What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-16 · 429 added, 537 removed, 532 unchanged (64% of the section changed)

3 unchanged sentences

thousands, except share and per share amounts)

September 30, 2021

March 31, 2022

December 31, 2021

12 unchanged sentences

Current portion of long-term debt

PPP loan, current portion

Accrued liabilities

1 unchanged sentence

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

3 unchanged sentences

Common stock, $ 0.001 par value;

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

50,000,000 shares authorized;

24,626,004 shares issued and outstanding at March 31, 2022 and December 31, 2021

Additional paid-in capital

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For the three months ended

For the nine months ended

September 30,

Licensing revenue

5 unchanged sentences

Total cost of sales

Gross profit (loss)

Operating expenses:

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Total operating expenses

Loss from operations

Other (expense) income:

Interest and other (expense) income, net

Gain on PPP loan forgiven

Gain on equipment sale

Loss before income tax expense

(Loss) income from operations

Other expense:

Interest and other expense, net

(Loss) income before income tax expense

Income tax expense

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.

Pharmaceuticals, Inc.

Statements of Stockholders’ Equity

the three months ended September 30, 2021 and 2020

thousands, except share amounts)

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

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

Stock-based compensation

Stock option exercises

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

Balances at September 30, 2020

Net (loss) income

Net (loss) income per share, basic

Net (loss) income per share, diluted

Weighted average number of common shares outstanding, basic

Weighted average number of common shares outstanding, diluted

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

1 unchanged sentence

Statements of Stockholders’ Equity

the nine months ended September 30, 2021 and 2020

the three months ended March 31, 2022 and 2021

thousands, except share amounts)

3 unchanged sentences

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Common stock issued related to restricted stock units

Warrant exercises

Balances at September 30, 2021

Balances at March 31, 2022

Additional Paid-in

3 unchanged sentences

Stock option exercises

Employee stock purchase plan

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

Warrant exercises

Net income (loss)

Balances at March 31, 2021

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

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Statements of Cash Flows

Nine months ended September 30, 2021

Nine months ended

September 30, 2020

March 31, 2022

March 31, 2021

Cash flows from operating activities

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

Net (loss) income

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

Stock-based compensation

Common stock issued for product candidate licensing rights

Depreciation and amortization

Debt discount amortization

Gain on forgiveness of debt

Gain on sale of equipment

Changes in operating assets and liabilities:

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Accrued liabilities

Net cash provided by (used in) operating activities

Cash provided by (used in) investing activities

Proceeds from sale of equipment

Net cash provided by operating activities

Cash used in investing activities

Purchases of property and equipment

Net cash provided by (used in) financing activities

Net cash used in investing 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

Repayment of long-term debt

Proceeds from employee stock option exercises

Net cash (used in) provided by financing activities

Change in cash and cash equivalents

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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

Supplemental disclosures of non-cash investing activities:

Payable for product

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 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.

is an innovative pharmaceutical company focused on developing, acquiring, and commercializing innovative products to treat

rare diseases.

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.

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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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

The Company acquired the licensing rights to Alkindi Sprinkle® and this product was approved by the FDA in October 2020 and

launched in December 2020.

In February 2021, the Company sold three pediatric neurology products it had under development to Azurity

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

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.

The Company entered into a co-promotion agreement with Tolmar Pharmaceuticals in November 2021 whereby Tolmar

will promote Alkindi Sprinkle through its salesforce in exchange for a royalty on net sales.

In February 2021, the Company sold three

pediatric neurology products it had under development to Azurity Pharmaceuticals (“Azurity”) and anticipates additional revenues

from Azurity based on various product-related milestones including the commercial launch for two of these products which are currently

under review with the FDA.

Azurity launched one of the three products, Eprontia, in December 2021.

the Company launched Carglumic Acid tablets in December 2021 as the first and only FDA-approved generic version of Carbaglu®.

March 2022, the Company’s U.S.

marketing partner, XGen Pharmaceuticals (“XGen”) launched Rezipres® (a ready-to-use

form of injectable ephedrine) and the Company receives a profit share on the sale of the Rezipres product.

2 — Liquidity Considerations

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 $ 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.

date, the Company has generated revenues from six products and expects further growth in 2022 and beyond in accordance with additional

market penetration from these products plus revenues from licensing and additional products where it anticipates FDA approval.

