What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-16 · 628 added, 649 removed, 609 unchanged (68% of the section changed)

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(the “Company”) as of December 31, 2022 and 2021,

the related statements of operations, stockholders’ equity, and cash flows

for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December

31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

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statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

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evaluated trends in actual sales and discount accrual balances, and compared cash receipts to product sales.

We also examined

terms and conditions for a sample of contracts with the Company’s customers, tested a sample of credits issued and payments

made throughout the year and agreed rates to underlying contract terms.

We also examined terms and

conditions for a sample of contracts with the Company’s customers, tested a sample of credits issued and payments made throughout

the year and agreed rates to underlying contract terms.

KMJ Corbin & Company LLP

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thousands, except share and per share amounts)

and cash equivalents

receivable, net

expenses and other current assets

Current assets:

and equipment, net

lease right-of-use assets, net

long-term assets, net

and stockholders’ equity

loan, current portion

portion of long-term debt

Cash and cash equivalents

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Intangible assets, net

Operating lease right-of-use assets, net

Other long-term assets, net

Liabilities and stockholders’ equity

Current liabilities:

debt, net of discount and including accrued fees

portion of PPP and EIDL loans

lease liabilities, net of current portion

and contingencies (Note 14)

Stockholders’

stock, $ 0.001 par value;

50,000,000 shares authorized;

24,626,004 and 24,312,808 shares issued and outstanding at December 31, 2021

and 2020, respectively

paid-in capital

Accounts payable

Current portion of long-term debt

Accrued liabilities

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 14)

Stockholders’ equity

liabilities and stockholders’ equity

Common stock, $ 0.001 par value;

50,000,000 shares authorized;

25,353,119 and 24,626,004 shares issued and outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these financial statements.

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thousands, except per share amounts)

the years ended

sales and royalties, net

sales and royalties

For the years ended

Licensing revenue

Product sales and royalties, net

Total net revenues

Cost of Sales:

profit (loss)

and development

and administrative

Licensing revenue

Product sales and royalties

Total cost of sales

Gross profit (loss)

Operating expenses:

from operations

income (expense):

and other income (expense), net

on PPP loan forgiveness

on equipment sale

before income tax expense

loss per share, basic and diluted

average number of common shares outstanding, basic and diluted

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest and other income (expense), net

Gain on PPP loan forgiveness

Gain on equipment sale

Loss before income tax expense

Income tax expense

Net loss per share, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

accompanying notes are an integral part of these financial statements.

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thousands, except share amounts)

Stockholders’

at December 31, 2018

option exercises

from sales of common stock, net of offering costs

Additional Paid-in

Total Stockholders’

Balances at December 31, 2019

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Proceeds from sales of common stock, net of offering costs

of common stock for product candidate licensing rights

Issuance of common stock for product candidate licensing

rights, shares

stock issued related to restricted stock units

Common stock issued related to restricted stock units, shares

stock issued under employee stock purchase plan

warrant exercises

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

at December 31, 2019

option exercises

stock purchase plan

from sales of common stock, net of offering costs

of common stock for product candidate licensing rights

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

at December 31, 2020

option exercises

stock purchase plan

stock issued related to restricted stock units

warrant exercises

at December 31, 2021

Issuance of common stock for product candidate licensing rights

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

Balances at December 31, 2020

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Common stock issued related to restricted stock units

Stock warrant exercises

Balances at December 31, 2021

Beginning balance, value

Stock-based compensation

Stock option exercises

Employee stock purchase plan

Stock warrant exercises

Balances at December 31, 2022

$ ( 103,134 )

Ending balance, value

$ ( 103,134 )

accompanying notes are an integral part of these financial statements.

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OF CASH FLOWS

the years ended

flows from operating activities

to reconcile net loss to net cash used in operating activities:

stock issued for product candidate licensing rights

and amortization

discount amortization

on forgiveness of PPP loan

on sale of equipment

in operating assets and liabilities:

expenses and other assets

cash used in operating activities

used in investing activities

from sale of equipment

of property and equipment

of product licensing rights

For the years ended

Cash flows from operating activities

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

Stock-based compensation

Common stock issued for product candidate licensing rights

Depreciation and amortization

Debt discount amortization

Gain on forgiveness of PPP loan

Gain on sale of equipment

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable

Accrued liabilities

Net cash provided by (used in) operating activities

Cash used in investing activities

flows from financing activities

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

from sales of common stock, net of offering costs

from PPP and EIDL loans

from employee stock purchase plan and stock option exercises

cash provided by financing activities

in cash and cash equivalents

and cash equivalents at beginning of year

and cash equivalents at end of year

disclosures of cash flow information

paid for interest

paid for income taxes

disclosures of non-cash investing and financing activities:

fair value of common stock warrants issued in connection with debt

assets obtained in exchange for lease liabilities

Proceeds from sale of equipment

Purchases of property and equipment

Purchase of product licensing rights

Net cash used in investing activities

Cash flows from financing activities

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

Proceeds from sales of common stock, net of offering costs

Proceeds from PPP and EIDL loans

Proceeds from employee stock purchase plan and stock option

and stock warrant exercises

Net cash (used in) provided by financing activities

Change in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosures of cash flow information

Cash paid for interest

Cash paid for income taxes

Supplemental disclosures of non-cash investing and financing activities:

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

Right-of-use assets obtained in exchange for lease liabilities

accompanying notes are an integral part of these 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

an 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 and in October 2020, the Company received net proceeds of $ 21,026

from a public offering for its shares at an offering price of $ 7.00 per share (see Note 6).

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

Eton is primarily focused

on hospital injectable and rare disease products.

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

in order to address unmet patient needs.

Eton pursues what it perceives to be low-risk product candidates where existing published literature,

historical clinical trials, or physician usage has established safety and/or efficacy of the molecule, thereby reducing the incremental

clinical burden required for the Company to bring the product to patients.

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 60+ person salesforce in exchange for a royalty on net sales.

In addition, the Company launched Carglumic

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

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

in patients suffering from rare diseases.

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

Carglumic Acid for the treatment of 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 are Alaway® Preservative Free, EPRONTIA®, Cysteine Hydrochloride, ZONISADE™, Lamotrigine,

and Biorphen®.

2 — Liquidity Considerations

of December 31, 2021, the Company had an accumulated deficit of $ 94,113

and for the year ended December 31, 2021 the Company used net cash in operating activities of $ 4,721 .

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

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

currently believes its existing cash and cash equivalents of $ 14,406

as of December 31, 2021 augmented by the $ 5,000

milestone payment received in January 2022 for

the commercial launch of EPRONTIA™ (Topiramate oral solution) by Azurity Pharmaceuticals (“Azurity”),

will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date

of issuance of these financial statements.

This estimate is based on the Company’s current assumptions, including assumptions relating

to estimated sales and its ability to manage its spending.

The Company could use its available capital resources sooner than currently

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

The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences

compared to currently outstanding common shares.

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

the Company’s ability to pay dividends or make other distributions to stockholders.

If the Company experiences delays in product

sales growth and completing its product development and obtaining regulatory approval for its other product candidates and is unable

to obtain such additional financing, operations would need to be scaled back or discontinued.

of December 31, 2022, the Company had an accumulated deficit of $ 103,134 and for the year ended December 31, 2022 the Company had a net loss of $ 9,021 .

date, the Company has generated revenues from multiple products and expects further growth in 2023 and beyond in accordance with additional

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

The Company currently

believes its existing cash and cash equivalents of $ 16,305 as of December 31, 2022 will be sufficient to fund its operating expenses

and capital expenditure requirements for at least the next twelve months from the date of issuance of these financial statements.

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 may contain senior rights and preferences compared to currently outstanding

common shares.

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

dividends or make other distributions to stockholders.

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

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

would need to be scaled back or discontinued.

3 — Summary of Significant Accounting Policies

of Presentation

Company has prepared the accompanying financial statements in accordance with GAAP.

Pharmaceuticals, Inc.

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thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies

of Presentation

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

States of America (“GAAP”).

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

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

reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these financial

statements include, but are not limited to, provisions for uncollectible receivables, chargebacks 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.

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

Actual results could differ from those

estimates or assumptions.

3 — Summary of Significant Accounting Policies (continued)

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

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

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

Significant estimates and assumptions

reflected in these financial statements include, but are not limited to, provisions for uncollectible receivables, chargebacks and

sales returns, valuation of inventories, useful lives of assets and the impairment of property and equipment, deferred tax assets,

the accrual of research and development expenses and the valuation of common stock, stock options and warrants, and restricted stock

units (“RSUs”).

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

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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Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

cash equivalents are held in U.S.

and cash equivalents are held in U.S.

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

treasury bills.

Cash equivalents consist of an

interest-bearing checking account and a U.S.

treasury bill.

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

The Company believes the associated credit risk to be minimal.

treasury bills or high-grade money market funds.

From 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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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

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

impairment is identified.

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

At December 31, 2021, inventories are

shown net of a slow-moving reserve for its Biorphen product of $ 1,414 due to the risk of expiry before this entire stock of inventories

There was an inventory reserve of $ 1,414 and $ 623 at December 31, 2021 and 2020, respectively.

At December 31,

2022, inventories are shown net of a reserve for damaged Biorphen inventory yet to be destroyed and net of ALKINDI SPRINKLE®

inventory at risk of expiry prior to being sold.

At December 31, 2021, inventories are shown net of a reserve for Biorphen inventory

due to the risk of expiry prior to being sold.

There was an inventory reserve of $ 62

at December 31, 2022 and 2021, respectively.

and Equipment

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3 — Summary of Significant Accounting Policies (continued)

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

recoverable based on expected future cash flows from the product.

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

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

Intangibles - Goodwill and Other.

payment related to the approval of the Company’s

Biorphen product in 2019 has been capitalized and that cost

is being amortized over five years .

payment related to the approval of the Company’s

Carglumic Acid product in December 2021 has been capitalized and that cost is being amortized over ten years.

The intangible assets,

net on the Company’s balance sheet reflected $ 379

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

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

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

estimated useful life of the product commencing on the approval date in accordance with Accounting Standards Codification

(“ASC”) 350 — 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

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 (see Note 14), amortization of that asset was accelerated to record $ 275

of expense in June 2022 and the remaining $ 75

of expense in the last six months of the year ended 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 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 $ 1,996

of accumulated amortization as of December 31, 2022.

2021 and 2020, respectively.

The Company recorded amortization expense of $ 204 ,

$ 25 for the years ended December 31, 2021, 2020

and 2019, respectively, and will record amortization expense of $ 475

per year for these intangible assets for 2022

through 2023 and then $ 450

in 2024 when the Biorphen asset will be fully

For 2025 through 2030, the Company will incur amortization expense of $ 325

and then $ 271

in 2031 when the Carglumic Acid asset will be

fully amortized.

The Company recorded $ 1,617 ,

of amortization expense for the years ended December 31, 2022, 2021, and 2020 respectively.

During the years ended December 31, 2021

and 2020, the Company reclassified $ 204

of amortization expense of intangible assets, respectively, to cost of sales to conform with the current year presentation.

below shows the estimated remaining amortization for these products for each of the five years from 2023 to 2027 and

Intangible Assets Amortization Expenses

Amortization Expense

Total estimated amortization expense

of Long-Lived Assets

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of a contract to determine if it is a lease whereby the terms of the agreement convey the right to control the direct use and receive

substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.

The associated

right-of-use assets and lease liabilities are recognized at lease commencement.

The Company measures lease liabilities based on the present

value of the lease payments over the lease term discounted using the rate it would pay on a loan with the equivalent payments and term

for the lease.

substantially all the economic benefits of an identified asset for a period of time in exchange for consideration.

The associated right-of-use

assets and lease liabilities are recognized at lease commencement.

The Company measures lease liabilities based on the present value

of the lease payments over the lease term discounted using the rate it would pay on a loan with the equivalent payments and term for

The Company does not include the impact for lease term options that would extend or terminate the lease unless it is reasonably

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Company commences recognizing operating lease expense when the lessor makes the underlying asset available for use by the Company and

the operating lease expense is recognized on a straight-line basis.

the operating lease expense is recognized on a straight-line basis over the term of the lease.

Variable lease payments are expensed as incurred.

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by the financial institutions holding its cash and cash equivalents to the extent recorded on the balance sheets.

The Company believes

the associated credit risk to be minimal.

Company is dependent on third-party suppliers for its products and product candidates.

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3 — Summary of Significant Accounting Policies (continued)

Company is also subject to credit risk from its accounts receivable related to product sales as it extends credit based on an evaluation

of the customer’s financial condition, and collateral is not required.

Management monitors its exposure to accounts receivable

by periodically evaluating the collectability of the account receivable based on a variety of factors including the length of time the

receivables are past due, the financial health of the customer and historical experience.

Based upon the review of these factors, the

Company recorded no allowance for doubtful accounts at December 31, 2021 or 2020.

The accounts receivable balance at December 31, 2021

and 2020 and product sales revenue recognized during the year ended December 31, 2021 and 2020 consist of sales to and amounts due from

AmerisourceBergen Corporation, Cardinal Health Services and McKesson Corporation for sales of the Company’s Biorphen product.

December 31, 2021 accounts receivable balance and sales in 2021 also include a $ 5,000

milestone from Azurity, in accordance with the

Eprontia™ (topiramate oral solution) product, amounts due from AnovoRx for sales of the Company’s Alkindi Sprinkle

product and its Carglumic Acid product, which launched in December 2021.

Company is also subject to credit risk from its accounts receivable related to product sales as it extends credit based on an

evaluation of the customer’s financial condition, and collateral is not required.

Management monitors its exposure to accounts

receivable by periodically evaluating the collectability of the account receivable based on a variety of factors including the

length of time the receivables are past due, the financial health of the customer and historical experience.

Based upon the review

of these factors, the Company recorded no allowance for doubtful accounts at December 31, 2022 or 2021.

The accounts receivable

balance at December 31, 2022 and 2021 and product sales revenue recognized during the year ended December 31, 2022 and 2021 consist

of sales to and amounts due from AmerisourceBergen Corporation, Cardinal Health Services and McKesson Corporation for sales of the

Company’s Biorphen product.

The December 31, 2022 accounts receivable balance and sales in 2022 also include amounts due from

AnovoRx for sales of the Company’s ALKINDI SPRINKLE® product and its Carglumic Acid product.

AnovoRx sales made up 45.5 %

of 2022 total net revenues and 79.8 %

of net accounts receivable as of December 31, 2022, and 9.0 % of 2021 total net revenues and 6.4 % of net accounts receivable as of December 31, 2021.

Recognition for Contracts with Customers

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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

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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.

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

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

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

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

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

Wholesalers also

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

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

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

For its Alkindi Sprinkle and Carglumic Acid products, the Company bills at the initial product list price which are subject

to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues

at the date of sale/shipment.

Company 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.

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.

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

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.

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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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.

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 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.

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.

and royalties from products it has developed or acquired.

Pharmaceuticals, Inc.

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of Product Sales

of product 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

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

of product 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, the amortization of certain intangible assets, and freight and handling/storage costs from the Company’s 3PL logistics service providers.

The cost of sales for

profit-sharing and royalty fees and costs for purchased finished products and the associated inbound freight expense is recorded

when the associated product sale revenue is recognized in accordance with the terms of shipment to customers while outbound freight

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

Cost of sales also reflects any

write-downs or reserve adjustments for the Company’s inventories.

and Development Expenses

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(Loss) Per Share

net loss per common share is computed by dividing net loss attributable to common stockholders for the period by the weighted average

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 loss per share is computed by dividing the net loss attributable to

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 Series A Preferred,

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earnings per share calculation would have been anti-dilutive (see Note 9).

Basic weighted average shares for the year ended December

31, 2021 include 600,000 vested warrants to purchase common shares.

As the shares underlying these warrants can be purchased for little

to no consideration ($ 0.01 per share exercise price), they are included in the computation of basic earnings per share.

