What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-12 · 315 added, 244 removed, 953 unchanged (37% of the section changed)

3 unchanged sentences

thousands, except share and per share amounts)

June 30, 2020

September 30, 2020

December 31, 2019

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Long-term debt, net of discount and including accrued fees

Long-term portion of PPP loan

Long-term portion of PPP and EIDL loans

Operating lease liabilities, net of current portion

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Common stock, $0.001 par value;

50,000,000 shares authorized as of June 30, 2020 and December 31, 2019;

20,956,033 and 17,877,486 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

50,000,000 shares authorized as of September 30, 2020 and December 31, 2019;

20,988,533 and 17,877,486 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

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For the three months ended

For the six months ended

Product sales

For the nine months ended

September 30,

Product sales, net

Licensing revenue

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Statements of Stockholders’

the three months ended June 30, 2020 and 2019

the three months ended September 30, 2020 and 2019

thousands, except share amounts)

1 unchanged sentence

Total Stockholders’

Balances at March 31, 2020

Balances at June 30, 2020

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Proceeds from sales of common stock, net of offering costs

Balances at June 30, 2020

Relative fair value of warrants to purchase common stock issued in connection with debt

Balances at September 30, 2020

Additional Paid-in

Total Stockholders’

Balances at March 31, 2019

Balances at June 30, 2019

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Stock warrant exercises

Balances at June 30, 2019

Balances at September 30, 2019

accompanying notes are an integral part of these condensed financial statements.

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Statements of Stockholders’

the six months ended June 30, 2020 and 2019

the nine months ended September 30, 2020 and 2019

thousands, except share amounts)

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Issuance of common stock for product candidate licensing rights

Balances at June 30, 2020

Relative fair value of warrants to purchase common stock issued in connection with debt

Balances at September 30, 2020

Additional Paid-in

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Stock warrant exercises

Balances at June 30, 2019

Balances at September 30, 2019

accompanying notes are an integral part of these condensed financial statements.

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Statements of Cash Flows

Six months ended June 30, 2020

Six months ended

June 30, 2019

Nine months ended September 30, 2020

Nine months ended

September 30, 2019

Cash flows from operating activities

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Cash flows from financing activities

Proceeds from issuance of long-term debt, net of issuance costs

Proceeds from sales of common stock, net of offering costs

Proceeds from PPP loan

Proceeds from PPP and EIDL loans

Proceeds from employee stock purchase plan and stock option exercises

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Cash paid for income taxes

Supplemental disclosure of non-cash financing activity

Relative fair value of common stock warrants issued in connection with debt

accompanying notes are an integral part of these condensed financial statements.

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In November 2019, the Company entered into a credit agreement and received net

proceeds of $4,750 (see Note 5), and in March and April 2020, Eton received net proceeds of $7,756 from the sale of shares of

its common stock (see Note 6).

proceeds of $4,750 and in August 2020 the Company received net proceeds of $1,965 under the credit agreement (see Note 5).

March and April 2020, Eton received net proceeds of $7,756 from the sale of shares of its common stock (see Note 6).

2020, the Company received net proceeds of approximately $21,040 from a public offering for its shares (see Note 12).

is a specialty pharmaceutical company focused on developing, acquiring, and commercializing innovative products.

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focused on hospital injectable and pediatric rare disease products.

The Company seeks to improve the formula, delivery system,

or safety of existing molecules in order to address unmet patient needs.

Eton pursues what it perceives to be low-risk product

candidates where existing published literature, historical clinical trials, or physician usage has established safety and/or efficacy

of the molecule, thereby reducing the incremental clinical burden required for the Company to bring the product to patients.

Liquidity Considerations

of June 30, 2020, the Company had an accumulated deficit of $77,967 and for the six months ended June 30, 2020, the Company had

net cash used in operating activities of $10,070.

of September 30, 2020, the Company had an accumulated deficit of $84,471 and for the nine months ended September 30, 2020, the

Company had net cash used in operating activities of $15,164.

date, the Company has generated limited revenues and has incurred negative cash flows from operating activities since its inception

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Food and Drug Administration (“FDA”), Biorphen®,

in October 2019 and currently believes its future revenues and its existing cash and cash equivalents of $10,270 will be sufficient

to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of issuance

of these financial statements.

This estimate is based on the Company’s current assumptions, including expected sales for

Biorphen and its ability to manage its spending.

in October 2019 and currently believes its future revenues and its cash and cash equivalents of $7,332 as of September 30, 2020

combined with the $21,040 of net proceeds from its October 2020 public offering discussed in Note 1 above will be sufficient to

fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of the filing

of this Report.

This estimate is based on the Company’s current assumptions, including expected sales for Biorphen and Alkindi

Sprinkle and its ability to manage its spending.

The Company could use its available capital resources sooner than currently expected,

and accordingly, could seek to obtain additional capital through equity financings, make additional drawings under its current

credit agreement (see Note 5), the sale of additional debt, or other arrangements.

and accordingly, could seek to obtain additional capital through equity financings, additional drawdowns under its current credit

agreement (see Note 5), the sale of additional debt, or through other arrangements.

However, there can be no assurance that the

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The sale of additional equity

may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding

may dilute existing stockholders and newly issued shares could contain senior rights and preferences compared to currently outstanding

common shares.