Company currently believes its existing cash and cash equivalents of $ 15,229 as of March 31, 2022 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.

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.

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

of Presentation

Company has prepared the accompanying financial statements in accordance with accounting principles generally accepted in the United

States of America (“GAAP”).

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.

Pharmaceuticals, Inc.

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thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

3 — Summary of Significant Accounting Policies

of Presentation

Company has prepared the accompanying condensed financial statements in accordance with accounting principles generally accepted

in the United States of America (“GAAP”).

Interim Financial Information

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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 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.

as of March 31, 2022 and the results of its operations and its cash flows for the periods ended March 31, 2022 and 2021.

The financial

data and other information disclosed in these notes related to the three-month periods ended March 31, 2022 and 2021 are also unaudited.

The results for the three-month period ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending

December 31, 2022, 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 as of 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 at 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 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.

treasury bills or high-grade money market funds.

As of March 31, 2022, all of the Company’s cash is in a non-interest bearing account due to the current low-interest rate environment.

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

The Company believes the associated credit risk to

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

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The total for these reserves

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

amounted to $ 132 and $ 96 as of March 31, 2022 and December 31, 2021, 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

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.

Inventories at March 31, 2022 and December 31, 2021 consist solely of purchased finished goods.

At March 31, 2022 and December

31, 2021 inventories are shown net of a reserve for its Biorphen product of $ 1,284 and $ 1,414 , respectively due to the risk of expiry

before this entire stock of inventories is sold.

Pharmaceuticals, Inc.

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and repairs are charged to expense as incurred, while renewals and improvements are capitalized.

March 2021, the Company completed an evaluation of its expected needs for product development and testing activities and determined that

it would discontinue its laboratory operation in Lake Zurich, Illinois.

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 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

recoverable based on expected future cash flows from the product.

The cost is amortized on a straight-line basis over the estimated useful

life of the product commencing on the approval date in accordance with Accounting Standards Codification (“ASC”) 350 —

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

is recoverable based on expected future cash flows from the product.

The cost is amortized on a straight-line basis over the estimated

useful life of the product commencing on the approval date in accordance with Accounting Standards Codification (“ASC”) 350

— Intangibles - Goodwill and Other.

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.

payment related to the approval of the Company’s

Biorphen product in 2019 has been capitalized and that cost is being amortized over five

In November 2021, the Company purchased

the rights for its Carglumic Acid product for $ 3,250

and that cost is being amortized over ten

During the first quarter of 2022, the

Company capitalized a $ 750

fee for its Rezipres product and that cost

is being amortized over five

The intangible assets, net on the Company’s

balance sheet reflected $ 510

of accumulated amortization as of March 31, 2022.

The Company recorded $ 131

of amortization expense for the three months ended March 31,

The table below shows the estimated remaining amortization for these products for each of the five years from 2022

to 2026 and thereafter.

of Intangible Assets Amortization Expense

Remainder of 2022

Total estimated amortization expense

of Long-Lived Assets

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debt issuance costs over the expected term of the related debt using the effective interest method.

Debt discounts relate to the relative

fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and accreted over

the expected term of the debt to interest expense using the effective interest method.

Debt discounts related to

the relative fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and

accreted over the expected term of the debt to interest expense using the effective interest method.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

Recognition for Contracts with Customers

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised

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generate pull-through sales.

In addition, the Company sells its Alkindi Sprinkle product to one pharmacy distributor customer which provides

order fulfilment and inventory storage/distribution services.

prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sell

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

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

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

these fees are not distinct from its sales of Biorphen, and accordingly it applies these amounts to reduce revenues.

Wholesalers also

have rights to return unsold product nearing or past the expiration date.

Because of the shelf life of Biorphen and the Company’s

lengthy return period, there may be a significant period of time between when the product is shipped and when it issues credits on returned

For its Alkindi Sprinkle product, the Company bills at the initial product list price which are subject to offsets for patient

co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

In addition, the Company sells its Alkindi Sprinkle and Carglumic Acid product to one pharmacy distributor

customer which provides order fulfilment and inventory storage/distribution services.

Pharmaceuticals, Inc.

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3 — Summary of Significant Accounting Policies (continued)

prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when the wholesalers

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

government programs.

In addition, the Company pays fees to wholesalers for their distribution services, inventory reporting and

chargeback processing.

