, 2024 :

Number of Units

2 unchanged sentences

274,204 $ 2.63

Outstanding and unvested as of March 31, 2024

( 3,000 ) $ —

Stock-based compensation related to RSUs was $ 60 and $ 58 for the three -month periods ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 , there was $ 548 of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of 2.3 years.

Outstanding and unvested as of June 30, 2024

271,204 $ 2.63

Stock-based compensation related to RSUs was $ 117 and $ 118 for the six -month periods ended June 30, 2024 and 2023 , respectively.

As of June 30, 2024 , there was $ 483 of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of approximately 2.0 years.

Employee Stock Purchase Plan

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 March 31, 2024 , there were 773,514 shares available for issuance under the ESPP.

As of June 30, 2024 , there were 718,274 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.

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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 three -month periods ended March 31, 2024 and 2023, there were no share issuances under the ESPP.

The weighted average fair value of share awards in the first three months of 2024 and 2023 was $ 1.36 and $ 1.11 , respectively.

Employees contributed $ 134 and $ 107 via payroll deductions during the three -month periods ended March 31, 2024 and 2023, respectively.

The Company recorded an expense of $ 56 and $ 36 related to the ESPP in the three -month periods ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023 , the accompanying condensed balance sheets include $ 158 and $ 24 , respectively, in accrued liabilities for employee ESPP contributions.

For the six -month periods ended June 30, 2024 and 2023 , there were 55,240 and 57,616 share issuances, respectively, under the ESPP.

The weighted average fair value of share awards in the first six months of 2024 and 2023 was $ 1.35 and $ 1.14 , respectively.

Employees contributed $ 182 and $ 133 via payroll deductions during the six -month periods ended June 30, 2024 and 2023 , respectively.

The Company recorded an expense of $ 112 and $ 63 related to the ESPP in the six -month periods ended June 30, 2024 and 2023 , respectively.

As of June 30, 2024 and December 31, 2023 , the accompanying condensed balance sheets include $ 19 and $ 24 , respectively, in accrued liabilities for employee ESPP contributions.

Eton Pharmaceuticals, Inc.

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(i) one milestone payment for $ 250 upon regulatory approval in the territory by the FDA of the first single agent product and (ii) one milestone payment for $ 500 following the first commercial sale of the first single agent product in the territory.

From the effective date of the Amended Agreement, the Company has realized a total of $ 1,840 of the non-royalty and royalty revenue through March 31, 2024 .

From the effective date of the Amended Agreement, the Company has realized a total of $ 1,840 of the non-royalty and royalty revenue through June 30, 2024 .

The EM- 100 asset and its associated product rights were sold to Bausch Health on February 18, 2019, and future potential royalties of twelve percent on Bausch Health sales of the product, named Alaway® Preservative Free by Bausch, which was approved by the FDA in September 2020, would be split between Eyemax and the Company.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of March 31, 2024 , and 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, 2024 , and Bausch Health discontinued sales of Alaway® Preservative Free effective March 24, 2023.

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 as G&A in the condensed statements of operations was $ 20 for the three months ended March 31, 2024 , and $ 23 for the three months ended March 31, 2023 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 10 for the three months ended March 31, 2024 , and $ 22 for the three months ended March 31, 2023 .

The ROU asset amortization was $ 18 and $ 19 for the three -month periods ended March 31, 2024 and 2023, respectively, and is reflected within depreciation and amortization on the Company’s condensed statements of cash flows.

As of March 31, 2024 , the weighted-average remaining lease term was 1.00 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, 2024 (in thousands).

In June 2024, the Company renewed its office lease for a two -year period through March 2027 and recorded $ 219 in ROU assets and $ 219 in operating lease liabilities in association with the lease extension.

The Company’s operating lease cost as presented as G&A in the condensed statements of operations was $ 39 for the six months ended June 30, 2024 , and $ 46 for the six months ended June 30, 2023 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 13 for the six months ended June 30, 2024 , and $ 37 for the six months ended June 30, 2023 .

The ROU asset non-cash lease expense was $ 36 and $ 39 for the six -month periods ended June 30, 2024 and 2023 , respectively, and is reflected within non-cash lease expense on the Company’s condensed statements of cash flows.

As of June 30, 2024 , the weighted-average remaining lease term was 2.75 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, 2024 (in thousands).

