What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 413 added, 420 removed, 541 unchanged (61% of the section changed)

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thousands, except share and per share amounts)

March 31, 2022

June 30, 2022

December 31, 2021

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50,000,000 shares authorized;

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

25,272,037 and 24,626,004 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

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For the three months ended

For the six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Licensing revenue

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(Loss) income from operations

Other expense:

Other (expense) income:

Interest and other expense, net

Gain on PPP loan forgiveness

Gain on equipment sale

(Loss) income before income tax expense

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Statements of Stockholders’ Equity

the three months ended March 31, 2022 and 2021

the three months ended June 30, 2022 and 2021

thousands, except share amounts)

Total Stockholders’

Balances at March 31, 2022

Stock-based compensation

Employee stock purchase plan

Warrant exercises

Warrant extensions

Balances at June 30, 2022

$ ( 101,001 )

Total Stockholders’

Balances at March 31, 2021

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Common stock issued related to restricted stock units

Balances at June 30, 2021

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

Pharmaceuticals, Inc.

Statements of Stockholders’ Equity

the six months ended June 30, 2022 and 2021

thousands, except share amounts)

Additional Paid-in

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Stock-based compensation

Balances at March 31, 2022

Employee stock purchase plan

Warrant exercises

Warrant extensions

Balances at June 30, 2022

$ ( 101,001 )

Additional Paid-in

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Stock option exercises

Employee stock purchase plan

Common stock issued related to restricted stock units

Warrant exercises

Net income (loss)

Balances at March 31, 2021

Balances at June 30, 2021

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

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Statements of Cash Flows

March 31, 2022

March 31, 2021

Six months ended

June 30, 2022

Six months ended

June 30, 2021

Cash flows from operating activities

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Debt discount amortization

Gain on forgiveness of debt

Gain on sale of equipment

Changes in operating assets and liabilities:

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Net cash provided by operating activities

Cash used in investing activities

Cash (used in) provided by investing activities

Proceeds from sale of equipment

Purchase of product license rights

Purchases of property and equipment

Net cash used in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Repayment of long-term debt

Proceeds from employee stock option exercises

Proceeds from employee stock option exercises and ESPP

Net cash (used in) provided by financing activities

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Cash paid for interest

Cash paid for income taxes

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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1 — Company Overview

Pharmaceuticals, Inc.

(“Eton” or the “Company”) was incorporated as a Delaware “C” corporation on

April 27, 2017 and was initially set up as a wholly-owned subsidiary of Harrow Health, Inc.

(“Harrow”, fka Imprimis Pharmaceuticals,

In June 2017, the Company raised $ 20,055 in start-up capital through a private sale of preferred stock and a separate management

team was then established for Eton with its corporate offices located in Deer Park, Illinois.

In November 2018, the Company completed

its initial public offering (the “IPO”) and received net proceeds of $ 21,960 , after deducting underwriting discounts and

commissions and offering-related expenses.

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

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

In March and April 2020,

Eton received net proceeds of $ 7,756 from the sale of shares of its common stock in a private placement and in October 2020, the Company

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 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.

Eton’s EM-100 product was sold to Bausch Health and the product was approved by the FDA in September 2020.

Bausch Health launched

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

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.

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.

is an innovative pharmaceutical company focused on developing, acquiring, and commercializing innovative products to address unmet needs

in patients suffering from rare diseases.

The Company seeks to improve the formula, delivery system, or safety of existing molecules

in order to address unmet patient needs.

Company currently commercializes two rare disease products, ALKINDI SPRINKLE® for the treatment of adrenocortical insufficiency and

Carglumic Acid for the treatment of acute hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and has two additional product candidates in late-stage development.

The Company is developing dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning,

and the ZENEO® hydrocortisone autoinjector for the treatment of adrenal crisis.

addition, the Company is entitled to royalties or milestone payments from six FDA-approved products that the Company developed and out-licensed.

The products include Alaway® Preservative Free, EPRONTIA™, Cysteine Hydrochloride, Zonisade®, Biorphen®, and Rezipres®.

2 — Liquidity Considerations

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

date, the Company has generated revenues from ten 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

Company currently believes its existing cash and cash equivalents of $ 17,046 as of June 30, 2022 along with revenues from approved products and additional milestone payments

expected to be paid in 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.

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dividends or make other distributions to stockholders.

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

If the Company experiences delays in product sales growth, 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.

might need to be scaled back or discontinued.

Pharmaceuticals, Inc.

