What changed in this filing

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Item 1. Financial Statements

2021-11-16 compared with 2021-08-16 · 388 added, 402 removed, 681 unchanged (54% of the section changed)

3 unchanged sentences

thousands, except share and per share amounts)

September 30, 2021

December 31, 2020

Current assets:

Cash and cash

Cash and cash equivalents

Accounts receivable, net

expenses and other current assets

Prepaid expenses and other current assets

Total current assets

Property and equipment,

Property and equipment, net

Intangible assets, net

Operating lease right-of-use

long-term assets, net

Liabilities and stockholders’

Operating lease right-of-use assets, net

Other long-term assets, net

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

Current portion of long-term

Current portion of long-term debt

PPP loan, current portion

Accrued liabilities

Total current liabilities

Long-term debt, net of discount and including

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

Long-term portion of PPP and EIDL loans

Operating lease liabilities,

net of current portion

Commitments and contingencies

Operating lease liabilities, net of current portion

Total liabilities

Commitments and contingencies (Note 12)

Stockholders’ equity

Common stock, $ 0.001 par value;

50,000,000 shares authorized as of June

30, 2021 and December 31, 2020;

24,600,175 and 24,312,808 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

50,000,000 shares authorized as of September 30, 2021 and December 31, 2020;

24,606,175 and 24,312,808 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

stockholders’ equity

liabilities and stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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thousands, except per share amounts)

the three months ended

the six months ended

For the three months ended

For the nine months ended

September 30,

Licensing revenue

sales and royalties

Product sales and royalties

Total net revenues

Cost of sales:

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Product sales and royalties

cost of sales

profit (loss)

Total cost of sales

Gross profit (loss)

Operating expenses:

Research and development

and administrative

operating expenses

(Loss) income from operations

General and administrative

Total operating expenses

Loss from operations

Other (expense) income:

Interest and other (expense)

Interest and other (expense) income, net

Gain on PPP loan forgiven

on equipment sale

(Loss) income before income

Gain on equipment sale

Loss before income tax expense

Income tax expense

(loss) income

loss (income) per share, basic

loss (income) per share, diluted

Weighted average number

of common shares outstanding, basic

Weighted average number

of common shares outstanding, diluted

Net loss per share, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

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

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Statements of Stockholders’ Equity

the three months ended June 30, 2021 and 2020

the three months ended September 30, 2021 and 2020

thousands, except share amounts)

Stockholders’

Balances at March 31, 2021

Additional Paid-in

Total Stockholders’

Balances at June 30, 2021

Stock-based compensation

Stock option exercises

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

Employee stock purchase plan

Common stock issued related to restricted

Proceeds from sales of common stock, net of offering costs

Proceeds from sales of common stock, net of offering costs, shares

Employee stock purchase plan,shares

Common stock issued related to restricted stock units

Common stock issued related to restricted stock units,shares

Warrant exercises

Warrant exercises,shares

Proceeds from sales of common stock, net of offering costs

Proceeds from sales of common stock, net of offering costs,shares

issuance of common stock for product candidate licensing rights

issuance of common stock for product candidate licensing rights,shares

Balances at September 30, 2021

Additional Paid-in

Total Stockholders’

Balances at June 30, 2020

Stockholders’

Balances at March 31, 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,

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

Balances at September 30, 2020

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

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Statements of Stockholders’ Equity

the six months ended June 30, 2021 and 2020

the nine months ended September 30, 2021 and 2020

thousands, except share amounts)

Stockholders’

Additional Paid-in

Total Stockholders’

Balances at December 31, 2020

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Employee stock purchase plan

Common stock issued related to restricted

Common stock issued related to restricted stock units

Warrant exercises

Balances at June 30,

Stockholders’

Balances at September 30, 2021

Additional Paid-in

Total Stockholders’

Balances at December 31, 2019

Beginning balance

Stock-based compensation

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Employee stock purchase plan

Proceeds from sales of common stock, net of

offering costs

Issuance of common stock for product candidate

licensing rights

Balances at June 30,

Ending balance

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

Proceeds from sales of common stock, net of offering costs

Issuance of common stock for product candidate licensing rights

Balances at September 30, 2020

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

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Statements of Cash Flows

months ended June 30, 2021

Cash flows from operating

Adjustments to reconcile net income (loss)

to net cash provided by (used in) operating activities:

Nine months ended September 30, 2021

Nine months ended

September 30, 2020

Cash flows from operating activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Stock-based compensation

Common stock issued for

product candidate licensing rights

Common stock issued for product candidate licensing rights

Depreciation and amortization

Debt discount amortization

Gain on forgiveness of

Gain on forgiveness of debt

Gain on sale of equipment

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Accounts receivable

Prepaid expenses and other

Prepaid expenses and other assets

Accounts payable

cash used in operating activities

Cash provided by (used in)

investing activities

Accrued liabilities

Net cash provided by (used in) operating activities

Cash provided by (used in) investing activities

Proceeds from sale of equipment

of property and equipment

cash provided by (used in) financing activities

Cash flows from financing

Proceeds from sales of

common stock, net of offering costs

Proceeds from PPP loan

from employee stock purchase plan and stock option exercises

cash provided by financing activities

Change in cash and cash

Cash and cash equivalents

at beginning of period

Cash and cash equivalents

at end of period

Supplemental disclosures

of cash flow information

Purchases of property and equipment

Net cash provided by (used in) financing activities

Cash flows from financing activities

Proceeds from sales of common stock, net of offering costs

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

EIDL loan payoff

Proceeds from PPP and EIDL loans

Proceeds from employee stock purchase plan and stock option exercises

Net cash provided by financing activities

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of non-cash financing activity

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

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

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received net proceeds of $ 21,026 from a public offering for its common stock at an offering price of $ 7.00 per share.

