What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-11 · 440 added, 449 removed, 505 unchanged (64% of the section changed)

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thousands, except share and per share amounts)

June 30, 2022

December 31, 2021

Current assets:

Cash and cash equivalents

Cash and cash

Accounts receivable, net

Prepaid expenses and other current assets

expenses and other current assets

Total current assets

Property and equipment, net

Property and equipment,

Intangible assets, net

Operating lease right-of-use assets, net

Other long-term assets, net

Liabilities and stockholders’ equity

Operating lease right-of-use

long-term assets, net

Liabilities and stockholders’

Current liabilities:

Accounts payable

Current portion of long-term debt

Accrued liabilities

Current portion of long-term

Total current liabilities

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

Operating lease liabilities, net of current portion

Total liabilities

Commitments and contingencies (Note 11)

Long-term debt, net of discount and including

Operating lease liabilities,

net of current portion

Commitments and contingencies

Stockholders’ equity

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shares authorized;

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

25,297,037 and 24,626,004 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

stockholders’ equity

liabilities and stockholders’ equity

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

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thousands, except per share amounts)

For the three months ended

For the six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

the three months ended

the nine months ended

Licensing revenue

Product sales and royalties

Total net revenues

sales and royalties

Cost of sales:

Licensing revenue

Product sales and royalties

Total cost of sales

sales and royalties

cost of sales

Operating expenses:

Research and development

General and administrative

Total operating expenses

and administrative

operating expenses

(Loss) income from operations

Other (expense) income:

Interest and other expense, net

Interest and other expense,

Gain on PPP loan forgiveness

Gain on equipment sale

(Loss) income before income tax expense

on equipment sale

(Loss) income before income

Income tax expense

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

(loss) income

loss (income) per share, basic

loss (income) per share, diluted

Weighted average number of common shares

outstanding, basic

Weighted average number of common shares

outstanding, diluted

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

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Statements of Stockholders’ Equity

the three months ended June 30, 2022 and 2021

the three months ended September 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 September

$ ( 104,046 )

Total Stockholders’

Balances at June 30, 2021

Stock-based compensation

Stock option exercises

Balances at September

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

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Statements of Stockholders’ Equity

the six months ended June 30, 2022 and 2021

the nine months ended September 30, 2022 and 2021

thousands, except share amounts)

Additional Paid-in

Total Stockholders’

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Employee stock purchase plan

Stock option exercises

Warrant exercises

Warrant extensions

Balances at June 30, 2022

Balances at September

$ ( 104,046 )

Additional Paid-in

Total Stockholders’

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Employee stock purchase plan

Common stock issued related to restricted stock units

Common stock issued related to restricted stock

Warrant exercises

Net income (loss)

Balances at June 30, 2021

Balances at September

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

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Statements of Cash Flows

Six months ended

June 30, 2022

Six months ended

June 30, 2021

Cash flows from operating activities

Net (loss) income

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

Cash flows from operating

Adjustments to reconcile net loss to net cash

provided by operating activities:

Stock-based compensation

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Debt discount amortization

Gain on forgiveness of debt

Gain on forgiveness of

Gain on sale of equipment

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Accounts receivable

Prepaid expenses and other assets

Prepaid expenses and other

Accounts payable

Accrued liabilities

Net cash provided by operating activities

Cash (used in) provided by investing activities

cash provided by operating activities

Cash flows from investing

Proceeds from sale of equipment

Purchase of product license rights

Purchases of property and equipment

Net cash (used in) provided by investing activities

Cash flows from financing activities

Repayment of long-term debt

Proceeds from employee stock option exercises and ESPP

Net cash (used in) provided by financing activities

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information

Purchase of product license

of property and equipment

cash (used in) provided by investing activities

Cash flows from financing

Repayment of long-term

from employee stock purchase plan and stock option exercises

cash (used in) provided by financing activities

Change in cash and cash

Cash and cash equivalents

at beginning of period

Cash and cash equivalents

at end of period

Supplemental disclosures

of cash flow information

Cash paid for interest

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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.

