10-Q

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, 2024

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

Commission File Number 001-36075

EVOKE PHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware		20-8447886
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

420 Stevens Avenue, Suite 230, Solana Beach, CA		92075
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 345-1494

Securities registered pursuant to Section 12(b) of the Act:

     
Title of each class

Trading symbol

    Name of each exchange on which registered

    Common Stock, 
par value $0.0001 per share

    EVOK

    The Nasdaq Capital 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 period 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 8, 2024, the registrant had 734,836 shares of common stock outstanding.

Evoke pharma, inc.

Form 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Condensed Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	1
Condensed Statements of Operations for the three and six months ended June 30, 2024 and 2023 (Unaudited)	2
Condensed Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2024 and 2023 (Unaudited)	3
Condensed Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited)	4
Notes to Condensed Financial Statements (Unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures about Market Risk	20
Item 4. Controls and Procedures	21
PART II. OTHER INFORMATION	22
Item 1. Legal Proceedings	22
Item 1A. Risk Factors	22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	23
Item 4. Mine Safety Disclosures	23
Item 5. Other Information	23
Item 6. Exhibits	25
SIGNATURES	27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Evoke Pharma, Inc.

Condensed Balance Sheets


	June 30, 2024			December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,177,836		$	4,739,426
Accounts receivable, net of allowance for credit losses of $0		2,003,003			673,071
Prepaid expenses		382,936			885,040
Inventories		544,765			481,840
Other current assets		27,675			47,532
Total current assets		12,136,215			6,826,909
Deferred offering costs		—			241,637
Total assets	$	12,136,215		$	7,068,546
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	2,183,850		$	1,711,778
Accrued compensation		425,797			1,324,010
Note payable		5,000,000			5,000,000
Accrued interest payable		1,861,610			1,612,295
Total current liabilities		9,471,257			9,648,083
Total liabilities		9,471,257			9,648,083
Commitments and contingencies
Stockholdersʼ equity (deficit):
Preferred stock, $0.0001 par value; authorized shares — 5,000,000 as of June 30, 2024 and December 31, 2023; issued and outstanding shares — zero as of June 30, 2024 and December 31, 2023		—			—
Common stock, $0.0001 par value; authorized shares — 100,000,000 and 50,000,000 as of June 30, 2024 and December 31, 2023, respectively; issued and outstanding shares — 734,836 and 278,558 as of June 30, 2024 and December 31, 2023, respectively		73			28
Additional paid-in capital		128,951,361			120,859,873
Accumulated deficit		(126,286,476	)		(123,439,438	)
Total stockholdersʼ equity (deficit)		2,664,958			(2,579,537	)
Total liabilities and stockholders' equity (deficit)	$	12,136,215		$	7,068,546

See accompanying notes to these unaudited condensed financial statements.

Evoke Pharma, Inc.

Condensed Statements of Operations

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net product sales	$	2,551,366		$	1,131,368		$	4,286,856		$	1,941,777
Operating expenses:
Cost of goods sold		41,478			57,357			134,007			107,948
Research and development		—			92,357			4,645			159,347
Selling, general and administrative		3,733,450			2,766,077			6,872,986			5,614,018
Total operating expenses		3,774,928			2,915,791			7,011,638			5,881,313
Loss from operations		(1,223,562	)		(1,784,423	)		(2,724,782	)		(3,939,536	)
Other income (expense):
Interest income		81,001			41,164			127,059			76,494
Interest expense		(124,657	)		(124,658	)		(249,315	)		(247,945	)
Total other expense		(43,656	)		(83,494	)		(122,256	)		(171,451	)
Net loss	$	(1,267,218	)	$	(1,867,917	)	$	(2,847,038	)	$	(4,110,987	)
Net loss per share of common stock, basic and diluted	$	(0.93	)	$	(6.71	)	$	(2.69	)	$	(14.76	)
Weighted-average shares used to compute basic and diluted net loss per share		1,363,525			278,558			1,060,166			278,558

See accompanying notes to these unaudited condensed financial statements.

Evoke Pharma, Inc.