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

Eton is primarily 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.

is an innovative specialty pharmaceutical company focused on developing, acquiring, and commercializing treatments for rare diseases.

The Company seeks to improve the formula, delivery system, or safety of existing molecules in order to address unmet patient needs.

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.

Company’s Biorphen® product was approved by the FDA in October 2019 and sales commenced for this product at the end of 2019.

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Bausch Health launched

this product under the name of Alaway® Preservative Free in January 2021 and Eton will receive royalties from the sale of the product.

this product under the name of Alaway® Preservative Free in January 2021 and Eton receives royalties from the sale of the product.

In addition, the Company acquired the licensing rights to Alkindi Sprinkle and this product was approved by the FDA in October 2020 and

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Pharmaceuticals (“Azurity”) and anticipates additional revenues from Azurity based on various product-related milestones

including the commercial launch for these products which are currently under review with the FDA.

including the commercial launch for these products.

One of the three products was approved by the FDA in November 2021 and two

are currently under review with the FDA.

In June 2021, the Company’s Rezipres product was approved by the FDA and is expected to

launch in the coming months.

In October 2021, the Company acquired the rights to an FDA-approved generic carglumic acid product indicated

for the treatment of hyperammonemia due to N-acetylglutamate Synthase (NAGS) deficiency and it expects to launch this product late in

The Company has three additional product candidates under development, two of which have been submitted to the FDA.

2 — Liquidity Considerations

In the first six

months of 2021, the Company generated net cash provided by operating activities of $ 3,346

primarily from the initial proceeds from the sale of three neurology products.

The Company expects further growth in 2021 and

beyond in accordance with additional market penetration from its approved products plus additional revenues from licensing and additional

products where it anticipates FDA approval.

Prior to 2021,

the first nine months of 2021, the Company generated net cash provided

by operating activities of $ 396

primarily from the

sale of three neurology products.

The Company expects further growth in 2021 and beyond in accordance with additional market penetration

from its approved products plus additional revenues from licensing and additional products where it anticipates FDA approval.

2021, the Company had generated limited revenues and had incurred negative cash flows from operating activities since its inception in

Company currently believes its existing cash and cash equivalents of $ 25,802 as of June 30, 2021 will be sufficient to fund its operating

expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report.

estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage

its spending.

Company currently believes its existing cash and cash equivalents of $ 22,709 as of September 30, 2021 will be sufficient to fund its

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

This estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its

ability to manage its spending.

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

Accordingly, the Company could seek

to obtain additional capital through equity financings, the issuance of debt or other arrangements.

However, there can be no assurance

that the Company will be able to raise additional capital if needed or under acceptable terms, if at all.

The sale of additional equity

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

common shares.

The Company’s existing long-term debt obligation contains covenants and limits the Company’s ability to pay

dividends or make other distributions to stockholders.

If the Company experiences delays in product sales growth and completing its product

development and obtaining regulatory approval for its other product candidates and is unable to obtain such additional financing, operations

would need to be scaled back or discontinued.

Accordingly, the

Company could seek to obtain additional capital through equity financings, the issuance of debt or other arrangements.

However, there

can be no assurance that the Company will be able to raise additional capital if needed or under acceptable terms, if at all.

of additional equity may dilute existing stockholders and newly issued shares could contain senior rights and preferences compared to

currently outstanding common shares.

The Company’s existing long-term debt obligation contains covenants and limits the Company’s

ability to pay dividends or make other distributions to stockholders.

If the Company experiences delays in product sales growth and completing

its product development and obtaining regulatory approval for its other product candidates and is unable to obtain such additional financing,

operations would need to be scaled back or discontinued.

3 — Summary of Significant Accounting Policies

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

as of June 30, 2021 and the results of its operations and its cash flows for the periods ended June 30, 2021 and 2020.

The financial

data and other information disclosed in these notes related to the three and six-month periods ended June 30, 2021 and 2020 are also

The results for the six-month period ended June 30, 2021 are not necessarily indicative of results to be expected for the

year ending December 31, 2021, any other interim periods or any future year or period.

as of September 30, 2021 and the results of its operations and its cash flows for the periods ended September 30, 2021 and 2020.

financial data and other information disclosed in these notes related to the three and nine-month periods ended September 30, 2021 and

2020 are also unaudited.

