What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 185 added, 137 removed, 652 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2024

September 30, 2024

December 31, 2023

16 unchanged sentences

Debt, net of unamortized discount

Accrued liabilities

Accrued Medicaid rebates

Other accrued liabilities

Total current liabilities

7 unchanged sentences

50,000,000 shares authorized;

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

25,836,204 and 25,688,062 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

11 unchanged sentences

For the three months ended

For the six months ended

For the nine months ended

September 30,

Licensing revenue

27 unchanged sentences

501 ( 579 ) ( 3,297 ) 1,320

Income tax expense

Income tax expense (benefit)

( 126 ) — ( 72 ) —

Net income (loss)

11 unchanged sentences

Condensed Statements of Stockholders ’ Equity

For the three months ended June 30, 2024 and 2023

For the three months ended September 30, 2024 and 2023

(in thousands, except share amounts)

1 unchanged sentence

Total Stockholders’

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

Stock-based compensation

Stock option exercises and vesting of restricted stock units

Relative fair value of warrants issued in connection with debt

Balances at September 30, 2024

Additional Paid-in

Total Stockholders’

Balances at March 31, 2023

Stock-based compensation

Employee stock purchase plan

Balances at June 30, 2023

Stock-based compensation

Stock option exercises and vesting of restricted stock units

Balances at September 30, 2023

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

1 unchanged sentence

Condensed Statements of Stockholders ’ Equity

For the six months ended June 30, 2024 and 2023

For the nine months ended September 30, 2024 and 2023

(in thousands, except share amounts)

4 unchanged sentences

Employee stock purchase plan

Stock option exercises

Balances at June 30, 2024

Stock option exercises and vesting of restricted stock units

Relative fair value of warrants issued in connection with debt

Balances at September 30, 2024

Additional Paid-in

3 unchanged sentences

Employee stock purchase plan

Stock option exercises

Stock option exercises and vesting of restricted stock units

Shares withheld related to net share settlement of stock option exercises

Balances at June 30, 2023

Balances at September 30, 2023

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

2 unchanged sentences

(In thousands)

Six months ended

June 30, 2024

June 30, 2023

Nine months ended

September 30, 2024

September 30, 2023

Cash flows from operating activities

Net Income (loss)

$ ( 3,225 ) $ 1,320

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

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

Stock-based compensation

8 unchanged sentences

Accounts payable

Accrued liabilities

Net cash (used in) provided by operating activities

Accrued Medicaid rebates

Other accrued liabilities

( 559 ) 1,103

Net cash from operating activities

Cash flows from investing activities

1 unchanged sentence

Purchases of property and equipment

Net cash used in investing activities

Net cash from investing activities

Cash flows from financing activities

3 unchanged sentences

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

Net cash used in financing activities

Net cash from financing activities

( 979 ) ( 663 )

8 unchanged sentences

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

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

Relative fair value of warrants issued in connection with debt

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 $ 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.

The Company believes its existing cash and cash equivalents of $ 20,261 as of September 30, 2024 in addition to revenues from 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.

12 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 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.

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 September 30, 2024 , and the results of its operations and its cash flows for the periods ended September 30, 2024 and 2023 .

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

The results for the three -month and nine -month periods ended September 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

12 unchanged sentences

treasury bills or high-grade money market funds.

As of June 30, 2024 , the Company’s cash is in a non-interest-bearing account and a government money market fund.

As of September 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 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.

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

The total for these reserves amounted to $ 229 and $ 129 as of September 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.

3 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 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.

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

At September 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.

7 unchanged sentences

equipment, furniture and fixtures is depreciated over five years;

leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter.

and leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter.

Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized.

Intangible Assets

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 Company capitalizes payments it makes for licensed products when the payment relates to a U.S.

Food and Drug Administration (“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.

3 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 $ 1,772 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 intangible assets, net on the Company’s balance sheet, reflected $ 2,039 of accumulated amortization as of September 30, 2024 .