Condensed Statements of Stockholders’ Equity (Deficit)

(Unaudited)


					Additional						Total
	Common Stock				Paid-In			Accumulated			Stockholdersʼ
	Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance as of January 1, 2024		278,558	$	28	$	120,859,873		$	(123,439,438	)	$	(2,579,537	)
Stock-based compensation expense		—		—		254,029			—			254,029
Issuance of common stock, pre-funded warrants, series A warrants, series B warrants, and series C warrants net of issuance costs		427,886		43		6,172,580			—			6,172,623
Amendment and issuance of common stock and pre-funded warrants from exercise of series B warrants, net of issuance costs		9,967		1		1,229,873			—			1,229,874
Net loss		—		—		—			(1,579,820	)		(1,579,820	)
Balance as of March 31, 2024		716,411		72		128,516,355			(125,019,258	)		3,497,169
Stock-based compensation expense		—		—		126,578			—			126,578
Issuance of common stock from cashless exercise of pre-funded warrants		18,425		1		(1	)		—			—
Amendment and issuance of pre-funded warrants from exercise of series B warrants, net of issuance costs		—		—		308,429			—			308,429
Net loss		—		—		—			(1,267,218	)		(1,267,218	)
Balance as of June 30, 2024		734,836	$	73	$	128,951,361		$	(126,286,476	)	$	2,664,958


					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholdersʼ
	Shares		Amount		Capital		Deficit			Equity
Balance as of January 1, 2023		278,558	$	28	$	119,731,764	$	(115,647,143	)	$	4,084,649
Stock-based compensation expense		—		—		284,572		—			284,572
Net loss		—		—		—		(2,243,070	)		(2,243,070	)
Balance as of March 31, 2023		278,558		28		120,016,336		(117,890,213	)		2,126,151
Stock-based compensation expense		—		—		280,140		—			280,140
Net loss		—		—		—		(1,867,917	)		(1,867,917	)
Balance as of June 30, 2023		278,558	$	28	$	120,296,476	$	(119,758,130	)	$	538,374

See accompanying notes to these unaudited condensed financial statements.

Evoke Pharma, Inc.

Condensed Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2024			2023
Operating activities
Net loss	$	(2,847,038	)	$	(4,110,987	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		380,607			564,712
Non-cash interest expense		249,315			247,945
Non-cash lease expense		—			76,232
Change in operating assets and liabilities:
Accounts receivable		(1,329,932	)		(398,981	)
Prepaid expenses and other current assets		521,961			581,606
Inventories		(62,925	)		(224,334	)
Accounts payable and accrued expenses		586,220			480,997
Accrued compensation		(898,213	)		21,774
Operating lease liabilities		—			(76,232	)
Net cash used in operating activities		(3,400,005	)		(2,837,268	)
Financing activities
Proceeds from February 2024 offering, net of issuance costs		6,718,211			—
Payment of February 2024 offering costs		(426,293	)		—
Proceeds from amendment and exercise of series B warrants, net of issuance costs		1,546,497			—
Net cash provided by financing activities		7,838,415			—
Net increase (decrease) in cash and cash equivalents		4,438,410			(2,837,268	)
Cash and cash equivalents at beginning of period		4,739,426			9,843,699
Cash and cash equivalents at end of period	$	9,177,836		$	7,006,431

Supplemental disclosure of non-cash financial activities
Warrant amendment costs included in accounts payable and accrued expenses	$	8,190		$	—

See accompanying notes to these unaudited condensed financial statements.

Evoke Pharma, Inc.

Notes to Condensed Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Evoke Pharma, Inc. (the “Company”) was incorporated under the laws of the state of Delaware in January 2007. The Company is a specialty pharmaceutical company focused primarily on the development and commercialization of drugs to treat gastroenterological disorders and disease.

Since its inception, the Company has devoted its efforts to developing its sole product, Gimoti® (metoclopramide) nasal spray, the first and only nasally-administered product indicated for the relief of symptoms in adults with acute and recurrent diabetic gastroparesis. The Company launched U.S. commercial sales of Gimoti in October 2020 through its commercial partner Eversana Life Science Services, LLC (“Eversana”).

The Company’s activities are subject to the significant risks and uncertainties associated with any specialty pharmaceutical company that has launched its first commercial product, including market acceptance of the product and the potential need to obtain additional funding for its operations.