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statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s

financial position as of June 30, 2020 and the results of its operations and its cash flows for the periods ended June 30, 2020

The financial data and other information disclosed in these notes related to the three and six-month periods ended June

30, 2020 and 2019 are also unaudited.

The results for the six-month period ended June 30, 2020 are not necessarily indicative

of results to be expected for the year ending December 31, 2020, any other interim periods or any future year or period.

financial position as of September 30, 2020 and the results of its operations and its cash flows for the periods ended September

30, 2020 and 2019.

The financial data and other information disclosed in these notes related to the three and nine-month periods

ended September 30, 2020 and 2019 are also unaudited.

The results for the nine-month period ended September 30, 2020 are not necessarily

indicative of results to be expected for the year ending December 31, 2020, any other interim periods or any future year or period.

Pharmaceuticals, Inc.

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Intangibles - Goodwill and Other.

To date, a $750 payment related to the approval of the Company’s

A $750 payment related to the approval of the Company’s

Biorphen product has been capitalized and that cost is being amortized over five years.

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Recognition for Contracts with Customers

Company intends to generate its future revenues from direct sales of its approved Biorphen product and other of its products which

are in development.

In addition, the Company anticipates it will receive revenues from product licensing agreements for which

it has contracted for milestone payments and royalties from products it has developed or for which it has acquired the rights

to a product developed by a third party.

Company intends to generate its future revenues from direct sales of its approved Biorphen and Alkindi Sprinkle products as well

as other of its products which are in development.

In addition, the Company anticipates it will receive revenues from product

licensing agreements for which it has contracted for milestone payments and royalties from products it has developed or for which

it has acquired the rights to a product developed by a third party.

Company accounts for contracts with its customers in accordance with ASC 606 —

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selling price initially billed to the wholesaler arising from all of the above factors.

The Company has developed estimates for

future returns and chargebacks of Biorphen and the impact of the other discounts and fees it pays.

When estimating these adjustments

to the transaction price, the Company reduces it sufficiently to be able to assert that it is probable that there will be no significant

reversal of revenue when the ultimate adjustment amounts are known.

In September 2020, the Company reduced

its estimated selling price for Biorphen through wholesalers and recorded a $192 reduction to revenue based on the shelf stock

inventory held at its wholesale customers.

The Company has developed estimates for future returns and chargebacks of Biorphen

and the impact of the other discounts and fees it pays.

When estimating these adjustments to the transaction price, the Company

reduces it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the

ultimate adjustment amounts are known.

Company recognizes revenue from Biorphen product sales and related cost of sales upon product delivery to the wholesaler location.

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to customers while outbound freight and handling/storage fees charged by the 3PL service provider are expensed as they are incurred.

In the case where there is a loss under the profit-sharing arrangement, the Company is able to true-up and recover the loss from

its development partners, as occurred with Biorphen in the three-month period ended September 30, 2020.

and Development Expenses

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Common stock equivalents (using the treasury stock and “if converted”

method) from stock options, unvested RSAs and RSUs, and warrants at June 30, 2020 and 2019 were 3,307,335 and 3,460,950, respectively,

and are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive.

Included in the basic

and diluted net loss per share calculation are RSUs awarded to directors that have vested, but the issuance and delivery of the

common shares are deferred until the director retires from service as a director.

method) from stock options, unvested RSAs and RSUs, and warrants at September 30, 2020 and 2019 were 3,308,152 and 3,573,885,

respectively, and are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive.

in the basic and diluted net loss per share calculation are RSUs awarded to directors that have vested, but the issuance and delivery

of the common shares are deferred until the director retires from service as a director.

Pharmaceuticals, Inc.

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Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities,

PPP loan and long-term debt obligation.

The carrying amounts of these financial instruments, except for the PPP loan and long-term

debt obligation, approximate their fair values due to the short-term maturities of these instruments.

Based on borrowing rates

currently available to the Company, the carrying value of the PPP loan and long-term debt obligation approximate their fair values.

PPP and EIDL loans and long-term debt obligation.

The carrying amounts of these financial instruments, except for the PPP and

EIDL loans and long-term debt obligation, approximate their fair values due to the short-term maturities of these instruments.

Based on borrowing rates currently available to the Company, the carrying value of the PPP and EIDL loans and long-term debt obligation

approximate their fair values.

of New Accounting Pronouncements

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and equipment consist of the following:

September 30,

Computer hardware and software

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Property and equipment, net

expense for the three-month periods ended June 30, 2020 and 2019 was $87 and $89, respectively.

Depreciation expense for the six-month

periods ended June 30, 2020 and 2019 was $174 and $111, respectively.

expense for the three-month periods ended September 30, 2020 and 2019 was $86 and $86, respectively.

Depreciation expense for

the nine-month periods ended September 30, 2020 and 2019 was $260 and $197, respectively.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

Long-Term Debt

November 13, 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Holdings Corporation

(“SWK”) which provides for up to $10,000 in financing.

(“SWK”) which provided for up to $10,000 in financing.

