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Investment in Eton Pharmaceuticals, Inc. and Agreements - Related Party Transactions

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investment in Eton Pharmaceuticals, Inc. and Agreements - Related Party Transactions

NOTE 4. INVESTMENT IN ETON PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

In June 2017, the Company and its subsidiary, Eton, entered into and closed on definitive stock purchase agreements related to the sale of Eton’s Series A preferred stock (the “Series A Stock”) that resulted in the Company losing voting and ownership control of Eton and it at that time, ceased consolidating Eton’s financial statements. The Series A Stock has mandatory conversion requirements into common stock of Eton upon events, including an underwritten IPO of Eton common stock. Under the terms of its Series A Stock, Eton is required to complete an IPO by December 31, 2018, subject to exceptions and extension upon certain conditions.

The Company owns 3,500,000 common shares (approximately 27% issued and outstanding equity interest as of the date of this Report) of Eton and, uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Eton. Under this method, the Company recognizes earnings and losses of Eton in its consolidated financial statements and adjusts the carrying amount of its investment in Eton accordingly. The Company’s share of earnings and losses are based on the shares of common stock and in-substance common stock of Eton held by the Company. Any intra-entity profits and losses are eliminated. During the three and nine months ended September 30, 2018, the Company recorded equity in net loss of Eton of $1,032 and $3,247, respectively. As of September 30, 2018, the carrying value of the Company’s investment in Eton was $263.

The Company’s Chief Executive Officer, Mark L. Baum, is a director of Eton, and several employees of the Company (including Mr. Baum and the Company’s Chief Financial Officer, Andrew R. Boll) entered into consulting agreements and provided consulting services to Eton, these contracts concluded in April 2018.

The unaudited condensed results of operations information of Eton is summarized below:

	For the
	Nine months ended
	September 30, 2018
Revenues, net	$	-
Loss from operations		11,162
Net loss	$	(11,162	)

The unaudited condensed balance sheet information of Eton is summarized below:

	At September 30,
	2018
Current assets	$	6,803
Non current assets		722
Total assets		7,525

Total liabilities		1,193
Total preferred stock and stockholders’ equity		6,332
Total liabilities and stockholders’ equity	$	7,525