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of Presentation

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

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

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

United States (“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 March 31, 2022 and the results of its operations and its cash flows for the periods ended March 31, 2022 and 2021.

as of June 30, 2022 and the results of its operations and its cash flows for the periods ended June 30, 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.

data and other information disclosed in these notes related to the three-month and six-month periods ended June 30, 2022 and 2021 are

also unaudited.

The results for the three-month and six-month periods ended June 30, 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

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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

As of June 30, 2022, the Company’s cash is in a non-interest bearing account as well as a government money market fund.

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

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 $ 132 and $ 96 as of March 31, 2022 and December 31, 2021, respectively.

amounted to $ 404 and $ 96 as of June 30, 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

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

At March 31, 2022 and December

Inventories at June 30, 2022 and December 31, 2021 consist solely of purchased finished goods.

At June 30, 2022 and December

31, 2021 inventories are shown net of a reserve for its Biorphen product of $ 1,265 and $ 1,414 , respectively, due to the risk of expiry

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

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.

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

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.

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.

payment related to the approval of Biorphen had been capitalized in 2019 and that cost was being amortized over five

As a result of the Biorphen sale to Dr.

Reddy’s Laboratories S.A.

Reddy’s”) (see Note

11), amortization of that asset was accelerated to record $ 275

in June 2022 with $ 75

remaining to be amortized through December 31, 2022.

payment related to the approval of Rezipres had been capitalized in Q1 2022 and that cost was being amortized over five

As a result of the sale to Dr.

Reddy’s, amortization of the asset was accelerated to record the remaining $ 738

in the three-month period ended June 30, 2022.

The intangible assets, net on the Company’s balance sheet reflected $ 1,642

of accumulated amortization as of June 30, 2022.

The Company recorded $ 1,132

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

and $ 1,263 ,

respectively, of amortization expense for the three and six months ended June 30, 2022.

For the three and six-month periods ended

June 30, 2022 and 2021, the Company reclassified certain amortization expense of intangible assets from general and administrative

expenses to cost of sales to conform with the current period presentation.

The table below shows the estimated remaining

amortization for these products for each of the five years from 2022 to 2026 and thereafter.

Schedule of Intangible Assets Amortization Expense

Remainder of 2022

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debt issuance costs over the expected term of the related debt 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.

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.

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will be more than one year.

Company sells Biorphen in the U.S.

to wholesale pharmaceutical distributors, who then sell the product to hospitals and other end-user

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual

shipments of Biorphen represent performance obligations under each purchase order.

The Company uses a third-party logistics (“3PL”)

vendor to process and fulfill orders and has concluded it is the principal in the sales to wholesalers because it controls access to

the 3PL vendor services rendered and directs the 3PL vendor activities.

The Company has no significant obligations to wholesalers to

generate pull-through sales.

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.

Company sells its Alkindi Sprinkle and Carglumic Acid product to one pharmacy distributor customer which provides order fulfilment and

inventory storage/distribution services.

The Company may sell products in the U.S.

to wholesale pharmaceutical distributors, who then

sell the product to hospitals and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the

terms of a master agreement, and delivery of individual shipments represent performance obligations under each purchase order.

uses a third-party logistics (“3PL”) vendor to process and fulfill orders and has concluded it is the principal in the sales

to wholesalers because it controls access to the 3PL vendor services rendered and directs the 3PL vendor activities.

The Company has

no significant obligations to wholesalers to generate pull-through sales.

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.

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.

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

when the wholesalers sell products 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

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 product sales, and accordingly it applies these amounts to reduce revenues.

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

Because of the shelf life of the product 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

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 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.

that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership, and have an enforceable

obligation to pay the Company.

They also have the ability to direct sales of product to their customers on terms and at prices they negotiate.

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 and Carglumic Acid inventory at its pharmacy distributor customer location and sales are recorded

returns and chargebacks and the impact of other discounts and fees it pays, although Alkindi Sprinkle and Carglumic Acid sales 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 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

payment discounts, state Medicaid and GPO fees are included in sales reserves, accrued liabilities and net of accounts receivable.

Company monitors actual product returns, chargebacks, discounts and fees subsequent to the sale.

If these amounts end up differing from

its estimates, it will make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings

in the period of adjustment.

The Company recognizes revenue and cost of sales from products sold

to wholesalers upon delivery to the wholesaler location.

At that time, the wholesalers take control of the product as they take title,

bear the risk of loss of ownership and have an enforceable obligation to pay the Company.

They also have the ability to direct sales

of product to their customers on terms and at prices they negotiate.