The Company received proceeds of $5,000 at closing and was

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March 2020 sale of additional shares of its common stock (see Note 6), the Company and SWK amended the SWK Credit Agreement.

amendment provides the Company with the option to immediately draw $2,000 and can borrow an additional $3,000 upon the FDA approval

of both its EM-100 product candidate and another one of its other product candidates.

The term of the SWK Credit Agreement is

for five years and borrowings bear interest at a rate of LIBOR 3-month plus 10.0%, subject to a stated LIBOR floor rate of 2.0%.

A 2.0% unused credit limit fee is assessed during the first twelve months after the date of the SWK Credit Agreement and loan

fees include a 5.0% exit fee based on the principal amounts drawn which is payable at the end of the term of the SWK Credit Agreement.

The Company is required to maintain a minimum cash balance of $3,000, will only pay interest on the debt until May 2022 and then

will pay 5.5% of the loan principal balance commencing on May 15, 2022 and then every three months thereafter until November 13,

2024 at which time the remaining principal balance is due.

Borrowings under the SWK Credit Agreement are secured by the Company’s

The SWK Credit Agreement contains customary default provisions and covenants which include limits on additional indebtedness.

In March 2020, SWK provided a waiver for the Company to obtain loans with the Small Business Association.

The Company is currently

in the process of negotiating covenant targets for EBITDA and revenue for the SWK Credit Agreement.

connection with the SWK Credit Agreement, the Company issued warrants to SWK to purchase 51,239 shares of the Company’s

common stock (the “SWK Warrants”) with an exercise price of $5.86 per share.

The SWK Warrants are exercisable immediately

and have a term of seven years.

The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number

of shares issuable upon exercise subject to change in connection with stock splits, dividends, reclassifications and other conditions.

amendment provided the Company with the option to immediately draw $2,000 and the ability to borrow an additional $3,000 based

upon the FDA approval of EM-100 and Alkindi Sprinkle which subsequently occurred in September 2020.

Accordingly, the Company borrowed

an additional $2,000 on August 11, 2020.

The term of the SWK Credit Agreement is for five years and borrowings bear interest at

a rate of LIBOR 3-month plus 10.0%, subject to a stated LIBOR floor rate of 2.0%.

A 2.0% unused credit limit fee is assessed during

the first twelve months after the date of the SWK Credit Agreement and loan fees include a 5.0% exit fee based on the principal

amounts drawn which is payable at the end of the term of the SWK Credit Agreement.

The Company is required to maintain a minimum

cash balance of $3,000, will only pay interest on the debt until May 2022 and then will pay 5.5% of the loan principal balance

commencing on February 15, 2022 and then every three months thereafter until November 13, 2024 at which time the remaining principal

balance is due.

Borrowings under the SWK Credit Agreement are secured by the Company’s assets.

The SWK Credit Agreement

contains customary default provisions and covenants which include limits on additional indebtedness.

In March 2020, SWK provided

a waiver for the Company to obtain loans with the Small Business Association.

The Company is currently in the process of negotiating

covenant targets for EBITDA and revenue for the SWK Credit Agreement.

connection with the initial $5,000 borrowed in November 2019, the Company issued warrants to SWK to purchase 51,239 shares of

the Company’s common stock with an exercise price of $5.86 per share.

The relative fair value of these 51,239 warrants was

$226 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:

fair value of the Company’s

common stock at issuance of $5.75 per share;

seven-year contractual term;

95% volatility;

0% dividend rate;

and a risk-free interest

rate of 1.8%.

connection with the additional $2,000 borrowed in August 2020, the Company issued warrants for 18,141 shares of its common stock

at an exercise price of $6.62 per share.

The relative fair value of the 18,141 warrants was $94 and was estimated using the Black-Scholes-Merton

option pricing model with the following assumptions:

fair value of the Company’s common stock at issuance of $6.85 per share;

seven-year contractual term;

95% volatility;

0% dividend rate;

and a risk-free interest rate of 0.4%.

warrants (the “SWK Warrants”) are exercisable immediately and have a term of seven years from the date of issuance.

The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise

subject to change in connection with stock splits, dividends, reclassifications and other conditions.

Pharmaceuticals, Inc.

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Long Term Debt (continued)

expense of $386 was recorded during the six months ended June 30, 2020 which included $50 of debt discount amortization.

June 30, 2020, $63 of accrued interest is included in accrued liabilities.

table below reflects the future payments for the SWK loan principal and interest as of June 30, 2020.

expense of $617 was recorded during the nine months ended September 30, 2020 which included $85 of debt discount amortization.

As of September 30, 2020, $123 of accrued interest is included in accrued liabilities.

table below reflects the future payments for the SWK loan principal and interest as of September 30, 2020.

Total payments

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interest rate and is payable in monthly installments commencing on November 4, 2020 until paid in full on May 4, 2022.

recorded $1 in interest expense for the three-month period ended June 30, 2020.

recorded $1 in interest expense for the nine-month period ended September 30, 2020.

The Company intends to pursue full or partial

forgiveness of the loan as permitted under the applicable SBA guidelines for PPP loans.

July 21, 2020, the Company received $150 in loan proceeds under the Economic Injury Disaster Loan program (“EIDL”)

from the SBA.

The loan bears a 3.75% annual interest rate and is payable in monthly installments commencing on July 21, 2021 until

paid in full on July 21, 2050.

