eton20230630

eton20230630_10q.htm

UNITED STATES-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _________________ to _______________________

Commission file number: 001-38738

ETON PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		37-1858472
(State of incorporation)		(I.R.S. Employer Identification Number)

21925 W. Field Parkway, Suite 235

Deer Park, Illinois 60010-7278

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (847) 787-7361

Securities registered pursuant to Section

12(b) of the Act

Trading Symbol

Name of each exchange on which

registered

Common stock, $0.001 par value per share

ETON

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2023, Eton Pharmaceuticals, Inc. had outstanding 25,653,396 shares of common stock, $0.001 par value.

Part No	Item No	Description	Page No.

I		FINANCIAL INFORMATION	1

	1	Financial Statements	1

		Condensed Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	1

		Unaudited Condensed Statements of Operations for the three and six months ended June 30, 2023 and 2022	2

		Unaudited Condensed Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	3

		Unaudited Condensed Statements of Cash Flows for the six months ended June 30, 2023 and 2022	5

		Notes to Condensed Financial Statements	6

	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	3	Quantitative and Qualitative Disclosures About Market Risk	27

	4	Controls and Procedures	28

II		OTHER INFORMATION	29

	1	Legal Proceedings	29

	1A	Risk Factors	29

	2	Unregistered Sales of Equity Securities and Use of Proceeds	29

	3	Defaults Upon Senior Securities	29

	4	Mine Safety Disclosures	29

	5	Other Information	29

	6	Exhibits	29

		Exhibit Index	30

		Signatures	31

	*June 30, 2023*			*December 31, 2022*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	21,566		$	16,305
Accounts receivable, net		3,084			1,852
Inventories		816			557
Prepaid expenses and other current assets		867			1,290
Total current assets		26,333			20,004

Property and equipment, net		46			72
Intangible assets, net		4,392			4,754
Operating lease right-of-use assets, net		149			188
Other long-term assets, net		12			12
Total assets	$	30,932		$	25,030

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,300		$	1,766
Current portion of long-term debt		1,540			1,033
Accrued liabilities		5,748			3,662
Total current liabilities		9,588			6,461

Long-term debt, net of discount and including accrued fees		4,553			5,384
Operating lease liabilities, net of current portion		66			107

Total liabilities		14,207			11,952

Commitments and contingencies (Note 11)

Stockholders’ equity
Common stock, $0.001 par value; 50,000,000 shares authorized; 25,561,994 and 25,353,119 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		26			25
Additional paid-in capital		117,934			116,187
Accumulated deficit		(101,235	)		(103,134	)
Total stockholders’ equity		16,725			13,078

Total liabilities and stockholders’ equity	$	30,932		$	25,030

	*For the three months ended*						*For the six months ended*
	*June 30,*			*June 30,*			*June 30,*			*June 30,*
	*2023*			*2022*			*2023*			*2022*
Revenues:
Licensing revenue	$	5,500		$	5,000		$	5,500		$	5,000
Product sales and royalties		6,497			2,358			11,801			4,534
Total net revenues		11,997			7,358			17,301			9,534

Cost of sales:
Licensing revenue		—			990			—			990
Product sales and royalties		2,315			1,755			4,273			2,604
Total cost of sales		2,315			2,745			4,273			3,594

Gross profit		9,682			4,613			13,028			5,940

Operating expenses:
Research and development		1,125			690			1,660			2,308
General and administrative		4,674			5,263			10,019			10,059
Total operating expenses		5,799			5,953			11,679			12,367

Income (loss) from operations		3,883			(1,340	)		1,349			(6,427	)

Other income (expense):
Other income		800			—			800			—
Interest and other expense, net		(124	)		(218	)		(250	)		(461	)
Total other income (expense)		676			(218	)		550			(461	)

Income (loss) before income tax expense		4,559			(1,558	)		1,899			(6,888	)

Income tax expense		—			—			—			—

Net income (loss)	$	4,559		$	(1,558	)	$	1,899		$	(6,888	)
Net income (loss) per share, basic	$	0.18		$	(0.06	)	$	0.07		$	(0.28	)
Weighted average number of common shares outstanding, basic		25,593			25,126			25,560			24,915
Net income (loss) per share, diluted	$	0.18		$	(0.06	)	$	0.07		$	(0.28	)
Weighted average number of common shares outstanding, diluted		25,983			25,126			25,949			24,915