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses and negative cash flows from operations since inception and expects to continue to incur net losses for the foreseeable future until such time, if ever, that it can generate significant revenues from the sale of Gimoti. As of June 30, 2024, the Company had approximately $9.2 million in cash and cash equivalents. The Company anticipates that it will continue to incur losses from operations due to commercialization activities, including manufacturing Gimoti, conducting the post-marketing commitment single-dose pharmacokinetics (“PK”) clinical trial of Gimoti to characterize dose proportionality of a lower dose strength of Gimoti, and for other general and administrative costs to support the Company’s operations. Additionally, if Eversana were to terminate the Commercial Services and Loan Agreement, as described in Note 4, the principal and interest on the loan, $6.9 million as of June 30, 2024, becomes due in 90 days. As a result, the Company believes that there is substantial doubt about its ability to continue as a going concern for one year after the date these financial statements are issued. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

The Company’s net losses may fluctuate significantly from quarter-to-quarter and year-to-year. The Company anticipates that it will be required to raise additional funds through debt, equity or other forms of financing, such as potential collaboration arrangements, to fund future operations and continue as a going concern.

There can be no assurance that additional financing will be available when needed or on acceptable terms. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, and/or suspend or curtail commercialization activities. Any of these actions could materially harm the Company’s business, results of operations, financial condition and future prospects. There can be no assurance that the Company will be able to successfully commercialize Gimoti. Because the Company’s business is entirely dependent on the success of Gimoti, if the Company is unable to secure additional financing, successfully commercialize Gimoti or identify and execute on strategic alternatives for Gimoti or the Company, the Company will be required to curtail all of its activities and may be required to liquidate, dissolve or otherwise wind down its operations.

Notice of Delisting and Reverse Stock Split

On May 24, 2023, the Company received a written notice from Nasdaq indicating that, based on the Company's stockholders’ equity of $2.1 million as of March 31, 2023, as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, the Company was not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Requirement”). As required by Nasdaq, the Company submitted its plan to regain compliance with the Minimum Stockholders’ Equity Requirement and Nasdaq granted the Company an extension until November 20, 2023 to regain compliance. Following notice on November 21, 2023 from Nasdaq that the Company had not met the Minimum Stockholders’ Equity Requirement, the Company requested a hearing before the Nasdaq Hearings Panel (the “Panel”) and on December 9, 2023, Nasdaq notified the Company that the hearing was scheduled for February 15, 2024. On February 15, 2024, the Company had the hearing before the Panel.

On March 18, 2024, the Company announced that the Panel granted the Company’s request to continue its listing on the Nasdaq Capital Market, subject to the Company filing a Form 10-Q on or before May 15, 2024, demonstrating that, as of March 31, 2024, the Company is in compliance with the Minimum Stockholders’ Equity Requirement. The Panel noted the Company’s steps to maintain compliance with the Minimum Stockholders’ Equity Requirement on a long-term basis, including the equity financing completed in

February 2024, which provided the Company net proceeds of $6.2 million, and the potential for additional capital from the exercise of the warrants issued in the February 2024 financing. The Panel also noted that it is a requirement during the exception period that the Company provide prompt notification to the Panel of any significant events that occur during this time that may affect the Company’s compliance with Nasdaq’s requirements. This includes, but is not limited to, any event that may call into question the Company’s ability to meet the terms of the exception granted. The Panel reserved the right to reconsider the terms of the granted exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of the Company’s securities on the Nasdaq Capital Market inadvisable or unwarranted.

On May 14, 2024, the Company filed its Form 10-Q reporting approximately $3.5 million in stockholders’ equity.

On June 4, 2024, the Company was formally notified that the Panel determined that the Company has regained compliance with the Minimum Stockholders’ Equity Requirement. Pursuant to Nasdaq Listing Rule 5815(d)(4)(A), the Company will be subject to a discretionary panel monitor through June 4, 2025. If, within that one-year monitoring period, the Company fails to maintain compliance with any Nasdaq continued listing requirement, the Listing Qualifications Staff (the “Staff”) of Nasdaq will issue a Delist Determination Letter, and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened Hearings Panel if the initial Panel is unavailable. Notwithstanding Nasdaq Listing Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to any deficiency that arises during the one-year monitoring period, and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to any deficiency.