The Company recorded $2 in interest expense for the nine-month period ended September 30, 2020.

Company has 50,000,000 authorized shares of $0.001 par value common stock under its Amended and Restated Certificate of Incorporation.

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was recorded as a component of the Company’s research and development expense and an addition to its paid-in-capital.

the six months ended June 30, 2020, the Company issued 69,878 shares of its common stock resulting from stock option exercises

the nine months ended September 30, 2020, the Company issued 102,378 shares of its common stock resulting from stock option exercises

under its 2018 Equity Incentive Plan (see Note 8).

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Common Stock Warrants

Company’s outstanding warrants to purchase shares of its common stock at June 30, 2020 are summarized in the table below.

Company’s outstanding warrants to purchase shares of its common stock at September 30, 2020 are summarized in the table

Advisory Warrants

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Agent Warrants - IPO

Warrants - Debt

Warrants –

Debt (Tranche #1)

Warrants –

Debt (Tranche #2)

holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under the Securities

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There were 453,246 shares available for future issuance

under the 2018 Plan as of June 30, 2020.

under the 2018 Plan as of September 30, 2020.

that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards

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for these contingently vesting option awards to its product consultants.

the three months ended June 30, 2020 and 2019, the Company’s total stock-based compensation expense was $714 and $505, respectively.

Of these amounts, $651 and $421 was recorded in general and administrative expenses, respectively, and $63 and $84 was recorded

in research and development expenses, respectively.

the six months ended June 30, 2020 and 2019, the Company’s total stock-based compensation expense was $1,079 and $850, respectively.

Of these amounts, $976 and $690 was recorded in general and administrative expenses, respectively, and $103 and $160 was recorded

in research and development expenses, respectively.

the three months ended September 30, 2020 and 2019, the Company’s total stock-based compensation expense was $724 and $537,

respectively.

Of these amounts, $647 and $460 was recorded in general and administrative expenses, respectively, and $77 and $77

was recorded in research and development expenses, respectively.

the nine months ended September 30, 2020 and 2019, the Company’s total stock-based compensation expense was $1,803 and $1,387,

respectively.

Of these amounts, $1,623 and $1,150 was recorded in general and administrative expenses, respectively, and $180

and $237 was recorded in research and development expenses, respectively.

Pharmaceuticals, Inc.

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Forfeited/Cancelled

Options outstanding as of June 30, 2020

Options exercisable at June 30, 2020

Options vested and expected to vest at June 30, 2020

Options outstanding as of September 30, 2020

Options exercisable at September 30, 2020

Options vested and expected to vest at September 30, 2020

aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and

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the Company’s common stock.

assumptions used to calculate the fair value of options granted during the six months ended June 30, 2020 under the BSM were as

Expected dividends

Expected volatility

Risk-free interest rate

Expected term

Weighted average fair value

assumptions used to calculate the fair value of options granted during the nine months ended September 30, 2020 under the BSM

were as follows:

interest rate

average fair value

The Company has opted to use the “simplified method”

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Share-Based Payment Awards (continued)

of June 30, 2020, there was a total of $5,160 of unrecognized compensation costs related to non-vested stock option and restricted

In the six-month period ended June 30, 2020, there were four stock option exercises which totaled 69,878 shares at an

average exercise price of $1.39 per share with an intrinsic value of $139.

There were four stock option exercises for 90,000 shares

during the six months ended June 30, 2019 at an average exercise price of $0.86 per share with an intrinsic value of $599.

of September 30, 2020, there was a total of $4,810 of unrecognized compensation costs related to non-vested stock option and restricted

In the nine-month period ended September 30, 2020, there were six stock option exercises which totaled 102,378 shares

at an average exercise price of $1.37 per share with an intrinsic value of $436.

There were seven stock option exercises for 134,122

shares during the nine months ended September 30, 2019 at an average exercise price of $1.15 per share with an intrinsic value

December 2018, the Company’s board of directors approved and adopted an initial offering of the Company’s common stock

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preceding year or 150,000 shares, subject to reduction at the discretion of the Company’s board of directors.

As of September

30, 2020, there were 391,110 shares available for issuance under the ESPP.

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follows the conclusion of the preceding offering, each consisting of two purchase periods approximately six months in duration.

the first six months of 2020 and 2019 there were 14,005 and 23,083 share issuances under the ESPP.

the first nine months of 2020 and 2019 there were 14,005 and 23,083 share issuances under the ESPP.

The weighted average grant

date fair value of share awards in the first six months of 2020 and 2019 was $2.43 and $2.57, respectively.

date fair value of share awards in the first nine months of 2020 and 2019 was $2.43 and $2.57, respectively.

Employees contributed

$66 and $141 via payroll deductions during the six months ended June 30, 2020 and 2019, respectively.

The Company recorded an

expense of $33 and $75 related to the ESPP in the six-month periods ended June 30, 2020 and 2019, respectively.

As of June 30,

2020 and December 31, 2019, the accompanying condensed balance sheets include $9 and $16, respectively, in accrued liabilities

for remaining employee ESPP contributions.

$100 and $199 via payroll deductions during the nine months ended September 30, 2020 and 2019, respectively.