Company currently has three commercial rare disease products, ALKINDI SPRINKLE® for the treatment of adrenocortical insufficiency,

Carglumic Acid for the treatment of acute hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and Betaine Anhydrous for

the treatment of homocystinuria and has three 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, ZENEO® hydrocortisone autoinjector

for the treatment of adrenal crisis, and ET-400.

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®.

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

2 — Liquidity Considerations

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 $ 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.

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

its spending.

Company currently believes its existing cash and cash equivalents of $ 13,378 as of September 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.

This estimate is based

on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage its spending.

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

Accordingly, the Company could seek

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

However, there can be no assurance

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

The sale of additional equity

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

common shares.

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

dividends or make other distributions to stockholders.

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

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

might need to be scaled back or discontinued.

Accordingly, the Company could seek to obtain additional

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

However, there can be no assurance that the Company will

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

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.

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, completing its product development and

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

to be scaled back or discontinued.

Pharmaceuticals, Inc.

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

as of June 30, 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 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.

as of September 30, 2022 and the results of its operations and its cash flows for the periods ended September 30, 2022 and 2021.

financial data and other information disclosed in these notes related to the three-month and nine-month periods ended September 30, 2022

and 2021 are also unaudited.

The results for the three-month and nine-month periods ended September 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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statements include, but are not limited to, provisions for uncollectible receivables and sales returns, valuation of inventories, useful

lives of assets and the impairment of property and equipment, the accrual of research and development expenses and the valuation of common

stock, stock options and warrants.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

in estimates are recorded in the period in which they become known.

Actual results could differ from those estimates or assumptions.

lives of assets, the impairment of intangible assets, the accrual of research and development expenses and the valuation of common stock,

stock options and warrants, and restricted stock units.

Estimates are periodically reviewed in light of changes in circumstances, facts

and experience.

Changes in estimates are recorded in the period in which they become known.

Actual results could differ from those estimates

or assumptions.

Company operates the business on the basis of a single reportable segment, which is the business of developing and commercializing prescription

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treasury bills or high-grade money market funds.

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.

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

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

The Company believes the associated credit risk to be

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

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The total for these reserves

amounted to $ 404 and $ 96 as of June 30, 2022 and December 31, 2021, respectively.

amounted to $ 448 and $ 96 as of September 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 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

before this entire stock of inventories is sold.

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

At September 30, 2022

and December 31, 2021 inventories are shown net of a reserve for its Biorphen product of $ 0 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.

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

Company capitalizes payments it makes for licensed products when the payment relates to an FDA-approved product and the

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

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

in June 2022 with $ 75

of expense in June 2022 with $ 75

remaining to be amortized through December 31, 2022.

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As a result of the sale to Dr.

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

Reddy’s, amortization of the Rezipres asset was accelerated to record the

remaining $ 738

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

In September 2022, the Company purchased the rights for its Betaine Anhydrous product

and that cost is being amortized over five

The intangible assets, net on the Company’s balance sheet reflected $ 1,777

of accumulated amortization as of June 30, 2022.

of accumulated amortization as of September 30, 2022.

The Company recorded $ 135

and $ 1,398 ,

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.

respectively, of amortization expense for the three and nine months ended September 30, 2022.

During the periods ended September 30,

2022 and 2021, the Company reclassified certain amortization expense of intangible assets 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

Total estimated amortization expense

Total estimated amortization

of Long-Lived Assets

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date are classified as long-term deferred revenue, net of current portion.

Payments – If a commercial contract arrangement includes development and regulatory milestone payments, the Company will evaluate

whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before

recognizing the associated revenue.

Milestone payments that are not within the Company’s control or the licensee’s control,

such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

– For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the

result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate,

Payments – If a commercial contract arrangement includes development and regulatory milestone payments, the Company will

evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur

before recognizing the associated revenue.

Milestone payments that are not within the Company’s control or the licensee’s

control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

– For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are

the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate,

the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which

some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, the Company has not recognized any

royalty revenue resulting from any of its licensing arrangements.

Financing Component – In determining the transaction price, the Company will adjust consideration for the effects of the time

value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees

will be more than one year.