The results for the nine-month period ended September 30, 2021 are not necessarily indicative of results to

be expected for the year ending December 31, 2021, any other interim periods or any future year or period.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenue and expenses during the reporting periods.

amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and

the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these financial

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financial institutions or invested in short-term U.S.

treasury bills.

Cash equivalents consist of an

interest-bearing checking account and a U.S.

treasury bill.

From time to time, amounts deposited with its bank exceed federally insured

The Company believes the associated credit risk to be minimal.

treasury bills or high-grade short-term money

market accounts.

From time to time, amounts deposited with its bank exceed federally insured limits and the Company believes the associated

credit risk to be minimal.

receivable are recorded at the invoiced amount and are non-interest bearing.

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The total for these reserves

amounted to $ 85 and $ 71 as of June 30, 2021 and December 31, 2020, respectively.

amounted to $ 91 and $ 71 as of September 30, 2021 and December 31, 2020, respectively.

Company values its inventories at the lower of cost or net realizable value using the first-in, first-out method of valuation.

reviews its inventories for potential excess or obsolete issues on an ongoing basis and will record a write-down if an impairment is

Inventories at June 30, 2021 and December 31, 2020 consist solely of purchased finished goods.

At both June 30, 2021 and

December 31, 2020 inventories are shown net of a slow-moving reserve for its Biorphen product of $ 623 due to the risk of expiry before

this entire stock of inventories is sold.

During the three-month period ended September 30, 2021, the Company recorded a provision of $ 432

for excess quantities of its Biorphen product

that are approaching expiration.

Inventories at September 30, 2021 and December 31, 2020 consist solely of purchased finished goods.

At September 30, 2021 and December 31, 2020, inventories are shown net of a slow-moving reserve for its Biorphen product of $ 1,414

respectively, due to the risk of expiry before this entire stock of inventories is sold.

Pharmaceuticals, Inc.

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The Company completed a sale of the lab equipment in May 2021

at a price of $ 700

which was $ 181

in excess of the book value for these assets.

Accordingly, the $ 519 net

book value of these assets was removed from the property and equipment accounts and the $ 181

gain is reflected in the Company’s statements

of operations for the three and six-month periods ended June 30, 2021.

In conjunction with the closing of its laboratory operation,

the Company scrapped various furniture and equipment which had a net book value of $ 31

which has been included in research and development

expense in the statements of operations.

at a price of $ 700 which was $ 181 in excess of the book value for these assets.

Accordingly, the $ 519 net book value of these assets

was removed from the property and equipment accounts and the $ 181 gain is reflected in the Company’s statements of operations for

the nine-month period ended September 30, 2021.

In conjunction with the closing of its laboratory operation, the Company scrapped

various furniture and equipment which had a net book value of $ 31 which has been included in research and development expense in the

statements of operations.

Company capitalizes payments it makes for licensed products when the payment is based on FDA approval for the product and the cost is

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Intangibles - Goodwill and Other.

payment related to the approval of the Company’s Biorphen

product in 2019 has been capitalized and that cost

is being amortized over five years.

The intangible

assets, net on the Company’s balance sheet reflected $ 250

of accumulated amortization as of June 30, 2021.

The Company recorded $ 37 and $ 75

of amortization expense for the three and six months

ended June 30, 2021, respectively.

The Company will record amortization expense of $ 150

per year for this intangible asset for 2021 through

2023 and then $ 125

in 2024 when it will be fully amortized.

A $ 750 payment related to the approval of the Company’s Biorphen product in 2019 has been capitalized

and that cost is being amortized over five years.

The intangible assets, net on the Company’s balance sheet reflected $ 287 of accumulated

amortization as of September 30, 2021.

The Company recorded $ 37 and $ 112 of amortization expense for the three and nine months ended

September 30, 2021, respectively.

The Company will record amortization expense of $ 150 per year for this intangible asset for 2021 through

2023 and then $ 125 in 2024 when it will be fully amortized.

of Long-Lived Assets

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from products it has developed or for which it has acquired the rights to a product developed by a third party.

for the three months ended June 30, 2021 reflected $ 2,500

of licensing milestone fees, $ 493

in product sales and $ 74

in royalty revenue.

Revenues for the six

months ended June 30, 2021 reflected $ 14,000

of licensing milestone fees, $ 747

in product sales and $ 217

in royalty revenue.

Revenues for the three

and six months ended June 30, 2020 consisted solely of product sales.

for the three months ended September 30, 2021 reflected $ 734 in product sales and $ 41 in royalty revenue.

Revenues for the nine months

ended September 30, 2021 reflected $ 14,000 of licensing milestone fees, $ 1,481 in product sales and $ 258 in royalty revenue.

for the three and nine months ended September 30, 2020 consisted solely of product sales.

of sales consists of the profit-sharing and royalty fees with the Company’s product licensing and development partners, the purchase

costs for finished products from third-party manufacturers and freight and handling/storage costs from the Company’s 3PL logistics

service providers.