The Company recorded $ 267 and $ 753 , respectively, of amortization expense for the three and nine -month periods ended September 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 six months ended June 30, 2024 or 2023.

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

No impairment was recognized during the nine -month periods ended September 30, 2024 or 2023 .

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred to issue debt are deferred and recorded as a reduction to the debt balance in the accompanying balance sheets.

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 are also recorded as a reduction to the debt balance and accreted over the expected term of the interest expense using the effective interest method.

The Company amortizes these costs over the expected term of the related debt under the effective interest method.

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

The fair value of warrants related to the issuance of a delayed draw term loan commitment is capitalized as short-term assets.

Once a draw is made, the unamortized asset is reclassified as a reduction to the related debt balance and amortized into interest expense under the effective interest method.

Eton Pharmaceuticals, Inc.

11 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 June 30, 2024 or December 31, 2023 .

The Company did not have any finance leases as of September 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.

14 unchanged sentences

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 .

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

The accounts receivable balance at September 30, 2024 and December 31, 2023 , and product sales revenue recognized during the nine -month periods ended September 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 93.6 % of total net revenues recognized in the nine -month period ended September 30, 2024 and 98.5 % of net accounts receivable as of September 30, 2024 , and 72.9 % of total net revenues recognized in the nine -month period ended September 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.

48 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.

As of September 30, 2024 and December 31, 2023 , estimated state Medicaid liability was $ 8,047 and $ 3,627 , respectively.

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

Cost of Product Sales

Cost of 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 from the Company’s 3PL logistics service providers, and amortization expense of certain intangible assets.

2 unchanged sentences

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

Cost of licensing revenue consists of the profit-sharing fees related to the Company’s product licensing and development partners.

Research and Development Expenses

12 unchanged sentences

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.

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

The Company recorded income tax benefit o f ($ 126 ) an d zero for the three -month periods ended September 30, 2024 and 2023 , respectively.

The Company recorded income tax benefit o f ($ 72 ) an d zero for the nine -month periods ended September 30, 2024 and 2023 , respectively.

Our effective tax rate was ( 25.1 %) for the three -month period ended September 30, 2024 and zero for the three month period ended September 30, 2023.

Our effective tax rate was 2.4 % for the nine -month period ended September 30, 2024 and zero for the nine -month period ended September 30, 2023 .

The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes.

As of September 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.

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

3 unchanged sentences

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

For the three -month periods ended September 30, 2024 and 2023 , common stock equivalents excluded 4,896,038 and 5,618,663 , respectively, that were anti-dilutive.

For the nine -month periods ended September 30, 2024 and 2023 , common stock equivalents excluded 6,319,907 and 4,821,906 , 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.

45 unchanged sentences

Property and equipment consist of the following:

September 30,

Computer hardware and software

5 unchanged sentences

Property and equipment, net

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.

Depreciation expense for the three -month periods ended September 30, 2024 and 2023 was $ 12 and $ 9 , respectively.

Depreciation expense for the nine -month periods ended September 30, 2024 and 2023 was $ 38 and $ 32 , respectively.

Note 5 — Long-Term Debt

25 unchanged sentences

Note 5 — Long-Term Debt (continued)

These warrants (the “SWK Warrants”) are exercisable immediately and have a term of seven years from the date of issuance.

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.

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 $ 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 $ 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 .

In September 2024, the Company and SWK further amended the SWK Credit Agreement to extend the maturity date of the existing loan to December 31, 2024 and expand the credit facility by $ 25,695 to $ 30,000 , contingent upon closing of the October 2024 purchase agreement for Increlex® (see Note 12 ).

Under the terms of the amendment, the facility’s maturity will be extended to 3 years from closing of the October 2024 purchase agreement and reduce the annual interest rate to Term SOFR plus 6.75 % with no change to the Term SOFR floor rate of 5.0 %.