The Company pays GPOs fees for administrative services and for access to GPO members and concluded the

benefits received in exchange for these fees are not distinct from its sales of Biorphen, and accordingly it applies these amounts

to reduce revenues.

Wholesalers also have rights to return unsold product nearing or past the expiration date.

Because of the shelf

life of Biorphen and the Company’s lengthy return period, there may be a significant period of time between when the product

is shipped and when it issues credits on returned product.

For its Alkindi Sprinkle and Carglumic Acid products, the Company bills

at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid

reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

Company estimates the transaction price when it receives each purchase order taking into account the expected reductions of the selling

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The Company has developed estimates for future

returns and chargebacks of Biorphen and the impact of the other discounts and fees it pays while Alkindi Sprinkle sales to its distributor

are not subject to returns.

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.

returns and chargebacks of Biorphen and the impact of the other discounts and fees it pays while Alkindi Sprinkle and Carglumic Acid

sales to its distributor are not subject to returns.

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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Although wholesalers have product return rights, the Company does not believe they have a significant incentive to return the product.

The Company stores its Alkindi Sprinkle inventory at its pharmacy distributor customer location and sales are recorded when stock is

pulled and shipped to fulfill specific patient orders.

The Company stores its Alkindi Sprinkle and Carglumic Acid inventory at its pharmacy distributor customer location and sales are recorded

when stock is pulled and shipped to fulfill specific patient orders.

recognition of revenue from product sales, the estimated amounts of credit for product returns, chargebacks, distribution fees, prompt

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in the period of adjustment.

addition, the Company receives revenues from product licensing agreements where 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.

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.

addition, the Company anticipates it will receive revenues from product licensing agreements where 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.

for the three months ended March 31, 2022 consisted of $ 2,153

of product sales and $ 23 in royalty revenue.

Revenues for the three months ended March 31, 2021 reflected $ 11,500

of licensing milestone fees, $ 254

in product sales and $ 143

in royalty revenue.

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, 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.

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.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

and Development Expenses

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use in R&D activities are recorded as prepaid expenses and are expensed as the related goods are delivered or the services are performed.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

(Loss) Per Share

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.

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.

For the three-month period ended March 31, 2022 common stock equivalents

are excluded from the calculation of diluted

net loss per share because the effect is anti-dilutive.

For the three-month period ended March 31, 2021, common stock equivalents (using

the treasury stock and “if converted” method) from stock options, unvested RSAs and warrants were 2,093,952

and excluded 729,692

shares that were anti-dilutive.

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.

Basic weighted average shares for the three

months ended March 31, 2022 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

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

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Expected volatilities are based on comparable companies’ historical volatility along with

a limited weighting included for the Company’s own volatility subsequent to its IPO, which management believes represents the most

accurate basis for estimating expected future volatility under the current conditions.

a limited weighting included for the Company’s own volatility, which management believes represents the most accurate basis for

estimating expected future volatility under the current conditions.

The Company accounts for forfeitures as they occur.

The Company uses

the closing common stock price on the date of grant for the fair value of the common stock.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

Value Measurements

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to provide pricing information on an ongoing basis.

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

and long-term debt obligation.

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.

Based on borrowing rates currently available to the Company,

the carrying value of the long-term debt obligation approximates its fair value.

of New Accounting Pronouncements

were no new accounting pronouncements issued by the FASB during the period that would apply to the Company would have a material impact

on its financial position or results of operations.

Pharmaceuticals, Inc.

1 unchanged sentence

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

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

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

were no new accounting pronouncements issued by the FASB during the current period that would apply to the Company and have a material

impact on its financial position or results of operations.

4 – Property and Equipment

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Schedule of Property and Equipment

September 30,

Computer hardware and software

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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 .

expense for the three-month periods ended March 31, 2022 and 2021 was $ 21 and $ 84 , respectively.

The decrease in depreciation expense

was associated with the closure of the Company’s laboratory facility and sale of its equipment in 2021.

5 — Long Term Debt

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The amendment provided the Company with the option

to immediately draw an additional $ 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.

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.

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 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

Credit Agreement.

The Company is required to maintain a minimum cash balance of $ 3,000 , will only pay interest on the debt until February14,

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.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

5 — Long Term Debt (continued)

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.