The cost of sales for profit-sharing and royalty fees and costs for purchased finished products and the associated

inbound freight expense is recorded when the associated product sale revenue is recognized in accordance with the terms of shipment to

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

of sales also reflects any write-downs or reserve adjustments for the Company’s inventories.

costs for finished products from third-party manufacturers, write-downs for excess/obsolete inventory, and freight and handling/storage

costs from the Company’s 3PL logistics service providers.

The cost of sales for profit-sharing and royalty fees and costs for purchased

finished products and the associated inbound freight expense is recorded when the associated product sale revenue is recognized in accordance

with the terms of shipment to customers while outbound freight and handling/storage fees charged by the 3PL service provider are expensed

as they are incurred.

Cost of sales also reflects any write-downs or reserve adjustments for the Company’s inventories.

and Development Expenses

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(Loss) Per Share

net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders for the period by the

weighted average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by dividing the

net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares,

such as unvested restricted stock, stock options and warrants that are outstanding during the period.

Common stock equivalents are excluded

from the computation when their inclusion would be anti-dilutive.

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

method) from stock options, unvested RSAs and warrants at June 30, 2021 were 1,352,879

and excluded 1,624,598

shares that were anti-dilutive (see Note

Included in the basic and diluted net income (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 (see Note 8).

Basic weighted average shares for the three

and six months ended June 30, 2021 include 600,000 vested warrants to purchase common shares.

As the shares underlying these warrants

can be purchased for little to no consideration ($ 0.01 per share exercise price), they are included in the computation of basic earnings

net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding

during the period.

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common

and common equivalent shares, such as unvested restricted stock awards (“RSA”), restricted stock units (“RSU’”),

stock options and warrants, outstanding during the period.

Common stock equivalents (using the treasury stock method) from stock options, unvested RSAs and RSUs, and warrants at September 30, 2021 and 2020 were 4,279,400 and 3,308,152 , 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.

weighted average shares for the three and nine months ended September 30, 2021 include 600,000 vested warrants to purchase common shares.

As the shares underlying these warrants can be purchased for little to no consideration ($ 0.01 per share exercise price), they are included

in the computation of basic earnings per share.

Company accounts for stock-based compensation under the provisions of ASC 718 — Compensation — Stock Compensation.

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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.

and a long-term debt obligation.

Based on borrowing rates currently available to the Company, the carrying amounts of these financial

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

of New Accounting Pronouncements

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impact on its financial position or results of operations.

Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that no subsequent events have occurred

that would require recognition in the condensed financial statements or disclosure in the notes thereto, except as disclosed in the

notes to these condensed financial statements.

4 — Property and Equipment

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Schedule of Property and Equipment

September 30,

Computer hardware and software

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Leasehold improvements

Property and equipment,

and equipment, net

expense for the three-month periods ended June 30, 2021 and 2020 was $ 24

respectively.

Depreciation expense for the six-month periods ended June 30, 2021 and 2020 was $ 108

respectively.

The balances at June 30, 2021 reflect the sale of laboratory equipment in May 2021 which had a net book value of $ 519 .

In conjunction with the closing of its laboratory operation, the Company scrapped various furniture and equipment which had a net book

value of $ 31,

which is included in research and development

expense in the statements of operations.

Property and equipment, gross

accumulated depreciation

Property and equipment, net

expense for the three-month periods ended September 30, 2021 and 2020 was $ 24 and $ 86 , respectively.

Depreciation expense for the nine-month

periods ended September 30, 2021 and 2020 was $ 132 and $ 260 , respectively.

The balances at September 30, 2021 reflect the sale of laboratory

equipment in May 2021 which had a net book value of $ 519 .

5 — Long-Term Debt

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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

A 2.0 % unused credit limit fee was 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

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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.

In February 2021, the Company notified SWK that it

will not require additional borrowing capacity under the SWK Credit Agreement and terminated the additional borrowing capacity with SWK.

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

The relative fair value of the

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

contractual term;

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 the 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;

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

Warrants contain 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.

expense of $ 513 was recorded during the six months ended June 30, 2021, which included $ 73 of debt discount amortization.

Interest expense

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

As of June 30, 2021,

$ 64 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, 2021.

Warrants contain 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.

expense of $ 766 was recorded during the nine months ended September 30, 2021, which included $ 110 of debt discount amortization.

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

September 30, 2021, $ 107 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, 2021.

Schedule of Future Payments of Long Term Debt

Total payments

amount representing

Loan payable, gross

amount representing interest

payable, gross

current portion of long-term debt

unamortized discount

Long-term debt, net

of unamortized discount

debt, net of unamortized discount

May 4, 2020, the Company received $ 361 in loan proceeds under the Paycheck Protection Program (“PPP”) from the Small Business

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On May 20, 2021, the Company received notice

that the loan principal and cumulative interest of $ 4 was forgiven in full as permitted under the applicable SBA guidelines for PPP loans.

The $ 365 gain on debt extinguishment is reflected in non-operating income for the three and six-month periods ended June 30, 2021.