In accordance with the change, the Company has classified $ 4,125 as principal due in the next 12 months in its balance sheet at September 30, 2024 .

In connection with the additional $ 25,695 to be borrowed at closing of the October 2024 purchase agreement, the Company has agreed to issue warrants for 289,736 shares of its common stock at an exercise price of $ 5.32 per share.

The pro rata fair value of the warrants related to the extension of the debt is deferred and recorded as a reduction to the debt balance in the accompanying balance sheets, and the Company amortizes these costs over the expected term of the related debt under the effective interest method.

The pro rata fair value of the warrants related to the issuance of a delayed draw term loan commitment is capitalized as short-term assets.

Once a draw is made, the unamortized asset is reclassified as a reduction to the related debt balance and amortized into interest expense under the effective interest method.

All warrants (the “SWK Warrants”) are exercisable upon issuance and have a term of seven years from the date of issuance.

Interest expense of $ 211 was recorded during the three months ended September 30, 2024 , which included $ 22 of debt discount amortization.

Interest expense of $ 267 was recorded during the three months ended September 30, 2023 , which included $ 29 of debt discount amortization.

Interest expense of $ 672 was recorded during the nine months ended September 30, 2024 , which included $ 70 of debt discount amortization.

Interest expense of $ 805 was recorded during the nine months ended September 30, 2023 , which included $ 90 of debt discount amortization.

As of September 30, 2024 , $ 408 of accrued interest is included in accrued liabilities.

As of December 31, 2023 , $ 332 of accrued interest is included in accrued liabilities.

The table below reflects the future payments for the SWK loan principal and interest as of September 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 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 .

During the nine months ended September 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 ), and in July 2024 the Company issued 90,402 shares of its common stock resulting from the vesting of restricted stock units.

During the nine months ended September 30, 2023 , the Company issued 298,528 shares of its common stock resulting from cash and non-cash stock option exercises under its 2018 Equity Incentive Plan (see Note 8 ) and from the vesting of restricted stock units.

The Company withheld 50,867 shares for payroll tax obligations totaling $ 181 for the nine months ended September 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 June 30, 2024 are summarized in the table below.

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

Description of Warrants

4 unchanged sentences

18,141 $ 6.62

SWK Warrants – Debt – Tranche #3

289,736 $ 5.32

359,116 $ 5.46

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.

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

The third tranche of warrants is not yet exercisable at September 30, 2024 and would become exercisable when the term loan is drawn upon closing of the October 2024 purchase agreement for Increlex® (see Note 5 ).

Eton Pharmaceuticals, Inc.

5 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 248,773 shares available for future issuance under the 2018 Plan as of June 30, 2024 .

There were 470,511 shares available for future issuance under the 2018 Plan as of September 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.

8 unchanged sentences

No other terms were modified.

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.

In August 2024, the Company’s board of directors approved a modification of certain outstanding awards of a senior executive who retired in August 2024.

The combined awards had an exercise price range of $ 3.47 to $ 8.61 which were set to expire 90 days after retirement or termination as the case may be, and the Company extended the expiration dates to November 2025 in conjunction with ongoing consulting services.

No other terms were modified.

Due to these modifications, the Company incurred a modification expense of $ 75 that is included in general and administration expense on the Consolidated Statements of Operations for the three and nine -month periods ended September 30, 2024, respectively.

For the three and nine months ended September 30, 2024 and 2023 , the Company’s total stock-based compensation expense was $ 2,383 and $ 2,387 , respectively.

Of these amounts, $ 2,138 and $ 2,191 were recorded in general and administrative (“G&A”) expenses, respectively, and $ 245 and $ 196 were recorded in research and development expenses, respectively.