	*Common Stock*				*Additional Paid-in*		*Accumulated*			*Total Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances at March 31, 2023		25,504,378	$	26	$	117,009	$	(105,794	)	$	11,241

Stock-based compensation		—		—		785		—			785

Employee stock purchase plan		57,616		—		140		—			140

Net income		—		—		—		4,559			4,559

Balances at June 30, 2023		25,561,994	$	26	$	117,934	$	(101,235	)	$	16,725

	*Six months ended*			*Six months ended*
	*June 30, 2023*			*June 30, 2022*
Cash flows from operating activities
Net income (loss)	$	1,899		$	(6,888	)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation		1,657			2,383
Depreciation and amortization		424			1,352
Debt discount amortization		61			66
Changes in operating assets and liabilities:
Accounts receivable		(1,232	)		4,637
Inventories		(259	)		19
Prepaid expenses and other assets		423			1,827
Accounts payable		537			(475	)
Accrued liabilities		2,045			763
Net cash provided by operating activities		5,555			3,684

Cash flows from investing activities
Purchases of product license rights		—			(750	)
Purchases of property and equipment		—			(26	)
Net cash used in investing activities		—			(776	)

Cash flows from financing activities
Repayment of long-term debt		(385	)		(385	)
Proceeds from employee stock purchase plan and stock option exercises		271			117
Payment of tax withholding related to net share settlement of stock option exercises		(181	)		—
Net cash used in financing activities		(295	)		(268	)

Change in cash and cash equivalents		5,261			2,640
Cash and cash equivalents at beginning of period		16,305			14,406
Cash and cash equivalents at end of period	$	21,566		$	17,046

Supplemental disclosures of cash flow information
Cash paid for interest	$	426		$	378
Cash paid for income taxes	$	—		$	—

	*Amortization*
Year	*Expense*
Remainder of 2023	$	363
2024		725
2025		725
2026		725
2027		608
Thereafter		1,246
Total estimated amortization expense	$	4,392

	*June 30,*			*December 31,*
	*2023*			*2022*
Computer hardware and software	$	187		$	177
Furniture and fixtures		111			112
Equipment		52			52
Leasehold improvements		71			71
Construction in Progress		—			12
		421			424
Less: accumulated depreciation		(375	)		(352	)
Property and equipment, net	$	46		$	72

	*Amount*
Remainder of 2023	$	1,181
2024		6,468
Total payments		7,649
Less: amount representing interest		(1,420	)
Loan payable, gross		6,229
Less: current portion of long-term debt		(1,540	)
Less: unamortized discount		(136	)
Long-term debt, net of unamortized discount	$	4,553

Description of Warrants	*No. of Shares*		*Exercise Price*
Placement Agent Warrants - IPO		414,000	$	7.50
SWK Warrants – Debt – Tranche #1		51,239	$	5.86
SWK Warrants – Debt – Tranche #2		18,141	$	6.62
Total (Avg)		483,380	$	7.29

						*Weighted*
				*Weighted*		*Average*
				*Average*		*Remaining*		*Aggregate*
				*Exercise*		*Contractual*		*Intrinsic*
	*Shares*			*Price*		*Term (Yrs)*		*Value*
Outstanding as of December 31, 2022		4,402,292		$	4.71
Issued		1,063,291		$	3.47
Exercised		(402,308	)	$	2.22
Forfeited/Cancelled		(183,437	)	$	5.48
Outstanding as of June 30, 2023		4,879,838		$	4.61		7.8	$	751
Exercisable as of June 30, 2023		2,999,621		$	4.91		7.0	$	672
Vested and expected to vest at June 30, 2023		4,879,838		$	4.61		7.8	$	751

	*Number of Units*			*Weighted Average Grant-Date Fair Value Per Unit*
Outstanding and unvested as of December 31, 2022		369,606		$	2.63
Granted		—		$	—
Vested		—		$	—
Forfeited		(4,000	)	$	2.63
Outstanding and unvested as of June 30, 2023		365,606		$	2.63

SEC Form 10-Q filed by Eton Pharmaceuticals Inc.