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

The Company paid off the full EIDL loan principal and its cumulative interest of $ 6 in July 2021.

that the $ 361 loan principal along with cumulative interest of $ 4 was forgiven in full as permitted under the applicable SBA guidelines

for PPP loans.

The $ 365 gain on debt extinguishment is reflected in non-operating income for the nine-month period ended September 30,

Pharmaceuticals, Inc.

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thousands, except share and per share amounts)

5 — Long Term Debt (continued)

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

The Company paid off the full EIDL loan principal and its cumulative interest of $ 6 in July 2021.

6 — Common Stock

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

the six months ended June 30, 2021, the Company issued 138,233

shares of its common stock resulting from stock

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

In April 2021, the Company issued 25,000

shares of common stock

to a member of its board of directors upon his retirement from the board in connection with previously vested restricted stock units

the six months ended June 30, 2021, a holder of the Company’s common stock warrants exercised 135,650 warrants on a cashless basis

and the Company issued 94,808 shares of its common stock in connection with the warrant exercise.

the nine months ended September 30, 2021, the Company issued 144,233 shares of its common stock resulting from stock option exercises

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

In April 2021, the Company issued 25,000 shares of common stock to a member of its

board of directors upon his retirement from the board in connection with previously vested restricted stock units (“RSUs”).

the nine months ended September 30, 2021, a holder of the Company’s common stock warrants exercised 135,650 warrants on a cashless

basis and the Company issued 94,808 shares of its common stock in connection with the warrant exercise.

The intrinsic value of the warrant

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7 — Common Stock Warrants

Company’s outstanding warrants to purchase shares of its common stock at June 30, 2021 are summarized in the table below.

Company’s outstanding warrants to purchase shares of its common stock at September 30, 2021 are summarized in the table below.

Summary of Warrants Outstanding

Description of Warrants

Exercise Price

Business Advisory Warrants

Placement Agent Warrants – 2017 Preferred

Stock Offering

Placement Agent Warrants – 2017 Preferred Stock Offering

Placement Agent Warrants - IPO

SWK Warrants – Debt – Tranche #1

SWK Warrants –

Debt – Tranche #2

$ 3.18 (Avg )

SWK 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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2017 Equity Incentive Plan in May 2017 (the

“2017 Plan”), which authorized the issuance of up to 5,000,000

shares of the Company’s common stock.

conjunction with the Company’s IPO in November 2018, the Company’s stockholders and board of directors approved the 2018

Equity Incentive Plan (as amended in January 2021, the “2018 plan”) which succeeded the 2017 Plan.

The Company has

granted restricted stock awards (“RSAs”), stock options and RSUs for its common stock under the 2017 Plan and 2018

Plan as detailed in the tables below.

There were 481,160

shares available for future issuance under the

2018 Plan as of June 30, 2021.

“2017 Plan”), which authorized the issuance of up to 5,000,000 shares of the Company’s common stock.

In conjunction

with the Company’s IPO in November 2018, the Company’s stockholders and board of directors approved the 2018 Equity Incentive

Plan (as amended in January 2021, the “2018 plan”) which succeeded the 2017 Plan.

The Company has granted restricted stock

awards (“RSAs”), stock options and RSUs for its common stock under the 2017 Plan and 2018 Plan as detailed in the tables

There were 481,160 shares available for future issuance under the 2018 Plan as of September 30, 2021.

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

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vesting option awards to its product consultants.

the three months ended June 30, 2021 and 2020, the Company’s total stock-based compensation expense was $ 836

the three months ended September 30, 2021 and 2020, the Company’s total stock-based compensation expense was $ 1,009 and

respectively.

Of these amounts, $ 691

was recorded in general and administrative expenses,

respectively, and $ 145

was recorded in research and development expenses,

Of these amounts, $ 838 and $ 647,

respectively, was recorded in general

and administrative expenses, and $ 171 and $ 77,

respectively, was recorded in research

and development expenses.

the nine months ended September 30, 2021 and 2020, the Company’s total stock-based compensation expense was $ 2,518

and $ 1,803 ,

respectively.

the six months ended June 30, 2021 and 2020, the Company’s total stock-based compensation expense was $ 1,509 and $ 1,079 , respectively.

Of these amounts, $ 1,272 and $ 976 was recorded in general and administrative expenses, respectively, and $ 237 and $ 103 was recorded in

research and development expenses, respectively.

Of these amounts, $ 2,110

and $ 1,623 ,

respectively, was recorded in general and administrative expenses, and $ 408

respectively, was recorded in research

and development expenses.

Pharmaceuticals, Inc.