Stock Options

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

The following table summarizes stock option activity during the nine months ended September 30, 2024 :

Outstanding as of December 31, 2023

4 unchanged sentences

( 264,717 ) $ 4.61

Outstanding as of June 30, 2024

Outstanding as of September 30, 2024

6,083,127 $ 4.53 7.2 $ 11,194

Exercisable as of June 30, 2024

Exercisable as of September 30, 2024

4,060,340 $ 4.70 6.4 $ 7,448

Vested and expected to vest at June 30, 2024

Vested and expected to vest at September 30, 2024

6,083,127 $ 4.53 7.2 $ 11,194

3 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 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 .

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 September 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 $ 559 and $ 639 for the three -month periods ended September 30, 2024 and 2023 , respectively.

Stock based compensation related to stock options was $ 1,991 and $ 2,115 for the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 , there was a total of $ 5,266 of unrecognized compensation costs related to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the nine months ended September 30, 2024 was $ 2.94 per share.

In the nine months ended September 30, 2024 , the Company issued 2,500 shares of its stock resulting from stock option exercises 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 six months ended June 30, 2024 :

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

Number of Units

3 unchanged sentences

( 90,402 ) $ —

Outstanding and unvested as of June 30, 2024

( 23,000 ) $ —

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.

Outstanding and unvested as of September 30, 2024

160,802 $ 2.63

Stock-based compensation related to RSUs was $ 171 and $ 179 for the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 , there was $ 376 of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of approximately 1.8 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 June 30, 2024 , there were 718,274 shares available for issuance under the ESPP.

As of September 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 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.

For the nine -month periods ended September 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 nine months of 2024 and 2023 was $ 1.34 and $ 1.22 , respectively.

Employees contributed $ 209 and $ 181 via payroll deductions during the three and nine months ended September 30, 2024 and 2023 , respectively.

The Company recorded an expense of $ 145 and $ 93 related to the ESPP in the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 and December 31, 2023 , the accompanying condensed balance sheets include $ 48 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 June 30, 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 September 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 June 30, 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 September 30, 2024 , and Bausch Health discontinued sales of Alaway® Preservative Free effective March 24, 2023.

The CEO has a partial interest in a company that the Company has entered into an agreement with as described below.

Previously, the Company acquired DS- 200 and all related intellectual property pursuant to an asset purchase agreement (the “Selenix Agreement”) dated June 23, 2017 between the Company and Selenix LLC (“Selenix”), an entity affiliated with the CEO.

On August 30, 2024, the Company amended the Selenix Agreement in tandem with an agreement to sell DS- 200 in August 2024 ( see Note 11 ).

Pursuant to the terms of the amended Selenix Agreement, Selenix waived its rights to future milestone payments and 50 % of DS- 200 profit in exchange for 45 % of proceeds received by Eton from the DS- 200 sale agreement.

Selenix is 50 % owned by Messa Holdings LLC (“Messa”), which is 100 % owned by the CEO.

As of September 30, 2024 , the Company’s balance sheet reflected a $ 220 payment due to Selenix in accrued liabilities.

Eton Pharmaceuticals, Inc.

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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).

The Company’s operating lease cost as presented as G&A in the condensed statements of operations was $ 61 for the nine months ended September 30, 2024 , and $ 57 for the nine months ended September 30, 2023 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 35 for the nine months ended September 30, 2024 , and $ 66 for the nine months ended September 30, 2023 .

The ROU asset non-cash lease expense was $ 53 and $ 50 for the nine -month periods ended September 30, 2024 and 2023 , respectively, and is reflected within non-cash lease expense on the Company’s condensed statements of cash flows.

As of September 30, 2024 , the weighted-average remaining lease term was 2.50 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 September 30, 2024 (in thousands).

Classification

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Total operating lease liabilities

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

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

Operating Lease Liabilities

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The Company could pay up to $ 2,000 in commercial milestones based on future product sales and will pay the seller a royalty of 30 % of net sales, which will include the cost of the product.

In August 2024, the Company entered into an agreement to sell its DS- 200 product candidate.