The Company recorded

an expense of $38 and $93 related to the ESPP in the nine-month periods ended September 30, 2020 and 2019, respectively.

September 30, 2020 and December 31, 2019, the accompanying condensed balance sheets include $32 and $79, respectively, in accrued

liabilities for remaining employee ESPP contributions.

Related Party Transactions

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to successive two-year renewals unless the Company elected to terminate the Eyemax Agreement.

There were no amounts due under

the terms of the Eyemax Agreement as of June 30, 2020 or December 31, 2019.

February 18, 2019, the Company entered into an Amended and Restated Agreement with Eyemax amending the Sales Agreement (the “Amended

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or if the EM-100 U.S market share falls below a specified target percentage.

There were no amounts due under the terms of the Amended Agreement as of June 30, 2020 or December 31, 2019.

The FDA revised

the target action date for EM-100 from August 10, 2020 to September 15, 2020.

Company acquired the DS-200 product and all related intellectual property and government approvals pursuant to an asset purchase

agreement (the “Selenix Agreement”) dated June 23, 2017 between the Company and Selenix LLC (“Selenix”),

an entity affiliated with the Company’s CEO.

Pursuant to the Selenix Agreement, the Company paid Selenix $1,500 at signing,

which was recorded as a component of R&D expense and paid $1,500 in April 2019 upon submission of an NDA on March 13, 2019

which was reflected as a component of R&D expense in 2019.

The Company will pay $1,000 upon FDA approval of the DS-200 product.

The Company has also agreed to pay Selenix 50% of the net profit from the sale of the product for the first 10 years following

the date of the Selenix Agreement.

There were no amounts due under the terms of the Selenix Agreement as of June 30, 2020 or December

In accordance with the FDA approval for EM-100 on September 24, 2020, the Company owed Eyemax $250 as of September 30, 2020.

were no amounts due at December 31, 2019.

Pharmaceuticals, Inc.

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and “General and Administrative”

captions in the condensed statements of operations was $14 and $20, respectively, for the three months ended June 30, 2020 and

$14 and $20, respectively, for the three months ended June 30, 2019.

The Company’s operating lease cost as presented in

the “Research and Development”

captions in the condensed statements of operations was $13 and $21, respectively, for the three months ended September 30, 2020

and $13 and $21, respectively, for the three months ended September 30, 2019.

The Company’s operating lease cost as presented

in the “Research and Development”

and “General and Administrative”

captions in the condensed statements of

operations was $28 and $41, respectively, for the six months ended June 30, 2020 and $28 and $43, respectively, for the six months

ended June 30, 2019.

Cash paid for amounts included in the measurement of operating lease liabilities was $65 for the six months

ended June 30, 2020.

The ROU asset amortization for the three and six-month periods ended June 30, 2020 was $33 and $64, respectively,

and is reflected within depreciation and amortization on the Company’s condensed statements of cash flows.

The ROU asset

amortization for the three and six-month periods ended June 30, 2019 was $30 and $59, respectively, and is reflected within depreciation

and amortization on the Company’s condensed statements of cash flows.

As of June 30, 2020, the weighted-average remaining

lease term was 0.7 years, and the weighted-average incremental borrowing rate was 7.8%.

table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2020 (in thousands).

captions in the condensed statements

of operations was $41 and $62, respectively, for the nine months ended September 30, 2020 and $41 and $64, respectively, for the

nine months ended September 30, 2019.

Cash paid for amounts included in the measurement of operating lease liabilities was $99

for the nine months ended September 30, 2020.

The ROU asset amortization for the three and nine-month periods ended September

30, 2020 was $33 and $97, respectively, and is reflected within depreciation and amortization on the Company’s condensed

statements of cash flows.

The ROU asset amortization for the three and nine-month periods ended September 30, 2019 was $31 and

$90, respectively, and is reflected within depreciation and amortization on the Company’s condensed statements of cash flows.

As of September 30, 2020, the weighted-average remaining lease term was 0.5 years, and the weighted-average incremental borrowing

rate was 7.8%.

table below presents the lease-related assets and liabilities recorded on the balance sheet as of September 30, 2020 (in thousands).

Classification

Operating lease right-of-use assets

Operating lease right-of-use assets, net

Total leased assets

Operating lease liabilities, current

Accrued liabilities

Total operating lease liabilities

lease right-of-use assets

lease right-of-use assets, net

leased assets

lease liabilities, current

operating lease liabilities

Company’s future lease commitments for its administrative offices in Deer Park, Illinois and its laboratory facility in

Lake Zurich, Illinois as of June 30, 2020 are as indicated below:

Lake Zurich, Illinois as of September 30, 2020 are as indicated below:

Undiscounted lease payments

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Total lease liabilities

October 16, 2020, the Company negotiated a new two-year lease for its administrative offices in Deer Park, Illinois commencing

on April 1, 2021 and ending on March 31, 2023.

Pharmaceuticals, Inc.

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Elcys product (cysteine hydrochloride injection).

This case matter is still pending at this time.

and product development agreements

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The Company paid the licensor $350 upon execution of the Agreement and an additional $350 after receiving successful bioequivalence

study results, and will pay $325 upon the FDA’s acceptance of an NDA for review, $325 upon FDA approval of the NDA, $650

upon issuance of patent covering ET-104 listed in the FDA’s Orange Book and $500 in the event that product sales in excess

of $10,000 are achieved within a calendar year.