As of June 30, 2024, the Company remained in compliance with the Minimum Stockholder's Equity Requirement.

On February 21, 2024, the Company received a letter from Nasdaq indicating that, for the last thirty consecutive business days, the bid price for the Company's common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until August 19, 2024, to regain compliance. The letter states that Nasdaq will provide written notification that the Company has achieved compliance with its rules if at any time before August 19, 2024, the bid price of the Company's common stock closes at $1.00 per share or more for a minimum of ten consecutive business days. The Nasdaq letter had no immediate effect on the listing or trading of the Company's common stock and the common stock continued to trade on The Nasdaq Capital Market.

On May 22, 2024, the Company's stockholders granted the board of directors the authority to effect a reverse stock split of the Company's outstanding common stock. In order to regain compliance with the Minimum Bid Price Requirement by August 19, 2024, on July 31, 2024, the Company filed an amendment (the “Amendment”) to its amended and restated certificate of incorporation to effectuate a reverse stock split of the Company’s common stock. Pursuant to the Amendment, at the effective time of 12:01 a.m. Eastern Time on August 1, 2024, each twelve (12) shares of the Company’s common stock issued and outstanding was combined into one (1) validly issued, fully paid and non-assessable share of common stock (the “Reverse Stock Split”). The par value and the authorized shares of the Company's common stock were not adjusted as a result of the Reverse Stock Split. All of the Company’s issued and outstanding common stock, warrants to purchase common stock, options to purchase common stock, per-share data and related information have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

The Company has not regained compliance with the Minimum Bid Price Requirement as of the date these financial statements were issued.

2. Summary of Significant Accounting Policies

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the condensed financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 14, 2024. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2023, has been derived from the audited financial statements at that date.

Risks and Uncertainties

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the valuation of share-based awards, the fair value of warrants and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these condensed financial statements. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Estimates are assessed each reporting period and updated to reflect current information. As future events and their effects cannot be determined with precision, actual results may materially differ from those estimates or assumptions.

Cash and Cash Equivalents

The Company deposits its cash with reputable financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). This cash is held in checking, cash sweep, and money market accounts. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company maintains an insured cash sweep account in which cash from its main operating checking account is invested overnight in highly liquid, short-term investments. The Company considers all highly liquid investments with a maturity date of 90 days or less at the date of purchase to be cash equivalents. The Company has not experienced any losses in its cash and cash equivalents and management believes the Company is not exposed to significant credit risk with respect to such accounts. The Company's cash and cash equivalents are classified as Level 1 inputs within the fair value hierarchy.

Fair Value of Financial Instruments

The carrying amounts of all financial instruments, including accounts receivable and accounts payable and accrued expenses, are considered to be representative of their respective fair values because of the short-term nature of those instruments. The carrying value of the note payable approximates fair value based upon interest rates the Company believes it can currently obtain for similar debt, which is a Level 2 input within the fair value hierarchy.

Accounts Receivable

Accounts receivable are recorded net of allowance for credit losses, if any. The Company evaluates its estimate of expected credit losses based on a combination of factors, including historical experience, assessment of specific customer-related risks, review of outstanding invoices, forecasts about the future, and various other assumptions and estimates. The allowance for credit losses was zero as of both June 30, 2024 and December 31, 2023 and no bad debt expense was recorded for the three and six months ended June 30, 2024 and 2023.

Inventories

The Company does not own or operate manufacturing facilities for the production of Gimoti, nor does it plan to develop its own manufacturing operations in the foreseeable future. The Company depends on third-party contract manufacturers for all of its required raw materials, drug substance and finished product for its commercial manufacturing. The Company has agreements with Cosma S.p.A. to supply metoclopramide for the manufacture of Gimoti, and with Thermo Fisher Scientific Inc., through its subsidiary Patheon UK Limited, for the manufacturing of Gimoti. The Company currently utilizes third-party consultants, which it engages on an as-needed, hourly basis, to manage the manufacturing contractors.

The Company's inventories consisted of the following as of June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
Raw materials	$	283,283	$	361,219
Finished goods		261,482		120,621
Total inventories	$	544,765	$	481,840

Inventories are stated at the lower of cost (first-in first-out basis) or net realizable value. The Company’s raw materials inventories are held at its third-party suppliers and its work-in-process and finished goods inventories are held by Eversana. The Company records such inventories as consigned inventories.