Although wholesalers have product return rights, the Company does

not believe they have a significant incentive to return the product.

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

prompt payment discounts, state Medicaid and GPO fees are included in sales reserves, accrued liabilities and net accounts

The Company monitors actual product returns, chargebacks, discounts and fees subsequent to the sale.

amounts end up differing from its estimates, it will make adjustments to these allowances, which are applied to increase or reduce

product sales revenue and earnings in the period of adjustment.

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 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.

Cost 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, freight and handling/storage costs from the Company’s 3PL logistics service providers, and amortization

expense of certain intangible assets.

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

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

Pharmaceuticals, Inc.

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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

For the three-month and six-month periods ended June 30, 2022, common

stock equivalents of 5,557,881 and 5,335,601 , respectively, are excluded from the calculation of diluted net loss per share because the

effect is anti-dilutive.

For the three-month period ended June 30, 2021, common stock equivalents of 4,266,079 are excluded from the

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

For the six-month period ended June 30, 2021, common stock

equivalents (using the treasury stock and “if converted” method) from stock options, unvested RSAs, and warrants were 1,352,879

and excluded 1,624,598 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.

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

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Schedule of Property and Equipment

June 30, 2022

December 31, 2021

Computer hardware and software

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Leasehold improvements

Property and equipment, gross

Property and equipment,

accumulated depreciation

Property and equipment, net

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.

expense for the three months ended June 30, 2022 and 2021 was $ 18 and $ 24 , respectively.

Depreciation expense for the six months ended

June 30, 2022 and 2021 was $ 39 and $ 108 , 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

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

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

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

borrow an additional $ 5,000 upon the FDA approval of a second product developed by the Company, excluding EM-100.

In March 2020, in conjunction

with the Company’s Alkindi Sprinkle product licensing agreement (see Note 11) and the Company’s March 2020 sale of additional

shares of its common stock, the Company and SWK amended the SWK Credit Agreement.

The amendment provided the Company with the option

to immediately draw $ 2,000 and the ability to borrow an additional $ 3,000 based upon the FDA approval of EM-100 and Alkindi Sprinkle

which subsequently occurred in September 2020.

Accordingly, the Company borrowed an additional $ 2,000 on August 11, 2020.

the 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;

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

Corporation (“SWK”) which provided for up to $ 10,000

in financing.

The Company received proceeds of $ 5,000

at closing and was able to borrow an additional $ 5,000

upon the FDA approval of a second product developed by the Company, excluding its EM-100/Alaway Preservative-Free eye allergy

product (“EM-100”).

In March 2020, in conjunction with the Company’s Alkindi Sprinkle product licensing agreement

(see Note 11) and the Company’s March 2020 sale of additional shares of its common stock, the Company and SWK amended the SWK

Credit Agreement.

The amendment provided the Company with the option to immediately draw $ 2,000

and the ability to borrow an additional $ 3,000

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

Accordingly, the Company

borrowed an additional $ 2,000

on August 11, 2020.

The term of the SWK Credit Agreement is for five years and borrowings were at an interest rate of LIBOR 3-month

plus 10.0 % ,

subject to a stated LIBOR floor rate of 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

exit fee based on the principal amounts drawn which is payable at the end of the term of the SWK Credit Agreement.

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.

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

The SWK Credit Agreement contains customary default

provisions and covenants which include limits on additional indebtedness.

In March 2020, SWK provided a waiver for the Company to

obtain loans with the Small Business Association.

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 these 51,239 warrants was $ 226 and was estimated using

BSM with the following assumptions:

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

seven -year contractual

95% volatility;

0% dividend rate;

and a risk-free interest rate of 1.8 % .

connection with the additional $ 2,000

borrowed in August 2020, the Company issued warrants

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;

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 BSM with the following

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

seven -year contractual term;

95% volatility;

0% dividend rate;

7 unchanged sentences

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.

expense of $ 466 was recorded during the six months ended June 30, 2022, which included $ 66 of debt discount amortization.

Interest expense

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

As of June 30, 2022,

$ 156 of accrued interest is included in accrued liabilities.

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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.

with the change, the Company has classified $ 364 as principal due in the next 12 months and the remainder classified as long-term debt

in its balance sheet at June 30, 2022.

table below reflects the future payments for the SWK loan principal and interest as of June 30, 2022.

Schedule of Future Payments of Long Term Debt

Remainder of 2022

Total payments

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Loan payable, gross

current portion of long-term debt

unamortized discount

5 unchanged sentences

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

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 .

the six months ended June 30, 2022, a holder of the Company’s common stock warrants exercised 600,000 warrants on a cashless basis

and the Company issued 598,448 shares of its common stock in connection with the warrant exercise.