In addition, the Company is required to pay the licensor 35% of the net profit

from product sales.

The Agreement is for an initial term of 10 years from the date of the first commercial sale of the product.

study results, and will pay $325 based upon the FDA’s acceptance of the NDA for review which occurred on September 27, 2020,

$325 upon FDA approval of the NDA, $650 upon issuance of patent covering ET-104 listed in the FDA’s Orange Book and $500

in the event that product sales in excess of $10,000 are achieved within a calendar year.

In addition, the Company is required

to pay the licensor 35% of the net profit from product sales.

The Agreement is for an initial term of 10 years from the date of

the first commercial sale of the product.

The Company will retain sole ownership of the NDA after expiration of the Agreement.

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commencing on November 26, 2019.

There was a gross loss for the three-month period ended September 30, 2020 due to a September

product price reduction through the Company’s wholesaler customers and the Company will true-up this amount due from Sintetica.

Pharmaceuticals, Inc.

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with Diurnal for marketing Alkindi Sprinkle in the United States.

Alkindi Sprinkle’s New Drug Application (NDA) is currently

under review with the FDA for approval as a replacement therapy for pediatric adrenal insufficiency (AI), including congenital

adrenal hyperplasia (CAH) in patients from birth to less than 17 years of age.

The application has been assigned a Prescription

Drug User Fee Act (PDUFA) date of September 29, 2020.

Alkindi Sprinkle’s New Drug Application (NDA) was approved

by the FDA on September 29, 2020 as a replacement therapy for pediatric adrenal insufficiency (AI), including congenital adrenal

hyperplasia (CAH) in patients from birth to less than 17 years of age.

the initial licensing milestone fee, the Company paid Diurnal $3,500 in cash and issued 379,474 shares of its common stock to

Diurnal which was valued at $1,264 based on the Company’s closing stock price of $3.33 on March 26, 2020 (see Note 6).

total amount of $4,764 was recorded as a component of research and development expense in the Company’s condensed statement

of operations for the six-month period ended June 30, 2020.

Diurnal which were valued at $1,264 based on the Company’s closing stock price of $3.33 on March 26, 2020 (see Note 6).

The total amount of $4,764 was recorded as a component of research and development expense in the Company’s condensed statement

of operations for the nine-month period ended September 30, 2020.

The Company will pay Diurnal $2,500 after the commercial launch

subject to the product also obtaining orphan drug exclusivity status from the FDA.

Indemnifications

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Accordingly, the Company has not recorded any liabilities for these

indemnification rights and agreements as of June 30, 2020 or December 31, 2019.

indemnification rights and agreements as of September 30, 2020 or December 31, 2019.

Subsequent Events

On August 11, 2020,

the Company’s existing credit facility with SWK Holdings was amended and will provide for an increase of the credit facility

from $10,000 up to $15,000 upon the FDA approval of Alkindi Sprinkle.

At execution of the amendment, Eton agreed to draw $2,000.

In addition, the facility’s interest rate will be reduced in the future when certain performance metrics are achieved.

October 16, 2020, the Company completed a public offering for 3,220,000 shares of its common stock at a public offering price

of $7.00 per share.

The Company received approximately $21,040 of net proceeds from the offering.

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

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our business, you should carefully consider other matters set forth in our SEC filings including the Risk Factors set forth in

Part I, Item 1A of our 2019 10-K and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March

Part I, Item 1A of our 2019 10-K and Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarterly periods ended March

31 and June 30, 2020.

are a specialty pharmaceutical company focused on developing and commercializing innovative pharmaceutical products and we have

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primarily from vasodilation in the setting of anesthesia.

In September 2020, the FDA approved our Alkindi Sprinkle product as

a replacement therapy for pediatric adrenal insufficiency (AI), including congenital adrenal hyperplasia (CAH) in patients from

birth to less than 17 years of age.

In addition, the FDA approved EM-100, an eye allergy product which we sold to Bausch Health

whereby we will receive royalties on sales of EM-100 which is expected to be launched in early 2021.

have established a diversified pipeline of product candidates in various stages of development, including multiple candidates

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our Biorphen sales and marketing efforts will continue to be adversely affected by the pandemic in 2020.

Biorphen sales are currently

our only source of revenue, however we expect to receive revenue from additional products in the latter part of 2020 and beyond.

In September 2020, we

reduced the selling price for Biorphen, which we sell through wholesalers, and recognized a $192 reduction to revenue based on

the shelf stock inventory held at our wholesale customers.

Biorphen sales are currently our only source of revenue, however we

expect to receive revenue from Alkindi Sprinkle in the latter part of 2020 as well as royalty/licensing fees and sales for additional

products in future periods.

dollar amounts are listed in thousands below).

the three-month period ended June 30, 2020 we realized $20 in net sales of Biorphen primarily as a result of the COVID-19 pandemic

marketing and promotion factors discussed above.

There were no revenues for the three-month period ended June 30, 2019.

the six-month period ended June 30, 2020 we realized $119 in net sales of Biorphen primarily as a result of the COVID-19 pandemic

marketing and promotion factors discussed above.