Deferred Offering Costs

Deferred offering costs represent legal, accounting and other direct costs related to the public offering that was completed in February 2024. All deferred offering costs were reclassified to additional paid-in capital in February 2024. The Company recorded approximately zero and $242,000 deferred offering costs as a non-current asset in the condensed balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Warrants

The Company accounts for warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC

480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For warrants that meet all criteria for equity classification, the warrants are required to be recorded as additional paid-in capital in the condensed balance sheets at the time of issuance. Equity-classified warrants are measured at their estimated fair value on the issuance date using either the Black-Scholes option pricing model or a Monte-Carlo simulation model based on the applicable assumptions, which include the exercise price of the warrants, the Company's stock price and volatility, the expected warrant term, the risk-free interest rate, the expected dividends, and if applicable, the vesting behavior.

Revenue Recognition

In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when a customer obtains control of promised goods in an amount that reflects the consideration the Company expects to receive in exchange for the goods provided. Customer control is determined upon the customer’s physical receipt of the product. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: identify the contracts with the customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) it satisfies a performance obligation. At contract inception, the Company assesses the goods promised within each contract and determines those that are performance obligations and assesses whether each promised good is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the customer obtains control of the product.

Product revenues are recorded net of sales-related adjustments, or transaction price, wherever applicable, including patient support programs, rebates, and other sales related discounts. The Company uses judgment to estimate variable consideration. The Company is subject to rebates under Medicaid and Medicare programs. The rebates for these programs are determined based on statutory provisions. The Company estimates Medicaid and Medicare rebates based on the expected number of claims and related cost associated with the customer transaction. Medicaid and Medicare rebates of $132,000 and $46,000 were recorded as accounts payable and accrued expenses in the condensed balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Co-payment assistance is recorded as an offset to gross revenue at the time revenue from the product sale is recognized based on expected and actual program participation. Co-pay liabilities are estimated using prescribing data available from customers. The Company's analysis also contemplated application of the constraint in accordance with the guidance, under which it determined a significant reversal of revenue would not occur in a future period. If actual results in the future vary from estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Liabilities for co-pay assistance of approximately $152,000 and $66,000 as of June 30, 2024 and December 31, 2023, respectively, are classified as accounts payable and accrued expenses in the condensed balance sheets.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common stock outstanding for the period, without consideration for common stock equivalents. Pre-funded warrants issued and sold by the Company to purchase shares of its common stock are included in the calculation of basic net loss per common share if the exercise price of the pre-funded warrants represents de minimis consideration and is non-substantive in relation to the price paid for the warrant, and if the warrants are immediately exercisable with no further vesting conditions or contingencies associated with them. The 665,046 shares of the Company's common stock underlying the Pre-Funded Warrants described in Note 3 - Stockholders’ Equity, are included in the weighted average outstanding common stock in the calculation of basic and diluted net loss per share. The Company considers Series A Warrants, Series B Warrants, Series C Warrants, and Representatives’ Warrants to be participating securities, because holders of such instruments participate in the event a dividend is paid on common stock. The holders of the Series A Warrants, Series B Warrants, Series C Warrants, and Representatives’ Warrants do not have a contractual obligation to share in the Company’s losses. As such, losses are attributed entirely to common stockholders and for periods in which the Company has reported a net loss, diluted loss per common share is the same as basic loss per common share. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common stock and common stock equivalents outstanding for the period determined using the treasury-stock method.

The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to do so would be anti-dilutive:


	Three and Six Months Ended June 30,
	2024		2023
Warrants to purchase common stock		3,266,107		—
Common stock options		54,540		53,763
Total excluded securities		3,320,647		53,763

Recent Accounting Pronouncements – Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures (“Topic 280”), which modifies the disclosure and presentation requirements of reportable segments (“ASU 2023-07”). The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Lastly, the amendment requires that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 and all existing segment disclosures in Topic 280. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its financial statements and accompanying notes.

In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024 and for private businesses for annual periods beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statement disclosures.