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 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;

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

The Company was required to maintain a minimum cash balance of $ 3,000 , only pay interest on the debt until February 2022 and

then 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

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.

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 these 51,239

warrants was $ 226

and was estimated using BSM with the following

fair value of the Company’s common stock at issuance of $ 5.75

contractual term;

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;

connection with the additional $ 2,000

borrowed in August 2020, the Company issued warrants

shares of its common stock at an exercise price

The relative fair value of the 18,141

warrants was $ 94

and was estimated using BSM with the following

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

contractual term;

95 % volatility;

dividend rate;

and a risk-free interest rate of 0.4 %.

Pharmaceuticals, Inc.

to Condensed Financial Statements

thousands, except share and per share amounts)

5 — Long Term Debt (continued)

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 $ 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.

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.

expense of $ 247 was recorded during the three months ended March 31, 2022, which included $ 36 of debt discount amortization.

expense of $ 264 was recorded during the three months ended March 31, 2021, which included $ 36 of debt discount amortization.

31, 2022, $ 129 of accrued interest is included in accrued liabilities.

April 5, 2022, the Company and SWK entered into an amendment to the SWK Credit Agreement which allowed for a deferral of loan principal

payments until May 2023 and reduced the interest rate to LIBOR 3-month plus 8.0 %, subject to a stated LIBOR floor rate of 2.0 %.

In accordance

with the change, the Company has classified all the loan principal as long-term in its balance sheet at March 31, 2022.

table below reflects the future payments for the SWK loan principal and interest as of March 31, 2022.

Schedule of Future Payments of Long Term Debt

Total payments

amount representing interest

payable, gross

current portion of long-term debt

Loan payable, gross

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

Administration (“SBA”) through its banking relationship with Bank of America.

On May 20, 2021, the Company received notice

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,

Long-term debt, net of unamortized discount

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 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

exercise was $ 806 .

June 2021, the Company issued 29,326 shares of its common stock to employees in accordance with its Employee Stock Purchase Plan (“ESPP”).

Company did not have any stock issuance activity for the three-month period ended March 31, 2022.

During the three months ended March

31, 2021, the Company issued 75,000 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive

Plan (see Note 8).

During the three months ended March 31, 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 that warrant exercise was $ 806 .

7 — Common Stock Warrants

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

Company’s outstanding warrants to purchase shares of its common stock at March 31, 2022 are summarized in the table below.

Summary of Warrants Outstanding

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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.

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.

“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 (the “2018 Plan”), as amended, which succeeded the 2017 Plan.

The Company has granted restricted

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

Plan and 2018 Plan as detailed in the tables below.

There were 443,888

shares available for future issuance under the

2018 Plan as of March 31, 2022.

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

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of grant as the exercise price.

the third quarter of 2017, the Company issued 25,000 RSU’s to each of its four outside directors ( 100,000 total share units).

RSU’s issued to the outside directors were 100 % vested at June 30, 2018.

The associated 100,000 shares of the Company’s common

stock are not issued until the individual director retires from service from the Company’s board of directors.

In April 2021, 25,000

of these vested RSU shares were issued to a director after his retirement from the Company’s board.

The Company has not issued

any additional RSU’s.

date, all stock options issued have been non-qualified stock options, and the exercise prices were set at the fair value for the shares

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vesting option awards to its product consultants.

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, $ 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.

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.

to Condensed Financial Statements

thousands, except share and per share amounts)

8 — Share-Based Payment Awards (continued)

the three months ended March 31, 2022 and 2021, the Company’s total stock-based compensation expense was $ 1,083 and $ 673 , respectively.

Of these amounts, $ 995 and $ 581 was recorded in general and administrative expenses, respectively, and $ 88 and $ 92 was recorded in research

and development expenses, respectively.

summary of stock option activity is as follows:

Summary of Stock Option Activity

Weighted Average Exercise

Weighted Average Remaining Contractual Term (Yrs)

Aggregate Intrinsic

Options outstanding as of December 31, 2021

Forfeited/Cancelled

Options outstanding as of September 30, 2021

Options exercisable at September 30, 2021

Options vested and expected to vest at September 30, 2021

Options outstanding as of March 31, 2022

Options exercisable at March 31, 2022

Options vested and expected to vest at March 31, 2022

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 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

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

employees and directors, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term

of the option (generally ten years).

The expected term of options granted to non-employees equals the contractual life of the options.