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Summary of Stock Option Activity

Average Exercise

Average Remaining Contractual Term (Yrs)

Weighted Average Exercise

Weighted Average Remaining Contractual Term (Yrs)

Aggregate Intrinsic

Options outstanding as of December 31, 2020

Forfeited/Cancelled

Options outstanding

as of June 30, 2021

Options exercisable at June 30, 2021

Options vested and expected to vest at June

Options outstanding as of September 30, 2021

Options exercisable at September 30, 2021

Options vested and expected to vest at September 30, 2021

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

value of the Company’s common stock for those stock options that had strike prices lower than the fair value of the Company’s

common stock.

assumptions used to calculate the fair value of options granted during the six months ended June 30, 2021 under the BSM were as

common stock at period end.

assumptions used to calculate the fair value of options granted during the nine months ended September 30, 2021 under the BSM were as

Schedule of Assumptions Used to Calculate Fair Value of Options Granted

interest rate

average fair value

Expected dividends

Expected volatility

Risk-free interest rate

Expected term

5.3 – 6.3 years

Weighted average fair value

Term — The Company has opted to use the “simplified method” for estimating the expected term of options granted to

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8 — Share-Based Payment Awards (continued)

of June 30, 2021, there was a total of $ 8,242

of unrecognized compensation costs related

to non-vested stock option and restricted awards.

In the six-month period ended June 30, 2021, there were four stock option exercises

which totaled 138,233

of September 30, 2021, there was a total of $ 7,270

of unrecognized compensation costs related to

non-vested stock option and restricted awards.

During the nine-month period ended September 30, 2021, there were five stock option

exercises which totaled 144,233

shares at an average exercise price of $ 2.35

per share with an intrinsic value of $ 682 .

There were four stock option exercises for 69,878

shares during the six months ended June 30, 2020

There were six stock option exercises for 102,378

shares during the nine months ended September

30, 2020 at an average exercise price of $ 1.37

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shares, subject to reduction at the discretion of the Company’s board of directors.

As of June 30, 2021, there were 500,009 shares

available for issuance under the ESPP.

As of September 30, 2021, there were 500,009

shares available for issuance under the ESPP.

initial offering of the ESPP began on December 17, 2018 and ended on December 10, 2019.

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periods approximately six months in duration .

the first six months of 2021 and 2020 there were 29,326 and 14,005 share issuances under the ESPP.

the first nine months of 2021 and 2020 there were 29,326 and 14,005 share issuances under the ESPP.

The weighted average grant date fair

value of share awards in the first six months of 2021 and 2020 was $ 2.83 and $ 2.43 , respectively.

value of share awards in the first nine months of 2021 and 2020 was $ 2.83 and $ 2.43 , respectively.

Employees contributed $ 192 and $ 100

via payroll deductions during the six months ended June 30, 2021 and 2020, respectively.

The Company recorded an expense of $ 46 and $ 33

related to the ESPP in the six-month periods ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, the

accompanying condensed balance sheets include $ 19 and $ 9 , respectively, in accrued liabilities for remaining employee ESPP contributions.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

( in thousands, except share and per share amounts)

via payroll deductions during the nine months ended September 30, 2021 and 2020, respectively.

The Company recorded an expense of $ 83

and $ 38 related to the ESPP in the nine-month periods ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December

31, 2020, the accompanying condensed balance sheets include $ 77 and $ 19 , respectively, in accrued liabilities for remaining employee

ESPP contributions.

9 — Earnings (Loss) Per Share

Basic and diluted

net income (loss) per share was calculated as follows:

of Basic and Diluted Net Income (Loss) Per Share

Three months ended June 30,

Six months ended June 30,

Basic net income (loss) per share:

Net income (loss)

Weighted-average number of common shares outstanding,

Net income (loss) per share, basic

Diluted net income (loss) per share:

Net income (loss)

Weighted-average number of common shares outstanding, basic

Dilutive effect of stock awards and warrants

Weighted-average number of common shares outstanding,

Net income (loss) per share, diluted

Potential shares of common stock that were excluded from the computation of diluted

earnings per common share as their effect was anti-dilutive:

Stock awards and warrants

There was no difference between the Company’s

net income (loss) and the net income (loss) attributable to common stockholders for all periods presented.

and diluted net income (loss) per share was calculated as follows:

Schedule of Basic and Diluted Net Income (Loss) Per Share

Three months ended September 30,

Nine months ended September 30,

Basic net loss per share:

Weighted-average number of common shares outstanding, basic and diluted

Net loss per share, basic and diluted

was no difference between the Company’s net loss and the net loss attributable to common stockholders for all periods presented.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

10 — Related Party Transactions

was issued 3,500,000 shares of the Company’s common stock at the formation of the Company at the $ 0.001 par value per share price

as the paid-in-capital contribution from Harrow.

The Company and Harrow signed licensing agreements for two products developed by Harrow

was issued 3,500,000

shares of the Company’s common stock at

the formation of the Company at the $ 0.001

par value per share price as the paid-in-capital

contribution from Harrow.

In April 2021, Harrow sold 1,518,000 shares of the Eton common stock it owned in an underwritten public

As of September 30, 2021, Harrow owned 1,982,000 shares of Eton’s common shares which represents 8.1% of the Company’s

common shares outstanding.

In 2017, the Company and Harrow signed licensing agreements for two products developed by Harrow

whereby Harrow assigned the product rights to the Company.