The Company received $ 500 upfront and could receive additional payments of up to $ 6,500 based on the achievement of certain future regulatory and commercial milestones related to DS- 200.

The Company will retain 45 % of the proceeds from the transaction with the balance being distributed to other partners.

Indemnification

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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 June 30, 2024 or December 31, 2023 .

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of September 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.

On October 2, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Ipsen Biopharmaceuticals Inc.

(the “Seller”), pursuant to which the Company has agreed to acquire Increlex® (mecasermin injection) from Seller.

Increlex is a biologic product used to treat children who suffer from severe primary insulin-like growth factor 1 deficiency (SPIGFD) because their bodies do not produce enough insulin-like growth factor 1 (IGF- 1 ).

The product is approved in 40 territories, including the United States and the European Union.

Under the terms of the Purchase Agreement, the Company will purchase Increlex® for $ 22.5 million at closing and will pay an additional $ 7.5 million for product inventory.

The Company will also make payments to Seller of $ 2.5 million on each of the first and second anniversaries of closing.

In addition, the Company will be obligated to purchase additional inventory over 30 months, in an amount not to exceed €15.0 million.

The acquisition is structured as an all-cash purchase without any financing contingencies (see Note 5 ) and is expected to close near year-end 2024, subject to customary closing conditions.

Each of the Company and Seller have made customary representations, warranties, covenants and indemnities in the Purchase Agreement.

As part of the acquisition, the parties have entered into a transition services agreement, whereby Seller will continue to distribute the product in markets outside the United States for a period of six months following the closing.

The Company will immediately commercialize the product within the United States upon closing.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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Results of Operations (dollars in thousands)

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.

For the three months ended September 30, 2024, we had $10,324 in total revenue that generated a gross profit of $6,302.

We had total revenue of $7,028 for the three-month period ended September 30, 2023 that generated a gross profit of $4,403 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products, along with sales volume from Nitisinone and PKU GOLIKE® products launched in 2024 and licensing revenue of $500 from the sale of its DS-200 product candidate in September 2024.

For the nine months ended September 30, 2024, we had $27,364 in total revenue that generated a gross profit of $16,935.

We had total revenue of $24,329 for the nine-month period ended September 30, 2023 that generated a gross profit of $17,431 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products, along with sales volume from Nitisinone and PKU GOLIKE® products launched in 2024, which were offset by decreased licensing revenue of $5,500 from the sale of royalty interests to Azurity in June 2023.

Research and Development Expenses

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.

For the three months ended September 30, 2024, we incurred $505 of research and development (“R&D”) expenses as compared to $615 for the same period in 2023.

The decrease was primarily due to decreased expenses associated with ET-400 project development activities.

For the nine months ended September 30, 2024, we incurred $4,126 of research and development (“R&D”) expenses as compared to $2,275 for the same period in 2023.

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

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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, 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.

For the three-month periods ended September 30, 2024 and 2023, we incurred $5,288 and $4,336, respectively, of G&A expenses.

The increase in G&A expenses was mainly due to increased sales and marketing expenses and employee related expenses.

For the nine-month periods ended September 30, 2024 and 2023, we incurred $16,035 and $14,355, respectively, of G&A expenses.

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

Liquidity and Capital Resources

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.

As of September 30, 2024, we had total assets of $35.8 million, cash and cash equivalents of $20.3 million and working capital of $10.0 million.

We believe that our cash and cash equivalents on hand, along with continued product revenues, 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 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

Cash used in financing activities

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

Nine months ended

September 30, 2024

September 30, 2023

Net cash from operating activities

Cash from investing activities

Cash from financing activities

Change in cash and cash equivalents

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.

The increase in cash used in financing activities was primarily due to payments on the Company's long-term debt.

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

The decrease in cash from financing activities was primarily due to payments on the Company's long-term debt.

Critical Accounting Policies

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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.

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 the Company issues credits on returned product.

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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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