Volatility — Due to the Company’s limited operating history and a lack of Company-specific historical and implied volatility

data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are

publicly traded.

The Company has continued this methodology plus given some limited weighting to its own volatility in the periods subsequent

to its November 2018 IPO.

The historical volatility data was computed using the daily closing prices for the selected companies’

shares during the equivalent period of the calculated expected term of the stock-based awards.

Interest Rate — The risk-free rate assumption is based on the U.S.

Treasury instruments with maturities similar to the expected

term of the Company’s stock options.

Dividend — The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the

options and therefore has estimated the dividend yield to be zero .

Value of Common Stock —The Company uses the closing stock price on the date of grant for the fair value of the common stock.

value of the Company’s common stock at March 31, 2022 for those stock options that had strike prices lower than the fair

value of the Company’s common stock.

Pharmaceuticals, Inc.

2 unchanged sentences

8 — Share-Based Payment Awards (continued)

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 six stock option exercises for 102,378

shares during the nine months ended September

30, 2020 at an average exercise price of $ 1.37

of March 31, 2022, there was a total of $ 7,566

of unrecognized compensation costs related

to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the three-month period ended

March 31, 2022 was $ 2.36 per share.

There were no

stock option exercises during the three-month

period ended March 31, 2022.

In the three-month period ended March 31, 2021, stock option exercises totaled 75,000

shares at an exercise price of $ 1.38

per share with an intrinsic value of $ 416 .

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

the Company’s 2018 ESPP.

The Company’s ESPP provides for an initial reserve of 150,000 shares and this reserve is automatically

increased on January 1 of each year by the lesser of 1% of the outstanding common shares at December 31 of the preceding year or 150,000

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

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

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

2018 Employee Stock Purchase Plan (the “ESPP”).

Company’s ESPP provides for an initial reserve of 150,000

and this reserve is automatically increased on January 1 of each year by the lesser of 1% of the outstanding common shares at December

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

As of March 31, 2022, there were 630,180

shares available for issuance under the ESPP.

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periods approximately six months in duration .

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 nine months of 2021 and 2020 was $ 2.83 and $ 2.43 , respectively.

Employees contributed $ 192 and $ 100

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

accordance with the June and December stock purchase periods for the ESPP, there were no

share issuances in the first three months of

2022 or 2021.

The weighted average grant date fair value of share awards in 2022 and 2021 was $ 1.37

respectively.

Employees contributed $ 108

via payroll deductions during the three months

ended March 31, 2022 and 2021, respectively.

The Company recorded an expense of $ 45

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

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.

related to the ESPP in the three-month periods

ended March 31, 2022 and 2021, respectively.

As of March 31, 2022 and December 31, 2021, the accompanying condensed balance sheets include

respectively, in accrued liabilities for remaining employee ESPP contributions.

Pharmaceuticals, Inc.

2 unchanged sentences

9 — 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.

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

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 offering.

As of March 31, 2022, Harrow owned 1,982,000 shares of Eton’s common shares which represents 8.0 %

of the Company’s common shares outstanding.

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

whereby Harrow assigned the product rights to the Company.

11 unchanged sentences

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

shares of restricted common stock in the Company for consulting services, and certain Harrow managers also received stock options to

purchase a total of 130,000 shares of common stock from the Company ( 20,000 of these options were forfeited in 2018).

The restricted

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

Additionally,

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Executive Officer

CEO has a partial interest in a company that the Company has partnered with for its EM-100 product as described below.

CEO has a partial interest in a company that the Company has partnered with for its EM-100/Alaway PF eye allergy product as described below.

Company acquired the exclusive rights to sell the EM-100 product in the United States pursuant to a sales and marketing agreement (the

14 unchanged sentences

elected to terminate the Eyemax Agreement .

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

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

Pursuant to the Amended Agreement, Eyemax sold the Company all of its right, title and interest in EM-100, including

3 unchanged sentences

2013, as amended (the “Excelvision Agreement”), with respect to certain territories and arising during certain time periods.

Pursuant to the Amended Agreement, the Company was obligated to pay Eyemax two milestone payments:

Pursuant to the Amended Agreement, the Company paid Eyemax two milestone payments:

(i) one milestone payment for $ 250

upon regulatory approval in the territory by the FDA of the first single agent product which was paid in October 2020 and (ii) one milestone

payment for $ 500 following the first commercial sale of the first single agent product in the territory which was paid in February 2021.