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The CT-100 Asset Purchase Agreement also contains customary representations, warranties, covenants and indemnities by the parties.

date there have not been any sales of the CT-100 product and therefore no earned royalties to the Company for this product.

part of the early start-up for the Company’s pharmaceutical business in 2017, key executives at Harrow received a total of 1,500,000

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stock and stock options vested in full on April 30, 2018.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

10 — Related Party Transactions (continued)

Additionally,

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board associated with RSU’s that were previously fully vested.

late March 2021, the Company closed its laboratory operation in Lake Zurich, Illinois and in May 2021 it reached an agreement

for Imprimis Pharmaceuticals, a subsidiary of Harrow, to its our lab equipment for $ 700

which was $ 181

above the Companys’s net book value

late March 2021, the Company closed its laboratory operation in Lake Zurich, Illinois and in May 2021 it reached an agreement for Imprimis

Pharmaceuticals, a subsidiary of Harrow, to purchase its lab equipment for $ 700 which was $ 181 above the Company’s net book value

of the equipment.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

10 — Related Party Transactions (continued)

Executive Officer

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

There were no amounts due to Eyemax under the terms of the Amended Agreement as of June 30, 2021 or December 31, 2020.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of September 30, 2021 or December 31, 2020.

Pharmaceuticals, Inc.

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Company’s operating lease cost as presented in the “Research and Development” and “General and Administrative”

captions in the condensed statements of operations was $ 0 and $ 22 , respectively, for the three months ended June 30, 2021 and $ 14 and

$ 20 , respectively, for the three months ended June 30, 2020.

captions in the condensed statements of operations was $ 0 and $ 21 , respectively, for the three months ended September 30, 2021 and $ 13

and $ 21 , respectively, for the three months ended September 30, 2020.

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 $ 9 and $ 64 ,

respectively, for the six months ended June 30, 2021 and $ 28 and $ 41 , respectively, for the six months ended June 30, 2020.

for amounts included in the measurement of operating lease liabilities was $ 43 for the six months ended June 30, 2021.

The ROU asset

amortization for the three and six-month periods ended June 30, 2021 was $ 20 and $ 49 , 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, 2020 was $ 33 and $ 64 , respectively, and is reflected within depreciation and amortization on the Company’s condensed

statements of cash flows.

As of June 30, 2021, the weighted-average remaining lease term was 1.75 years, and the weighted-average incremental

borrowing rate was 5.4 %.

table below presents the lease-related assets and liabilities recorded on the balance sheet as of June 30, 2021 (in thousands).

respectively, for the nine months ended September 30, 2021 and $ 41 and $ 62 , respectively, for the nine months ended September 30, 2020.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 63 for the nine months ended September 30, 2021.

The ROU asset amortization for the three and nine-month periods ended September 30, 2021 was $ 20 and $ 69 , 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, 2020 was $ 33 and $ 97 , respectively, and is reflected within depreciation and amortization

on the Company’s condensed statements of cash flows.

As of September 30, 2021, the weighted-average remaining lease term was 1.50

years , and the weighted-average incremental borrowing rate was 5.4 %.

table below presents the lease-related assets and liabilities recorded on the balance sheet as of September 30, 2021 (in thousands).

Schedule of Lease-related Assets and Liabilities

Classification

lease right-of-use assets

lease right-of-use assets, net

leased assets

lease liabilities, current

lease liabilities, noncurrent

lease liabilities, net of current portion

operating lease liabilities

Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of June 30, 2020 are as indicated below:

Operating lease right-of-use assets

Operating lease right-of-use assets, net

Total leased assets

Operating lease liabilities, current

Accrued liabilities

Operating lease liabilities, noncurrent

Operating lease liabilities, net of current portion

Total operating lease liabilities

Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of September 30, 2021 are as indicated

Schedule of Future Lease Commitments

lease payments

Undiscounted lease payments

Imputed interest

lease liabilities

Total lease liabilities

Pharmaceuticals, Inc.

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thousands, except share and per share amounts)

12 — Commitments

and Contingencies

12 — Commitments and Contingencies

Company is subject to legal proceedings and claims that may arise in the ordinary course of business.

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upon the commencement of commercial product shipments.

Sintetica will supply Biorphen to the Company at its direct costs and the Company

will retain 5 % of net sales as a marketing fee.

Sintetica supplies Biorphen to the Company at its direct costs and the Company

retains 5 % of net sales as a marketing fee.

Sintetica is entitled to receive the first $ 500 of product profits.

4 unchanged sentences

February 8, 2019, the Company also entered into an Exclusive Licensing and Supply Agreement (the “ET-203 License Agreement”)

with Sintetica for marketing rights in the United States to ephedrine, an injectable product candidate for use in the hospital setting.

Pursuant to the terms of the ET-203 License Agreement, the Company will be responsible for marketing activities and Sintetica will be

responsible for development, manufacturing, and regulatory activities related to obtaining regulatory approval.

The Company paid Sintetica

a licensing payment of $ 1,000 upon execution of the ET-203 License Agreement which was refunded to Eton in early 2020 due to the FDA

not accepting the ET-203 file submission by Sintetica.

The refund was reflected as a component of prepaid and other current assets on

the Company’s balance sheet at December 31, 2019.