The intrinsic value of the warrant

exercise was $ 2,268 .

In June 2022, the Company issued 47,585 shares of its common stock to employees in accordance with its Employee

Stock Purchase Plan (“ESPP”).

7 — Common Stock Warrants

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

Company’s outstanding warrants to purchase shares of its common stock at June 30, 2022 are summarized in the table below.

Summary of Warrants Outstanding

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Exercise Price

Business Advisory Warrants

Placement Agent Warrants – 2017 Preferred Stock Offering

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and the investors.

June 26, 2022, 467,242

warrants from the 2017 preferred stock offering with an exercise price of $ 3.00

were set to expire.

Prior to the expiration, the Company entered into an agreement with the warrant holders, whereby it modified the

terms of the warrants to extend the expiration date until December 26, 2022 in exchange for the Company retaining the option of a

cashless exercise provision.

No other terms were modified.

Due to this modification, the Company incurred a modification expense of $ 244

that is included in general and administration expense on the Condensed Statements of Operations for the three and six-month

periods ending June 30, 2022.

Pharmaceuticals, Inc.

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Company’s board of directors and stockholders approved the Eton Pharmaceuticals, Inc.

2017 Equity Incentive Plan in May 2017 (the

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

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 (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.

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 December 2020, the “2018

Plan”) 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 551,626

shares available for future issuance under the

2018 Plan as of March 31, 2022.

shares available for future issuance under the 2018 Plan as of June 30, 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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to the FDA prior to the five-year expiration date;

Furthermore, these option awards to the Company’s product consultants do not

vest unless certain product submissions are made to the FDA, and accordingly, the Company has not recorded any expense for these contingently

vesting option awards to its product consultants.

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.

these options expired in July 2022 unexercised.

Furthermore, these option awards to

the Company’s product consultants would not vest unless certain product submissions are made to the FDA, and accordingly, the Company

has not recorded any expense for these contingently vesting option awards to its product consultants.

Company’s previous CFO had 474,295

employee stock options with an exercise price range of $ 1.37

which were set to expire three months after his retirement date of May 31, 2022, however, the Company extended the expiration

date to April 10, 2023.

No other terms were modified.

Due to this modification, the Company incurred a modification expense of

approximately $ 72

that is included in general and administration expense on the Condensed Statements of Operations for the three and six-month periods ended June 30, 2022.

the three months ended June 30, 2022 and 2021, the Company’s total stock-based compensation expense was $ 1,300 and $ 836 , respectively.

Of these amounts, $ 1,216 and $ 691 was recorded in general and administrative expenses, respectively, and $ 84 and $ 145 was recorded in

research and development expenses, respectively.

the six months ended June 30, 2022 and 2021, the Company’s total stock-based compensation expense was $ 2,383 and $ 1,509 , respectively.

Of these amounts, $ 2,211 and $ 1,272 was recorded in general and administrative expenses, respectively, and $ 172 and $ 237 was recorded

in research and development expenses, respectively.

summary of stock option activity is as follows:

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Forfeited/Cancelled

Options outstanding as of March 31, 2022

Options exercisable at March 31, 2022

Options vested and expected to vest at March 31, 2022

Options outstanding as of June 30, 2022

Options exercisable at June 30, 2022

Options vested and expected to vest at June 30, 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 at March 31, 2022 for those stock options that had strike prices lower than the fair

value of the Company’s common stock.

value of the Company’s common stock at June 30, 2022 for those stock options that had strike prices lower than the fair value of

the Company’s common stock.

Pharmaceuticals, Inc.

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8 — Share-Based Payment Awards (continued)

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 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.

of June 30, 2022, there was a total of $ 5,871 of unrecognized compensation costs related to non-vested stock option awards.

average grant date fair value of stock option awards for the six-months ended June 30, 2022 was $ 2.36 per share.

There were no stock

option exercises during the six-month period ended June 30, 2022.

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

totaled 138,233 shares at an average exercise price of $ 2.39 per share with an intrinsic value of $ 661 .

Company’s 2018 Employee Stock Purchase Plan (the “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

As of June 30, 2022, there were 582,595 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.

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.

the first six months of 2022 and 2021 there were 47,585 and 29,326 share issuances, respectively, under the ESPP.

The weighted average

grant date fair value of share awards in the first six months of 2022 and 2021 was $ 1.32 and $ 2.83 , respectively.