3. Stockholders’ Equity

February 2024 Offering

In February 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Craig-Hallum Capital Group LLC and Laidlaw & Company (UK) Ltd. (collectively, the “Underwriters”), relating to the issuance and sale of 427,886 common stock units (the “Common Stock Units”) at a public offering price of $8.16 per Common Stock Unit and, to certain investors, 491,221 pre-funded warrant units (the “PFW Units”) at a public offering price of $8.1588 per PFW Unit (the “February 2024 Offering”). Each Common Stock Unit consisted of (i) one share of common stock, (ii) a Series A Warrant to purchase one share of common stock (the “Series A Warrant”), (iii) a Series B Warrant to purchase one share of common stock (the “Series B Warrant”), and (iv) a Series C Warrant to purchase one share of common stock (the “Series C Warrant”). Each PFW Unit consisted of (i) a pre-funded warrant to purchase one share of common stock (the “Pre-Funded Warrants”), (ii) a Series A Warrant, (iii) a Series B Warrant, and (iv) a Series C Warrant. The Company also issued warrants to the Underwriters to purchase up to 45,955 shares of common stock, equal to 5% of the securities sold in the February 2024 Offering (the “Representatives’ Warrants”). The Series A Warrants are fully exercisable and recognized as a freestanding instrument. In accordance with the terms and provisions of the Series C Warrants, the Series C Warrants are not exercisable, in part or in whole, at any time unless the Series B Warrants have been exercised. If Series B Warrants are not exercised before November 13, 2024, the corresponding Series C Warrants are no longer deemed outstanding and cannot be exercised. Furthermore, the Series B Warrants and Series C Warrants cannot be transferred by the holder without the consent of the Company, and, therefore the Series B Warrants and Series C Warrants are accounted for as a single unit of account.

Net cash proceeds from the February 2024 Offering was $6.2 million after deducting underwriter and offering expenses. The Pre-Funded Warrants, Series A Warrants, Series B Warrants, and Series C Warrants are equity classified and were recognized as additional paid-in capital in the condensed balance sheets. The Representatives’ Warrants were accounted for under ASC 718, Compensation — Stock Compensation, and were recognized as an equity issuance cost at their grant date fair value within additional paid-in capital in the condensed balance sheets.

Warrant Amendments

In March and June 2024, the Company entered into identical amendments with certain holders (each, a “Holder”) of its Series B Warrants and Series C Warrants (the “March Warrant Amendment” and “June Warrant Amendment”, respectively, and collectively, the “Warrant Amendments”). Pursuant to the March Warrant Amendment and June Warrant Amendment, to the extent a Holder exercised its Series B Warrants before 5:00 p.m. Pacific time on March 27, 2024 (the “March Amendment Exercise Deadline”) and

June 21, 2024 (the “June Amendment Exercise Deadline” and together with the March Amendment Exercise Deadline, the "Amendment Exercise Deadlines"), respectively, the Holder’s corresponding Series C Warrants vested and were exercisable for the lesser of (i) three times the number of Series B Warrants exercised by the Holder and (ii) the total number of Series C Warrants outstanding to the Holder. Following the Amendment Exercise Deadlines, if such Holder exercised any remaining Series B Warrants, the remaining Series C Warrants, if any, vested and became exercisable on a one-for-one basis as to the same number of Series B Warrants exercised.

The Warrant Amendments also allowed a Holder to elect to receive Pre-Funded Warrants upon exercise of Series B Warrants and Series C Warrants in lieu of shares of the Company’s common stock, at a purchase price of $8.1588 per warrant exercised and an exercise price of $0.0012 per Pre-Funded Warrant.

Net cash proceeds from the March Warrant Amendment and June Warrant Amendment were $1.2 million and $0.3 million, respectively, after deducting underwriter and offering expenses. The Warrant Amendments were entered into to encourage the exercise of Series B Warrants in order to obtain capital to meet the Minimum Stockholders’ Equity Requirement. The Warrant Amendments neither changed the number of shares of common stock underlying each series of warrants nor its equity classification. The incremental change in fair value from the Warrant Amendments were equity issuance costs and recognized within additional paid-in capital in the condensed balance sheets.

The following table is a summary of the Company’s warrants outstanding as of June 30, 2024:

         
        Shares of

SEC Form 10-Q filed by Evoke Pharma Inc.