Eton Pharmaceuticals(ETON) - 2020 Q1 - Quarterly Report

Financial Performance - Total revenues for the three months ended March 31, 2020, were $99,000, a decrease from $500,000 in the same period in 2019[14] - The net loss for the three months ended March 31, 2020, was $9,049,000, compared to a net loss of $7,410,000 for the same period in 2019[14] - Operating expenses totaled $8,878,000 for the three months ended March 31, 2020, compared to $8,054,000 for the same period in 2019[14] - The company had net cash used in operating activities of $7,217,000 for the three months ended March 31, 2020, compared to $6,767,000 in the same period in 2019[21] - Revenue for the first three months of 2020 was $99 thousand from Biorphen product sales, a significant decrease from $500 thousand in the same period in 2019, which was from the sale of EM-100 product rights[149] Research and Development - Research and development expenses for the three months ended March 31, 2020, were $6,268,000, slightly down from $6,465,000 in the prior year[14] - Research and development (R&D) expenses include both internal and external costs, with significant judgments made in estimating accrued balances at the end of reporting periods[166] - The company paid $4,764 in licensing payments for Alkindi® Sprinkle in Q1 2020, which contributed to the increase in R&D expenses[137] - Research and development expenses include both internal activities and external contracted services, with significant judgments made in estimating accrued balances[51] Cash and Liquidity - Cash and cash equivalents as of March 31, 2020, were $12,335,000, an increase from $12,066,000 at the end of December 2019[11] - The Company has cash and cash equivalents of $12,335, which it believes will fund operating expenses for at least the next twelve months[25] - The company has a minimum cash balance requirement of $3,000,000 under the SWK Credit Agreement[66] - Cash flows from financing activities increased to $7,490 thousand in the first quarter of 2020, primarily due to the sale of common stock[145] Stock and Equity - The company issued 2,500,000 shares of common stock, generating net proceeds of $7,459,000 during the three months ended March 31, 2020[16] - The weighted average number of common shares outstanding for the three months ended March 31, 2020, was 18,143,000, compared to 17,502,000 in the prior year[14] - The company issued 2,500,000 shares of common stock at a price of $3.00 per share in March 2020, resulting in net proceeds of $7,459,000 after issuance costs[73] - As of March 31, 2020, the company had 2,789,378 stock options outstanding with a weighted average exercise price of $3.69[86] Debt and Obligations - The company has a long-term debt obligation of $5,000,000, with future payments totaling $7,667,000, including $2,667,000 representing interest[72] - The company expects to pay 4.0% of the loan principal balance commencing on May 15, 2021, until the remaining principal balance is due on November 13, 2024[66] Regulatory and Market Conditions - The Company received its first product approval, Biorphen®, from the FDA in October 2019 and intends to generate future revenues from direct sales and licensing agreements[33] - The company expects to recognize revenue from product sales upon delivery to wholesalers, with estimated amounts for returns and discounts included in sales reserves[160][161] - The company anticipates future revenues from direct sales of the FDA-approved Biorphen product and from product licensing agreements, including milestone payments and royalties[149][162] - The company has established a diversified pipeline of product candidates, focusing on hospital-based products and pediatric oral liquid products[135] Impact of COVID-19 - The COVID-19 pandemic is expected to have a significant adverse impact on the company's business, results of operations, and financial condition[182] - The pandemic has resulted in travel restrictions and shutdowns, affecting the company's ability to manufacture and distribute products[185] - The company's sales force has faced challenges in promoting products due to the pandemic, which may adversely affect revenues[186] - There is uncertainty regarding the duration and effects of COVID-19 on the company's operations and financial condition[183] - The pandemic could disrupt product candidate development programs and delay regulatory interactions[184] - The ongoing pandemic may lead to significant disruptions in global financial markets, affecting the company's access to capital[189] Internal Controls and Compliance - The company has concluded that its disclosure controls and procedures are effective as of the three-month period ended March 31, 2020[175] - The company has not reported any changes in internal control over financial reporting that materially affect its operations[177] - The company does not have any off-balance sheet transactions, ensuring transparency in its financial reporting[168] Legal and Risk Factors - There are no legal proceedings currently affecting the company[179] - The company has identified various risk factors that could materially affect its business and financial condition[180]