Employees contributed

via payroll deductions during the three months

ended March 31, 2022 and 2021, respectively.

The Company recorded an expense of $ 45

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.

$ 128 and $ 135 via payroll deductions during the six months ended June 30, 2022 and 2021, respectively.

The Company recorded an expense

of $ 70 and $ 46 related to the ESPP in the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31,

2021, the accompanying condensed balance sheets include $ 18 and $ 22 , respectively, in accrued liabilities for remaining employee ESPP

contributions.

Pharmaceuticals, Inc.

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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 offering.

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

Chief Executive Officer of Harrow Health, Inc.

(“Harrow”) was a member of the Company’s board of directors until

March 17, 2021 when he retired from service with the board.

The Company issued 25,000

shares to the Harrow CEO in April 2021 after his retirement from the Company’s board associated with RSU’s that were

previously fully vested.

As of June 30, 2022, Harrow owned 1,982,000

shares of Eton’s common shares which represents 7.8 %

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.

In July 2018, the Company determined that one of the products was not viable

for its portfolio of product opportunities and cancelled the licensing agreement whereby Harrow retains the product rights.

May 6, 2019, the Company entered into an Asset Purchase Agreement (the “CT-100 Asset Purchase Agreement”) with Harrow.

to the CT-100 Asset Purchase Agreement, the Company sold all of its right, title and interest in CT-100 to Harrow, including any such

product that incorporates or utilizes its intellectual property rights (a “Product” or, collectively, “Products”).

Pursuant to the CT-100 Asset Purchase Agreement, Harrow will make certain payments to the Company upon the achievement of certain development

and commercial milestones.

In addition, Harrow is required to pay the Company a royalty in the low-single digit percentage range worldwide

on a country-by-country basis on net sales for a period of the longer of 15 years from the date of the first commercial sale of a product

in a particular country or the time that a valid intellectual property claim on such Product remains in force in the applicable country.

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.

Additionally,

the Chief Executive Officer of Harrow was a member of the Company’s board of directors until March 17, 2021 when he retired from

service with the board.

The Company issued 25,000 shares to the Harrow CEO in April 2021 after his retirement from the Company’s

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

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)

9 — Related Party Transactions (continued)

Executive Officer

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.

CEO has a partial interest in a company that the Company has partnered with for its EM-100/Alaway Preservative Free 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

21 unchanged sentences

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 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”).

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.

(i) one milestone payment for $ 250 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 Company has realized $ 1,783

of the non-royalty and royalty revenue as of June 30, 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 June 30, 2022 or December 31, 2021.

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 $ 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).

captions in the condensed statements of operations was $ 0 and $ 21 , respectively, for the three months ended June 30, 2022 and $ 0 and

$ 22 , respectively, for the three months ended June 30, 2021.

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 $ 0 and $ 42 ,

respectively, for the six months ended June 30, 2022 and $ 9 and $ 43 , respectively, for the six months ended June 30, 2021.

for amounts included in the measurement of operating lease liabilities was $ 44 for the six months ended June 30, 2022.

The ROU asset

amortization for the three-month and six-month periods ended June 30, 2022 was $ 21 and $ 41 , 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, 2021 was $ 20 and $ 49 , respectively, and is reflected within depreciation and amortization on the Company’s condensed

statements of cash flows.

As of June 30, 2022, the weighted-average remaining lease term was 0.75 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, 2022 (in thousands).

Schedule of Lease-related Assets and Liabilities

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Total operating lease liabilities

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

Company’s future lease commitments for its administrative offices in Deer Park, Illinois as of June 30, 2022 is as indicated below:

Schedule of Future Lease Commitments

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Company has entered into various agreements in addition to those discussed above which are described below.

Company acquired the exclusive rights to sell the Cysteine injection product in the United States pursuant to a sales and marketing agreement

dated November 17, 2017 with an unaffiliated third party (the “Sales Agreement”).

Pursuant to the Sales Agreement, the licensor

is responsible for obtaining FDA approval, at its expense, and the Company is responsible for commercializing the product in the United

States at its expense.

The Company was to pay the third party 50 % of the net profit from the sale of the product, however, in February

2020, it executed an amendment to the Sales and Marketing Agreement.

Under the revised terms, the Company will be responsible for paragraph

IV related litigation and will be entitled to 62.5 % of product profit.

The initial term is for the first 10 years following the first

commercial sale of the product.