Revenues for the six-month period ended June 30, 2019 of $500 reflected the sale

of our EM-100 product to Bausch Health in February 2019.

the three-month period ended September 30, 2020 we had negative net sales of $161 for Biorphen due to the $192 wholesaler price

reduction noted above combined with low sales volume primarily as a result of the COVID-19 pandemic marketing and promotion factors

discussed above.

This unfavorable sales impact was partially offset by a negative cost of sales of $144 based on the profit/(loss)

sharing agreement with our product development partner for Biorphen.

There were no revenues for the three-month period ended September

the nine-month period ended September 30, 2020 we realized a negative $42 in net sales of Biorphen mainly due to the $192 wholesaler

price reduction noted above combined with low sales volume primarily as a result of the COVID-19 pandemic marketing and promotion

factors discussed above.

Revenues for the nine-month period ended September 30, 2019 of $500 reflected the sale of our EM-100

product to Bausch Health in February 2019.

and Development Expenses

the three-month periods ended June 30, 2020 and 2019, we incurred $1,609 and $1,439, respectively, of research and development

expenses (“R&D”).

the three-month periods ended September 30, 2020 and 2019, we incurred $2,826 and $3,418, respectively, of research and development

(“R&D”) expenses.

The full comparative three-month detail of our R&D expense is listed in the table below

and reflects an overall $170 higher expense level in 2020 mainly due to increased general product development partially offset

by decreased compensation and laboratory spending expense in the 2020 period.

the six-month periods ended June 30, 2020 and 2019, we incurred $7,877 and $7,904, respectively, of R&D.

The 2020 period includes

$4,764 in expense for the licensing payments for the U.S.

and reflects an overall $592 lower expense level in 2020 mainly due to decreased product development spending for Lamotrigine

partially offset by higher spending for Zonisamide and lower compensation and laboratory spending expense in the 2020 period.

the nine-month periods ended September 30, 2020 and 2019, we incurred $10,703 and $11,322, respectively, of R&D expense.

2020 period includes $4,764 in expense for the licensing payments for the U.S.

rights to Alkindi®

Sprinkle and the 2019 period includes $2,000

for licensing payments related to the U.S.

rights for Biorphen.

The full comparative six-month detail of our R&D expense is

listed in the table below and reflects an overall $27 lower expense level in 2020.

forth in the table below is our research and development spending for our current product candidates and general product development

expenses for the three and six-month periods ended June 30, 2020 and 2019.

Sprinkle and the 2019 period

includes $2,000 for licensing payments related to the U.S.

rights for Biorphen and $1,853 for Selenium product development expenses.

The full comparative nine-month detail of our R&D expense is listed in the table below and reflects an overall $619 lower

expense level in 2020.

forth in the table below is our R&D spending for our current product candidates and general product development expenses for

the three and nine-month periods ended September 30, 2020 and 2019.

We currently have five employees that support our overall

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Three months ended

June 30, 2020

Three months ended

June 30, 2019

Six months ended

June 30, 2020

Six months ended

June 30, 2019

September 30, 2020

September 30, 2019

Nine months ended

September 30, 2020

Nine months ended

September 30, 2019

Alkindi Sprinkle

Dehydrated Alcohol

Other products

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fees, product marketing expenses, distribution expenses, business insurance, travel expenses and general office expenses.

the three-month periods ended June 30, 2020 and 2019, we incurred $2,921 and $1,910, respectively, of G&A expenses.

increase in G&A expense was mainly due to increased legal expenses due to our initiating a Paragraph IV patent challenge against

Exela Pharma Science’s Elcys product (cysteine hydrochloride injection), increased compensation expenses, higher product

marketing/distribution expenses related to Biorphen commercialization.

the six-month periods ended June 30, 2020 and 2019, we incurred $5,531 and $3,499, respectively, of G&A expenses.

increase in G&A expense was mainly due to increased legal expenses due to our initiating a Paragraph IV patent challenge against

Exela Pharma Science’s Elcys product (cysteine hydrochloride injection), higher product marketing/distribution expenses

related to Biorphen commercialization and increased compensation expenses.

the three-month periods ended September 30, 2020 and 2019, we incurred $3,429 and $1,624, respectively, of G&A expenses.

$1,085 increase in G&A expense was mainly due to increased spending for marketing/promotional activities towards the Alkindi

Sprinkle launch, higher marketing/distribution spending for Biorphen commercialization, legal expenses due to our initiating a

Paragraph IV patent challenge against Exela Pharma Science’s Elcys product (cysteine hydrochloride injection), and increased

compensation expenses.

the nine-month periods ended September 30, 2020 and 2019, we incurred $8,960 and $5,123, respectively, of G&A expenses.

$3,837 increase in G&A expense was mainly due to increased spending for marketing/promotional activities towards the Alkindi

Sprinkle launch, higher marketing/distribution spending for Biorphen commercialization, legal expenses due to our initiating a

Paragraph IV patent challenge against Exela Pharma Science’s Elcys product (cysteine hydrochloride injection), and increased

compensation expenses.

and other (expense) income

comparing the three-month periods ended June 30, 2020 and 2019, net interest expense increased by $292 as a result of $193 in

interest expense mainly associated with borrowings under our SWK Credit agreement and $99 in reduced interest income due to lower

interest rates and lower levels of cash and cash equivalents in 2020.