Following payment of the milestones, the Company is entitled to retain all of the non-royalty transaction revenues and royalties up to

upon regulatory approval in the territory by

the FDA of the first single agent product and (ii) one milestone payment for $ 500

following the first commercial sale of the first

single agent product in the territory.

Following payment of the milestones, the Company is entitled to retain all of the non-royalty

transaction revenues and royalties up to $ 2,000

(the “Recovery Amount”).

After the Company has retained the full Recovery Amount, it is entitled to retain half of

all royalty and non-royalty transaction revenue.

The Amended Agreement also contains customary representations, warranties, covenants

and indemnities by the parties.

The EM-100 asset and its associated product rights were sold to Bausch Health on February 18, 2019 and

future potential royalties of twelve percent on Bausch Health sales of EM-100, which was approved by the FDA in September 2020, will

be split between Eyemax and the Company.

The royalty from Bausch Health is subject to reduction if a competitive product with the same

active pharmaceutical ingredient is launched in the U.S.

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 September 30, 2021 or December 31, 2020.

Company has retained the full Recovery Amount, it is entitled to retain half of all royalty and non-royalty transaction revenue.

Company has realized $ 1,757

of the non-royalty and royalty revenue as

of March 31, 2022.

The Amended Agreement also contains customary representations, warranties, covenants and indemnities by the parties.

The EM-100 asset and its associated product rights were sold to Bausch Health on February 18, 2019 and future potential royalties of

twelve percent on Bausch Health sales of the product, named Alaway® Preservative Free by Bausch, which was approved by the FDA in

September 2020, will be split between Eyemax and the Company.

The royalty from Bausch Health is subject to reduction if a competitive

product with the same active pharmaceutical ingredient is launched in the U.S.

or if the product’s U.S market share falls below

a specified target percentage.

were no amounts due to Eyemax under the terms of the Amended Agreement as of March 31, 2022 or December 31, 2021.

Pharmaceuticals, Inc.

4 unchanged sentences

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 $ 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 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).

captions in the condensed statements of operations was $ 0 and $ 21 , respectively, for the three months ended March 31, 2022 and $ 9 and

$ 21 , respectively, for the three months ended March 31, 2021.

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

was $ 20 for the three months ended March 31, 2022.

The ROU asset amortization for the three-month periods ended March 31, 2022 and 2021

was $ 20 and $ 29 , respectively, and is reflected within depreciation and amortization on the Company’s condensed statements of cash

As of March 31, 2022, the weighted-average remaining lease term was 1.0 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 March 31, 2021 (in thousands).

Schedule of Lease-related Assets and Liabilities

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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

Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of March 31, 2022 is as indicated below:

Schedule of Future Lease Commitments

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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 (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.

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.

with Sintetica for marketing rights in the United States to ephedrine HCl (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

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 Rezipres product was successfully resubmitted

in late 2020 and the Company paid a $ 600 milestone fee in July 2021 and paid $ 750 in April 2022 after the first commercial sale of the

product in March 2022.

Sintetica supplies Rezipres to the Company at its direct costs.

The Company retains 5 % of net sales as a marketing

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

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 which occurred in March 2022.

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

the Company and its various product candidate development partners and the Company subsequently sold all its rights and interests in

these three products to Azurity Pharmaceuticals, Inc.

(“Azurity”) in 2021.

these three products to Azurity in 2021.

The Company has recognized $ 17,000 in milestone revenues to date from these three products and

may receive up to $ 25,000 in additional milestone revenues related to FDA product approvals and the future sales levels for the products.

the years ended December 31, 2021, 2020 and 2019, the Company worked with Tulex Pharmaceuticals, Inc.

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filed the product with the FDA in October 2020 and paid a $ 1,438 filing fee.

In November 2021, the product received approval from the

FDA and was launched by Azurity in December 2021.

The Company recognized a $ 5,000 milestone revenue at launch which was reflected in

accounts receivable on the Company’s balance sheet at December 31, 2021 and subsequently collected in January 2022.

Pharmaceuticals, Inc.

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(“LMW”) for Zonisamide oral liquid, a development stage product candidate (“ET-104”).

Pursuant to the terms of

the Agreement, the Company was to be responsible for regulatory and marketing activities.