The ET-203 product was successfully resubmitted in late 2020 and the Company

will pay a $ 600 milestone fee and will also pay $ 750 upon FDA approval and the commercial sale of the product candidate.

Upon approval,

Sintetica will supply ET-203 to the Company at its direct costs.

with Sintetica for marketing rights in the United States to ephedrine (brand name Rezipres®), an injectable product candidate for

use in the hospital setting.

Pursuant to the terms of the ET-203 License Agreement, the Company will be responsible for marketing activities

and Sintetica will be responsible for development, manufacturing, and regulatory activities related to obtaining regulatory approval.

The Company paid Sintetica a licensing payment of $ 1,000 upon execution of the ET-203 License Agreement which was refunded to Eton in

early 2020 due to the FDA not accepting the ET-203 file submission by Sintetica.

The refund was reflected as a component of prepaid and

other current assets on the Company’s balance sheet at December 31, 2019.

The ET-203 product was successfully resubmitted in late

2020 and the Company paid a $ 600 milestone fee in October 2021.

The product has received FDA approval and the Company will pay $ 750 upon

the commercial launch of the product candidate which is anticipated in late 2021.

Sintetica will supply ET-203 to the Company at its

direct costs.

The Company will retain 5 % of net sales as a marketing fee.

will be entitled to receive the first $ 500 of product profits.

Sintetica will be entitled to receive the first $ 500 of product

All additional profit will be split 50 % to the Company and 50 % to Sintetica.

The ET-203 License Agreement has a ten-year term from first commercial sale of product.

The ET-203 License Agreement has a ten-year term

from first commercial sale of product.

three oral solution pediatric neurology product candidates discussed below, Topiramate, Zonisamide and Lamotrigine were developed by

48 unchanged sentences

Diurnal Limited (“Diurnal”) for marketing Alkindi Sprinkle in the United States.

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 were valued at $ 1,264 based on the Company’s closing stock price of $ 3.33 on March 26, 2020.

The total amount of $ 4,764 was

recorded as a component of research and development expense in the Company’s statement of operations for the six months ended June

The Company will also pay Diurnal $ 2,500 if the product obtains orphan drug exclusivity status from the FDA.

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 were

valued at $ 1,264

based on the Company’s closing stock price

on March 26, 2020.

The total amount of $ 4,764

was recorded as a component of research and development

expense in the Company’s statement of operations for the nine months ended September 30, 2020.

The Company pays Diurnal a low double-digit

royalty on its sales of Alkindi Sprinkle and will also pay Diurnal $ 2,500

if the product obtains orphan drug exclusivity

status from the FDA.

June 15, 2021, the Company entered into a Distribution and Promotion License Agreement with Crossject S.A.

4 unchanged sentences

adrenal insufficiency.

The Company paid Crossject $ 500

upon execution of the agreement which has

been included in research and development expense in the statements of operations and will pay an additional $ 500

for technical batches of the product if the technical

batches are completed by December 31, 2021 and then another $ 500

for registration batches if those are completed

by December 31, 2022.

The Company will pay Crossject $ 1,500

upon FDA acceptance of the product filing and

upon FDA approval of the product.

The acceptance

and approval fees are subject to reduction if other hydrocortisone autoinjector intramuscular products receive FDA approval prior to

the Crossject product.

In addition, the Company will pay Crossject a ten

percent royalty on net sales and one-time net

sales milestone fees of up to $ 6,000

The Company paid Crossject $500 upon execution of the agreement which has been included in research and development

expense in the statements of operations and will pay an additional $ 500 for technical batches of the product if the technical batches

are completed by December 31, 2021 and then another $ 500 for registration batches if those are completed by December 31, 2022.

will pay Crossject $ 1,500 upon FDA acceptance of the product filing and $ 2,000 upon FDA approval of the product.

The acceptance and approval

fees are subject to reduction if other hydrocortisone autoinjector intramuscular products receive FDA approval prior to the Crossject

In addition, the Company will pay Crossject a ten percent royalty on net sales and one-time net sales milestone fees of up to

$ 6,000 as indicated in the table below:

13 unchanged sentences

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements

as of June 30, 2021 or December 31, 2020.

as of September 30, 2021 or December 31, 2020.

13 — Subsequent Events

October 27, 2021, the Company entered into a license agreement for a generic carglumic acid product which is used to treat hyperammonemia

due to N- acetylglutamate Synthase (NAGS) deficiency.

The Company paid $ 3,250 at signing for the exclusive U.S.

licensing rights for

the carglumic acid product and expects to launch this product in late 2021.

The Company will also pay its development partners 50 % of

the net profits for this product.

November 12, 2021, the Company entered into a multi-year agreement with Tolmar Pharmaceuticals, Inc.

(“Tolmar”) to

co-promote the Company’s Alkindi Sprinkle® product.

The Company will leverage Tolmar’s 62-person sales force and

their existing relationships in the pediatric endocrinology specialty.

Tolmar will receive a royalty on net sales growth above the

Company’s current baseline sales for Alkindi Sprinkle.

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