Classification

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Accrued liabilities

Operating lease liabilities, noncurrent

Operating lease liabilities, net of current portion

Total operating lease liabilities

The Company’s future lease commitments as of March 31, 2024 , are as indicated below:

The Company’s future lease commitments as of June 30, 2024 , are as indicated below:

Operating Lease Liabilities

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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, 2024 or December 31, 2023 .

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of June 30, 2024 or December 31, 2023 .

Note 12 — Subsequent Events

On July 12, 2024 the Company issued 90,402 shares of common stock in connection with the vesting of restricted stock units.

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.

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Results of Operations (dollars in thousands)

For the three months ended March 31, 2024, we had $7,966 in total revenue that generated a gross profit of $5,007.

We had total revenue of $5,304 for the three-month period ended March 31, 2023 that generated a gross profit of $3,346 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products.

For the three months ended June 30, 2024, we had $9,074 in total revenue that generated a gross profit of $5,626.

We had total revenue of $11,997 for the three-month period ended June 30, 2023 that generated a gross profit of $9,682 for the period.

The decrease was primarily due to a $5,500 sale of royalty interests to Azurity in June 2023 offset by increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products.

For the six months ended June 30, 2024, we had $17,040 in total revenue that generated a gross profit of $10,633.

We had total revenue of $17,301 for the six-month period ended June 30, 2023 that generated a gross profit of $13,028 for the period.

The decrease was primarily due to a $5,500 sale of royalty interests to Azurity in June 2023 offset by increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products.

Research and Development Expenses

For the three months ended March 31, 2024, we incurred $651 of research and development (“R&D”) expenses as compared to the $535 for the same period in 2023.

For the three months ended June 30, 2024, we incurred $2,970 of research and development (“R&D”) expenses as compared to $1,125 for the same period in 2023.

The increase was primarily due to increased expenses associated with ET-400 project development activities.

For the six months ended June 30, 2024, we incurred $3,621 of research and development (“R&D”) expenses as compared to $1,660 for the same period in 2023.

The increase was primarily due to increased expenses associated with ET-400 project development activities.

General and Administrative Expenses

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, 2024 and 2023, we incurred $5,156 and $5,345, respectively, of G&A expenses.

The slight decrease in G&A expenses was mainly due to decreased employee-related expenses along with decreased legal and consulting expenses.

For the three-month periods ended June 30, 2024 and 2023, we incurred $5,591 and $4,674, respectively, of G&A expenses.

The increase in G&A expenses was mainly due to increased sales and marketing expenses, legal fees, and consulting expenses.

For the six-month periods ended June 30, 2024 and 2023, we incurred $10,747 and $10,019, respectively, of G&A expenses.

The slight increase in G&A expenses was mainly due to increased sales and marketing expenses and legal fees.

Liquidity and Capital Resources

As of March 31, 2024, we had total assets of $30.8 million, cash and cash equivalents of $16.7 million and working capital of $9.0 million.

As of June 30, 2024, we had total assets of $31.8 million, cash and cash equivalents of $17.7 million and working capital of $7.2 million.

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, 2024 and 2023 (dollars in thousands):

Three months ended

March 31, 2024

March 31, 2023

Net cash used in operating activities

The following table sets forth a summary of our cash flows for the six-month periods ended June 30, 2024 and 2023 (dollars in thousands):

Six months ended

June 30, 2024

June 30, 2023

Net cash (used in) provided by operating activities

Cash used in investing activities

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Change in cash and cash equivalents

The increase in cash used in operating activities was primarily due to increased sales and gross profit from sales of our ALKINDI SPRINKLE® and Carglumic Acid products, offset by a $1,000 milestone payment related to 2023 ALKINDI SPRINKLE® sales and increased inventory purchases for ALKINDI SPRINKLE®, Carglumic Acid, Nitisinone, and PKU GOLIKE®.

The decrease in cash (used in) provided by operating activities was primarily due to a $5,500 sale of royalty interests to Azurity in June 2023, a $1,000 milestone payment related to 2023 ALKINDI SPRINKLE® sales in January 2024, and increased inventory purchases for ALKINDI SPRINKLE®, Carglumic Acid, Nitisinone, and PKU GOLIKE® in 2024.

The increase in cash used in investing activities was due to a $1,868 payment related to the acquisition of the PKU GOLIKE® product license in March 2024.

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

The Company estimates the fair value of stock-based option awards using the BSM.

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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