LMW will be responsible for development and

manufacturing of ET-104.

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

bioequivalence study results, and $ 325 upon the FDA’s acceptance of the NDA for review and will pay $ 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 were achieved within a calendar year.

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

product sales.

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

was to retain sole ownership of the NDA after expiration of the Agreement.

Pursuant to the terms

of the Agreement, the Company is responsible for regulatory and marketing activities and LMW is responsible for

development and manufacturing of ET-104.

The Company paid the licensor $ 350

upon execution of the Agreement and an additional

after receiving successful bioequivalence study

results, and $ 325

upon the FDA’s acceptance of the NDA for

review and will pay $ 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

were achieved within a calendar year.

the Company was required to pay the licensor 35 %

of the net profit from product sales.

The Agreement was for an initial term of 10

years from the date of the first commercial sale

of the product.

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

June 12, 2019, the Company entered into an Exclusive Licensing and Supply Agreement (the “ET-105 License Agreement”) with

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If Aucta successfully completes a Lamotrigine product line extension product, Eton will pay

$ 1,500 upon FDA acceptance of the product filing and $ 1,950 upon FDA approval and commercial sales of the extension product candidate.

Aucta will receive a low double-digit royalty on net sales and will be entitled to receive milestone payments of up to $ 18,000 based

on commercial success of the product, including:

when net sales exceed $10 million in a calendar year

when net sales exceed $20 million in a calendar year

when net sales exceed $50 million in a calendar year

when net sales exceed $100 million in a calendar year

will remain responsible for certain licensing fee obligations owed to its development partners and Azurity will assume royalty or profit

share obligations owed to development partners.

$ 1,500 upon FDA acceptance of the product filing, $ 1,500 upon FDA approval and commercial sales of the extension product candidate and

$ 450 if the intellectual property for the extension product is transferred to Azurity.

Aucta will be entitled to receive milestone payments

from the Company of up to $ 3,000 based on commercial success of the product, including:

$ 1,000 when net sales exceed

$10 million in a calendar year

$ 2,000 when net sales exceed

$20 million in a calendar year

has assumed royalty or profit share obligations owed to development partners as well as additional milestone payments based on

sales volume targets.

March 27, 2020, the Company entered into an Exclusive Licensing and Supply Agreement (the “Alkindi License Agreement”) with

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

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.

(“Crossject”)

and Canadian rights to Crossject’s ZENEO ® hydrocortisone needleless autoinjector, which is under development

as a rescue treatment for adrenal crisis.

The product complements the Company’s Alkindi Sprinkle product which addresses pediatric

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.

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:

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 year ended December

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

June 15, 2021, the Company acquired U.S.

and Canadian rights to Crossject’s ZENEO® hydrocortisone needleless autoinjector,

which is under development as a rescue treatment for adrenal crisis.

The Company expects to submit the New Drug Application (NDA) to

the FDA in 2023 and plans to request orphan drug designation.

The Company paid Crossject $ 500

upon signing, $ 500

in March 2022 upon a completion of a successful

technical batch which is reflected as a component of research & development expense in the Company’s condensed statements

of operations for the period ended March 31, 2022, and could pay up to $ 4,000

in additional development milestones and up to

in commercial milestones, as well as a 10 %

royalty on net sales.

October 28, 2021, the Company acquired the U.S.

marketing rights to Carglumic Acid Tablets.

The product’s Abbreviated New Drug

Application (“ANDA”), which is owned by Novitium Pharma, was approved by the FDA on October 12, 2021.

The product is an AB-rated,

substitutable generic version of Carbaglu®.

The Company paid $ 3,250

upon signing and retains 50 %

of the product profits with the balance being distributed to the licensor and manufacturer.

The Company launched this product in December

Pharmaceuticals, Inc.

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11 — Commitments and Contingencies (continued)

when net sales exceed $10 million in any four consecutive quarters

when net sales exceed $20 million in any four consecutive quarters

when net sales exceed $30 million in any four consecutive quarters

Indemnifications

Indemnification

permitted under Delaware law and in accordance with the Company’s Amended and Restated Bylaws, the Company is required to indemnify

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

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

as of March 31, 2022 or December 31, 2021.

12 — 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.

April 5, 2022, the Company amended its SWK Credit Agreement with SWK Holding Corporation (see Note 5).

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