Financing Component – In determining the transaction price, the Company will adjust consideration for the effects of the

time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the

licensees will be more than one year.

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

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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

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 product.

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

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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.

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 receivable.

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.

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.

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

and royalties from products it has developed or acquired.

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 incurred.

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

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Actual results could differ from the Company’s estimates.

payments and milestone payments made for the licensing of technology for products that are not yet approved by the FDA are expensed as

payments and milestone payments made for the licensing of products that are not yet approved by the FDA are expensed as

R&D in the period in which they are incurred.

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(Loss) Per Share

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

weighted average number of common shares outstanding during the period.

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

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

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

Common stock equivalents are excluded

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

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.

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 and

nine-month periods ended September 30, 2022, common stock equivalents of 5,349,891

and 5,118,574 ,

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

three-month and nine-month periods ended September 30, 2021, common stock equivalents of 4,339,508

and 4,279,400 ,

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

Included in the

basic and diluted net income (loss) per share calculation are RSUs awarded to employees or 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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Property and equipment,

accumulated depreciation

Property and equipment, net

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.

and equipment, net

expense for the three months ended September 30, 2022 and 2021 was $ 14 and $ 24 , respectively.

Depreciation expense for the nine months

ended September 30, 2022 and 2021 was $ 53 and $ 132 , 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 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

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 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.

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 assets.

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

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 term;

95 % volatility;

0 % dividend rate;

and a risk-free interest rate of 1.8 % .

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

exercise price of $ 6.62 per share.

The relative fair value of the 18,141 warrants was $ 94 and was estimated using BSM with the following

and a risk-free interest rate

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 assumptions:

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

seven -year contractual term;

contractual term;

95 % volatility;

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

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.

expense of $ 699 was recorded during the nine months ended September 30, 2022, which included $ 96 of debt discount amortization.

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

September 30, 2022, $ 191 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 $ 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.

In accordance with the change, the Company has classified $ 708 as principal due in the next 12 months and the remainder classified as

long-term debt in its balance sheet at September 30, 2022.

Because LIBOR was intended to be phased out by the end of 2021, future borrowings

under our Credit Agreement could be subject to reference rates other than LIBOR.

However, the cessation date has been deferred to June

30, 2023 and we do not expect the planned discontinuation of LIBOR to have a material impact on interest payments incurred under the

SWK Credit Agreement.

The company is in discussions with SWK regarding an alternate reference rate.

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

Schedule of Future Payments of Long Term Debt

Remainder of 2022

Total payments

amount representing interest

amount representing

Loan payable, gross

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unamortized discount

Long-term debt, net of unamortized discount

Long-term debt, net

of unamortized discount

Pharmaceuticals, Inc.

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

the six months ended June 30, 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 nine months ended September 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

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7 — Common Stock Warrants

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

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

Summary of Warrants Outstanding

Description of Warrants

Exercise Price

Placement Agent Warrants – 2017 Preferred Stock Offering

Placement Agent Warrants - IPO

SWK Warrants – Debt – Tranche #1

SWK Warrants – Debt – Tranche #2

Agent Warrants – 2017 Preferred Stock Offering

Agent Warrants - IPO

Warrants – Debt – Tranche #1

Warrants – Debt – Tranche #2

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

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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.

June 26, 2022, 467,242 warrants from the 2017 preferred stock offering with an exercise price of $ 3.00 were set to expire.

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 Consolidated Statement of Operations for the nine-month period ended September 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

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 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 June 30, 2022.

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 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 673,773 shares available for future issuance under the 2018 Plan as of September

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

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Options typically have a ten -year life, except for options to purchase 50,000 shares of the Company’s common

stock granted to product consultants in July 2017 that expire within five years if the Company is not able to file certain product submissions

to the FDA prior to the five-year expiration date;

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.

stock granted to product consultants in July 2017 that expired, unexercised, in July 2022 as the Company was not able to file certain

product submissions to the FDA prior to the five -year expiration date.

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.

July 2022 and September 2022, the Company’s board of directors approved modifications of certain outstanding awards of two senior

executives, one of whom retired in May 2022 and the other whose employment was terminated in July 2022.

The combined awards had an exercise

price range of $ 1.37 to $ 8.61 which were set to expire 90 days after retirement or termination as the case may be, and the Company extended

the expiration dates to April 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:

Due to these modifications, the Company incurred a modification expense

of approximately $ 16 and $ 88 that is included in general and administration expense on the Consolidated Statements of Operations for

the three and nine-month periods ended September 30, 2022, respectively.

the three months ended September 30, 2022 and 2021, the Company’s total stock-based compensation expense was $ 949 and $ 1,009 , respectively.

Of these amounts, $ 893 and $ 838 was recorded in general and administrative expenses, respectively, and $ 56 and $ 171 was recorded in research

and development expenses, respectively.

the nine months ended September 30, 2022 and 2021, the Company’s total stock-based compensation expense was $ 3,332 and $ 2,518 ,

respectively.

Of these amounts, $ 3,102 and $ 2,110 was recorded in general and administrative expenses, respectively, and $ 230 and $ 408

was recorded in research and development expenses, respectively.

following table summarizes stock option activity during the nine months ended September 30, 2022:

Summary of Stock Option Activity

Options outstanding as of December 31, 2021

Outstanding as of December 31, 2021

Forfeited/Cancelled

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 June 30, 2022 for those stock options that had strike prices lower than the fair value of

the Company’s common stock.

Outstanding as of September 30, 2022

Exercisable at September 30, 2022

and expected to vest at September 30, 2022

Pharmaceuticals, Inc.

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8 — Share-Based Payment Awards (continued)

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.

The annual offerings consist of two stock purchase

periods, with the first purchase period ending in June and the second purchase period ending in December.

The terms of the ESPP permit

employees of the Company to use payroll deductions to purchase stock at a price per share that is at least the lesser of (1) 85% of the

fair market value of a share of common stock on the first date of an offering or (2) 85% of the fair market value of a share of common

stock on the date of purchase.

After the initial offering period ended, subsequent twelve-month offering periods automatically commence

over the term of the ESPP on the day that immediately follows the conclusion of the preceding offering, each consisting of two purchase

periods approximately six months in duration.

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

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 September 30, 2022 for those stock options that had strike prices lower than the fair value

of the Company’s common stock.

compensation related to stock options was $ 853 and $ 2,850 for the three and nine months ended September 30, 2022, respectively.

September 30, 2022, there was a total of $ 4,532 of unrecognized compensation costs related to non-vested stock option awards.

average grant date fair value of stock option awards for the nine-months ended September 30, 2022 was $ 2.38 per share.

In the nine-month

period ended September 30, 2022, there was one stock option exercise which totaled 25,000 shares at an exercise price of $ 1.38 per share

with an intrinsic value of $ 31 .

In the nine-month period ended September 30, 2021, stock option exercises totaled 144,233 shares at an

average exercise price of $ 2.35 per share with an intrinsic value of $ 682 .

Stock Units (RSUs)

following table summarizes restricted stock unit activity during the nine months ended September 30, 2022:

of Restricted Stock Unit Activity

Average Grant-Date Fair Value Per Unit

Outstanding and unvested as of December

Outstanding and unvested

as of September 30, 2022

compensation related to RSUs was $ 53 for the three and nine months ended September 30, 2022.

As of September 30, 2022, there was $ 919

of unrecognized stock-based compensation expense related to unvested RSUs which will be recognized over a weighted average period of

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 directors .

As of September 30,

2022, there were 582,595 shares available for issuance under the ESPP.

annual offerings consist of two stock purchase periods, with the first purchase period ending in June and the second purchase period

ending in December.

The terms of the ESPP permit employees of the Company to use payroll deductions to purchase stock at a price per

share that is at least the lesser of (1) 85% of the fair market value of a share of common stock on the first date of an offering or

(2) 85% of the fair market value of a share of common stock on the date of purchase.

After the initial offering period ended, subsequent

twelve-month offering periods automatically commence over the term of the ESPP on the day that immediately follows the conclusion of

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

the first nine 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.