Company acquired the exclusive rights to sell the Cysteine Hydrochloride product in the United States pursuant to a sales and marketing

agreement dated November 17, 2017 with an unaffiliated third party (the “Sales Agreement”).

Pursuant to the Sales Agreement,

the licensor is responsible for obtaining FDA approval, at its expense, and the Company was responsible for commercializing the product

in the United States at its expense.

In February 2020, the Sales Agreement was amended and under the revised terms, the Company would

be responsible for paragraph IV related litigation and will be entitled to 62.5 % of product profit.

The initial term was for the first

10 years following the first commercial sale of the product.

February 8, 2019, the Company entered into an Exclusive Licensing and Supply Agreement (the “ET-202 License Agreement”) with

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related to approval.

The Company paid Sintetica a licensing payment of $ 2,000 upon execution of the ET-202 License Agreement and $ 750

upon the commencement of commercial product shipments.

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.

All additional profit

will be split 50 % to the Company and 50 % to Sintetica.

The ET-202 License Agreement has a ten-year term from the first commercial sale

of Biorphen which occurred in November 2019.

Sintetica is entitled to receive the first $ 500 of product profits and all additional profit would be split 50 % to

the Company and 50 % to Sintetica.

The ET-202 License Agreement has a ten-year term from the first commercial sale of Biorphen which occurred

in November 2019.

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

3 unchanged sentences

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.

The 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 is entitled to receive the first $ 500 of product

profits and all additional profit would 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.

June 2022, the Company sold its rights in the three aforementioned products Cysteine Hydrochloride, Biorphen®, and Rezipres®

Under the terms of the transaction, Dr.

Reddy’s will take immediate ownership of Eton’s rights and

interest in the products.

Eton will continue to sell its existing Biorphen inventory until the end of 2022.

The Company received

at closing, recorded as licensing revenue in the three months ended June 30, 2022, and would receive up to $45,000 of additional

payments based on the achievement of certain event-based and sales-based milestones.

Of the $ 5,000

received at closing, $ 250

was held in escrow to address potential indemnity claims during the 12-month period following the effective date of the agreement.

In addition, 10% of any additional payments paid by Dr.

Reddy’s during the 12-month period following the effective date

will be held in escrow and subsequently released to Eton upon expiration of the 12-month period following the effective date.

accordance with the terms of the agreement, $ 812

of Sintetica profit share receivables were expensed as cost of goods sold in the three months ended June 30, 2022.

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

3 unchanged sentences

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.

(“Tulex”) as a third-party

contract manufacturer to develop an oral solution for Topiramate (fka ET-101) which targets a neurological condition.

The Company subsequently

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.

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

sales volume targets.

Pharmaceuticals, Inc.

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11 — Commitments and Contingencies (continued)

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

(“Tulex”) as a third-party

contract manufacturer to develop an oral solution for Topiramate (fka ET-101) which targets a neurological condition.

The Company subsequently

filed the product with the FDA in October 2020, received approval from the FDA in November 2021, and the product 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.

January 23, 2019, the Company entered into a Licensing and Supply Agreement (the “Agreement”) with Liqmeds Worldwide Limited

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

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 %

Pursuant to the terms of

the Agreement, the Company was responsible for regulatory and marketing activities and LMW was responsible for development and manufacturing

The Company will pay $ 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

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

of the product.

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to obtaining regulatory approval.

The Company paid Aucta a licensing payment of $ 2,000 in August 2019 upon receiving an acceptance for

review letter from the FDA and will pay $ 2,450 upon FDA approval and commercial sales of the product candidate and another $ 1,000 upon

issuance of an Orange-book listed patent.

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

$ 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.

The Company will pay $ 2,450 upon FDA approval and commercial sales of the product candidate and another

$ 1,000 upon issuance of an Orange-book listed patent.

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

will pay $ 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 , and $ 2,000 when net sales exceed $20 million in a calendar year .

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

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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.

FDA on September 29, 2020 as a replacement therapy in pediatric patients with adrenocortical insufficiency.

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

6 unchanged sentences

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.

The Company paid Crossject $ 500 upon signing, $ 500 in March 2022

upon a completion of a successful technical batch and could pay up to $ 4,000 in additional development milestones and up to $ 6,000 in

commercial milestones, as well as a 10 % royalty on net sales.

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

4 unchanged sentences

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 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 2021.

10 unchanged sentences

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

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

as of June 30, 2022 or December 31, 2021.

12 — Subsequent Events

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

July 12, 2022 the Company granted 373,606

restricted stock units to employees that vest over four

years subject to the continued services from the employee.

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