For the six-month periods ended June 30, 2020 and 2019,

net interest expense increased by $604 as a result of $388 in interest expense mainly associated with borrowings under our SWK

Credit agreement and $216 in reduced interest income due to lower interest rates and lower levels of cash and cash equivalents

incurred a net loss of $4,730 and $3,249 for the three-month periods ended June 30, 2020 and 2019, respectively.

comparing the three-month periods ended September 30, 2020 and 2019, net interest expense increased by $309 as a result of $232

in interest expense mainly associated with borrowings under our SWK Credit Agreement and $77 in reduced interest income due to

lower interest rates and lower levels of cash and cash equivalents in 2020.

For the nine-month periods ended September 30, 2020

and 2019, net interest expense increased by $913 as a result of $620 in interest expense mainly associated with borrowings under

our SWK Credit Agreement and $293 in reduced interest income due to lower interest rates and lower levels of cash and cash equivalents

incurred a net loss of $6,504 and $4,965 for the three-month periods ended September 30, 2020 and 2019, respectively.

The increased

loss in the 2020 period was mainly a result of increased general and administrative expenses as discussed above.

incurred a net loss of $13,779 and $10,659 for the six-month periods ended June 30, 2020 and 2019, respectively.

incurred a net loss of $20,283 and $15,624 for the nine-month periods ended September 30, 2020 and 2019, respectively.

The increased

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was realized in 2019 and increased net interest expense as discussed above.

following table sets forth a summary of our cash flows for the six-month periods ended June 30, 2020 and 2019:

Six months ended

June 30, 2020

Six months ended

June 30, 2019

and Capital Resources

primary source of financing has been raising equity capital in the public markets and obtaining loans through SWK to support our

product development projects along with marketing/distribution spending and working capital to support approved product launches.

We believe our existing cash balances combined with the net proceeds of approximately $21,040 from our October 2020 stock offering

will be sufficient to fund our business operations for at least the next twelve months from the date of the filing of this

We could use our available capital resources sooner than currently expected, and accordingly, would seek to obtain additional

capital through equity financings, additional drawdowns under our current credit agreement with SWK Holdings, the sale of additional

debt, or through other arrangements.

following table sets forth a summary of our cash flows for the nine-month periods ended September 30, 2020 and 2019:

Nine months ended

September 30, 2020

Nine months ended

September 30, 2019

Net cash used in operating activities

Cash used in investing activities

Cash flows from financing activities

Cash flows provided by financing activities

Change in cash and cash equivalents

decrease in cash used in operating activities was mainly due to the higher operating losses in 2020 being more than offset by

increase in cash used in operating activities was mainly due to the higher operating losses in 2020 being partially offset by

favorable working capital changes when compared to the same period in 2019.

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expenditures for setting up our new laboratory facility in 2019 and only nominal equipment spending requirements in 2020.

increase in financing activity was primarily the result of the sales of our common stock in March and April 2020.

increase in financing activity was primarily the result of the sales of our common stock in March and April 2020 along with additional

loan borrowings in August 2020.

Accounting Policies

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that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial

revenues for the first six months of 2020 for $119 resulted from our sales of our Biorphen product which we launched in December

2019 and sales for the six months ended June 30, 2019 of $500 resulted from the sale of our EM-100 product rights to Bausch Health

Ireland Limited (“Bausch”) per an Asset Purchase Agreement dated February 18, 2019 (the “Asset Purchase Agreement”).

We expect to generate future revenues from direct sales of our FDA-approved Biorphen®

product as well as products we have

in development which will typically require advance review and approval by the FDA.

Additionally, we anticipate we will receive

revenues from product licensing agreements where we have contracted for milestone payments and royalties from products we have

developed or for which we have acquired the rights to a product developed by a third party.

revenues for the first nine months of 2020 a negative $42 as a result of limited sales volumes for Biorphen and our reducing the

selling price for Biorphen, which we sell through wholesalers, and recognizing a $192 reduction to revenue based on the shelf

stock inventory held at our wholesale customers.

Sales for the nine months ended September 30, 2019 of $500 resulted from the

sale of our EM-100 product rights to Bausch Health Ireland Limited (“Bausch”) per an Asset Purchase Agreement dated

February 18, 2019 (the “Asset Purchase Agreement”).

We expect to generate future revenues from direct sales of our

FDA-approved Biorphen®

and Alkindi®

Sprinkle product as well as products we have in development which will typically require

advance review and approval by the FDA.

Additionally, we anticipate we will receive revenues from product licensing agreements

where we have contracted for milestone payments and royalties from products we have developed or for which we have acquired the

rights to a product developed by a third party.

account for contracts with our customers in accordance with Accounting Standards Codification (“ASC”) 606 —

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sell Biorphen at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government

In addition, the we pay fees to wholesalers for their distribution services, inventory reporting and chargeback processing.

In addition, we pay fees to wholesalers for their distribution services, inventory reporting and chargeback processing.

We pay GPOs fees for administrative services and for access to GPO members and concluded the benefits received in exchange for

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements