eton20230930

eton20230930_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 September 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 November 3, 2023, Eton Pharmaceuticals, Inc. had outstanding 25,658,396 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 September 30, 2023 (unaudited) and December 31, 2022	1

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

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

		Unaudited Condensed Statements of Cash Flows for the nine months ended September 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

	*September 30, 2023*			*December 31, 2022*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	22,070		$	16,305
Accounts receivable, net		3,495			1,852
Inventories		1,051			557
Prepaid expenses and other current assets		541			1,290
Total current assets		27,157			20,004

Property and equipment, net		38			72
Intangible assets, net		4,210			4,754
Operating lease right-of-use assets, net		109			188
Other long-term assets, net		12			12
Total assets	$	31,526		$	25,030

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,712		$	1,766
Current portion of long-term debt		1,540			1,033
Accrued liabilities		7,141			3,662
Total current liabilities		10,393			6,461

Long-term debt, net of discount and including accrued fees		4,197			5,384
Operating lease liabilities, net of current portion		44			107

Total liabilities		14,634			11,952

Commitments and contingencies (Note 11)

Stockholders’ equity
Common stock, $0.001 par value; 50,000,000 shares authorized; 25,658,396 and 25,353,119 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		26			25
Additional paid-in capital		118,680			116,187
Accumulated deficit		(101,814	)		(103,134	)
Total stockholders’ equity		16,892			13,078

Total liabilities and stockholders’ equity	$	31,526		$	25,030

	*For the three months ended*						*For the nine months ended*
	*September 30,*			*September 30,*			*September 30,*			*September 30,*
	*2023*			*2022*			*2023*			*2022*
Revenues:
Licensing revenue	$	—		$	—		$	5,500		$	5,000
Product sales and royalties		7,028			3,219			18,829			7,753
Total net revenues		7,028			3,219			24,329			12,753

Cost of sales:
Licensing revenue		—			—			—			990
Product sales and royalties		2,625			1,201			6,898			3,805
Total cost of sales		2,625			1,201			6,898			4,795

Gross profit		4,403			2,018			17,431			7,958

Operating expenses:
Research and development		615			744			2,275			3,052
General and administrative		4,336			4,169			14,355			14,228
Total operating expenses		4,951			4,913			16,630			17,280

Income (loss) from operations		(548	)		(2,895	)		801			(9,322	)

Other income (expense):
Other income		—			—			800			—
Interest and other expense, net		(31	)		(150	)		(281	)		(611	)
Total other income (expense)		(31	)		(150	)		519			(611	)

Income (loss) before income tax expense		(579	)		(3,045	)		1,320			(9,933	)

Income tax expense		—			—			—			—

Net income (loss)	$	(579	)	$	(3,045	)	$	1,320		$	(9,933	)
Net income (loss) per share, basic	$	(0.02	)	$	(0.12	)	$	0.05		$	(0.40	)
Weighted average number of common shares outstanding, basic		25,719			25,365			25,613			25,066
Net income (loss) per share, diluted	$	(0.02	)	$	(0.12	)	$	0.05		$	(0.40	)
Weighted average number of common shares outstanding, diluted		25,719			25,365			26,002			25,066

	*Common Stock*				*Additional Paid-in*		*Accumulated*			*Total Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances at June 30, 2023		25,561,994	$	26	$	117,934	$	(101,235	)	$	16,725

Stock-based compensation		—		—		730		—			730

Stock option exercises and vesting of restricted stock units		96,402		—		16		—			16

Net loss		—		—		—		(579	)		(579	)

Balances at September 30, 2023		25,658,396	$	26	$	118,680	$	(101,814	)	$	16,892

	*Nine months ended*			*Nine months ended*
	*September 30, 2023*			*September 30, 2022*
Cash flows from operating activities
Net income (loss)	$	1,320		$	(9,933	)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation		2,387			3,332
Depreciation and amortization		626			1,522
Debt discount amortization		90			96
Changes in operating assets and liabilities:
Accounts receivable		(1,643	)		3,973
Inventories		(494	)		69
Prepaid expenses and other assets		749			2,129
Accounts payable		(52	)		(720	)
Accrued liabilities		3,445			1,513
Net cash provided by operating activities		6,428			1,981

Cash flows from investing activities
Purchases of product license rights		—			(2,750	)
Purchases of property and equipment		—			(26	)
Net cash used in investing activities		—			(2,776	)

Cash flows from financing activities
Repayment of long-term debt		(770	)		(385	)
Proceeds from employee stock purchase plan and stock option exercises		288			152
Payment of tax withholding related to net share settlement of stock option exercises		(181	)		—
Net cash used in financing activities		(663	)		(233	)

Change in cash and cash equivalents		5,765			(1,028	)
Cash and cash equivalents at beginning of period		16,305			14,406
Cash and cash equivalents at end of period	$	22,070		$	13,378

Supplemental disclosures of cash flow information
Cash paid for interest	$	638		$	545
Cash paid for income taxes	$	—		$	—

Supplemental disclosures of non-cash transactions
Adjustment of operating lease right-of-use assets and liabilities due to tenant allowance	$	29		$	—

	*Amortization*
Year	*Expense*
Remainder of 2023	$	181
2024		725
2025		725
2026		725
2027		608
Thereafter		1,246
Total estimated amortization expense	$	4,210

	*September 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		(383	)		(352	)
Property and equipment, net	$	38		$	72

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		1,078,291		$	3.49
Exercised		(407,308	)	$	2.23
Forfeited/Cancelled		(263,549	)	$	5.94
Outstanding as of September 30, 2023		4,809,726		$	4.58		7.5	$	2,725
Exercisable as of September 30, 2023		3,139,749		$	4.81		6.9	$	1,828
Vested and expected to vest at September 30, 2023		4,809,726		$	4.58		7.5	$	2,725

	*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		(91,402	)	$	2.63
Forfeited		(4,000	)	$	2.63
Outstanding and unvested as of September 30, 2023		274,204		$	2.63

SEC Form 10-Q filed by Eton Pharmaceuticals Inc.