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

Employees contributed

$ 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.

$ 174 and $ 192 via payroll deductions during the nine months ended September 30, 2022 and 2021, respectively.

The Company recorded an

expense of $ 97 and $ 83 related to the ESPP in the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022

and December 31, 2021, the accompanying condensed balance sheets include $ 65 and $ 22 , respectively, in accrued liabilities for remaining

employee ESPP contributions.

Pharmaceuticals, Inc.

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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.

(“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 September 30, 2022,

Harrow owned 1,982,000 shares of Eton’s common shares which represents 7.8 % of the Company’s common shares outstanding.

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

book value of the equipment.

Executive Officer

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as a component of R&D expense.

Under the terms of the original agreement, the Company would pay Eyemax $ 250 upon FDA approval and

$ 500 upon the first commercial sale of the product and pay Eyemax a royalty of 10 % on the net sales of all products.

The Eyemax Agreement

was for an initial term of 10 years from the date of the Eyemax Agreement, subject to successive two-year renewals unless the Company

elected to terminate the Eyemax Agreement.

Under the terms of the original agreement, the Company would pay Eyemax $ 250 upon FDA approval

and $ 500 upon the first commercial sale of the product and pay Eyemax a royalty of 10 % on the net sales of all products.

Eyemax Agreement was for an initial term of 10 years from the date of the Eyemax Agreement, subject to successive two-year

renewals unless the Company elected to terminate the Eyemax Agreement .

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

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(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.

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 $ 1,799 of the non-royalty and royalty revenue as of September 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.

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 September 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 June 30, 2022 and $ 0 and

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

captions in the condensed statements of operations was $ 0 and $ 22 , respectively, for the three months ended September 30, 2022 and $ 0

and $ 21 , respectively, for the three months ended September 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 $ 64 ,

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).

respectively, for the nine months ended September 30, 2022 and $ 9 and $ 64 , respectively, for the nine months ended September 30, 2021.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 66 for the nine months ended September 30, 2022.

The ROU asset amortization for the three-month and nine-month periods ended September 30, 2022 was $ 21 and $ 62 , 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, 2021 was $ 20 and $ 69 , respectively, and is reflected within depreciation and

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

As of September 30, 2022, the weighted-average remaining lease

term was 0.5 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, 2022 (in thousands).

Schedule of Lease-related Assets and Liabilities

Classification

Operating lease right-of-use assets

Operating lease right-of-use assets, net

Total leased assets

Operating lease liabilities, current

lease right-of-use assets

lease right-of-use assets, net

leased assets

lease liabilities, current

Accrued liabilities

Total operating lease liabilities

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

operating lease liabilities

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

Schedule of Future Lease Commitments

Undiscounted lease payments

lease payments

Imputed interest

Total lease liabilities

lease liabilities

Company is evaluating its future facility needs and has not renewed its lease which expires on March 31, 2023 .

Pharmaceuticals, Inc.

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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.

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.

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.

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”)

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$ 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.

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.

Reddy’s assumed 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.

The Company received $ 5,000 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.

In 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

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 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.

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

sales volume targets.

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.

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.

Azurity has assumed

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

Pharmaceuticals, Inc.

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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.

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

2 unchanged sentences

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

of the product.

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 of the product.

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

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to obtaining regulatory approval.

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

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 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

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.

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.

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

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 31, 2020.

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 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.

and Canadian rights to Crossject S.A.’s (“Crossject”) ZENEO®

hydrocortisone needleless autoinjector, which is under development as a rescue treatment for adrenal crisis.

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.

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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.

September 13, 2022, the Company acquired an FDA approved ANDA for Betaine Anhydrous for oral solution.

The ANDA was approved by the FDA

on January 28, 2022.

The Company paid $ 2,000 upon signing and could pay up to $1,000 in commercial milestones.

The Company will

retain 65 % of the product profits with the balance being distributed to the licensor.

Pharmaceuticals, Inc.

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

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

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

12 — Subsequent Events

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.

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

that would require recognition in the condensed financial statements or disclosure in the notes thereto.

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