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

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31, 2022 or 2021.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

Value Measurements

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use in pricing the asset or liability developed based on the best information available.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

3 — Summary of Significant Accounting Policies (continued)

value measurements are classified based on the lowest level of input that is significant to the measurement.

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

PPP loan and long-term debt obligation.

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

and long-term debt obligation.

The carrying amounts of these financial instruments, except for the long-term debt

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

Based on borrowing rates currently available

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

Based on borrowing rates currently

available to the Company, the carrying value of the long-term debt obligation approximate their respective fair

of New Accounting Pronouncements

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

impact on its financial position or results of operations.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

were no new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) during the current period

that would apply to the Company and have a material impact on its financial position or results of operations.

4 – Property and Equipment

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Schedule of Property and Equipment

hardware and software

Computer hardware and software

Furniture and fixtures

Leasehold improvements

Construction in progress

and equipment, gross

accumulated depreciation and amortization

and equipment, net

and amortization expense for the years ended December 31, 2021, 2020 and 2019 was $ 155 , $ 347 and $ 283 , respectively.

The balances at

December 31, 2021 reflect the sale of laboratory equipment in May 2021 which had a net book value of $ 519 .

Property and equipment, net

expense for the years ended December 31, 2022, 2021 and 2020 was $ 66 , $ 155 and $ 347 , respectively.

Pharmaceuticals, Inc.

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In March 2020, in conjunction

with the Company’s Alkindi Sprinkle product licensing agreement (see Note 14) and the Company’s March 2020 sale of additional

with the Company’s ALKINDI SPRINKLE® product licensing agreement (see Note 14) and the Company’s March 2020 sale of

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

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

term of the SWK Credit Agreement is for five years and borrowings bear interest at a rate of LIBOR 3-month plus 10.0 %, subject to a stated

LIBOR floor rate of 2.0 %.

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

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

Credit Agreement.

The Company is required to maintain a minimum cash balance of $ 3,000 , 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.

The term of the SWK Credit Agreement is for five years and borrowings bear interest at a rate of LIBOR 3-month plus 10.0 %, subject to

a stated LIBOR floor rate of 2.0 %.

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

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

the SWK Credit Agreement.

The Company 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.

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.

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

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

Company recorded interest expense of $ 1,042 , $ 884 and $ 98 in 2021, 2020 and 2019, respectively, which included $ 148 $ 121 and $ 16 , respectively,

of debt discount amortization.

The Company had accrued interest of $ 134 and $ 48 as of December 31, 2021 and 2020, respectively, which

is included in accrued liabilities in the accompanying balance sheets.

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 $ 1,033 as principal due in the next 12 months and the remainder classified as long-term debt

in its balance sheet at December 31, 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 of LIBOR 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.

Company recorded interest expense of $ 955 , $ 1,042 and $ 884 in 2022, 2021 and 2020, respectively, which included $ 127 , $ 148 and $ 121 ,

respectively, of debt discount amortization.

The Company had accrued interest of $ 231 and $ 134 as of December 31, 2022 and 2021, respectively,

which is included in accrued liabilities in the accompanying balance sheets.

Pharmaceuticals, Inc.

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Schedule of Future Payments of Long Term Debt

Total payments

amount representing interest

payable, gross

Loan payable, gross

current portion of long-term debt

unamortized discount

debt, net of unamortized discount

Long-term debt, net of unamortized discount

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

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

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

6 — Common Stock

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received net proceeds of $ 21,026 .

the years ended December 31, 2021 and 2020, the Company issued 144,233

shares, respectively, of its common stock resulting

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

For the years ended December 31, 2021 and 2020, the Company

issued 49,155

shares, respectively, under the Company’s

Employee Stock Purchase Program (“ESPP”).

In April 2020, the Company issued 15,190

shares of its common stock as an RSA to a new

This RSA vested 25 %

every three months and was 100 %

vested in April 2021.

In April 2021, the Company issued 25,000

shares of its common stock to a member of its

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

During 2021, there were 135,650

warrants exercised (all on a cashless basis)

resulting in 94,808

shares of common stock being issued by the Company.

Pharmaceuticals, Inc.

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thousands, except share and per share amounts)

Note 7 — Common Stock Warrants

6 — Common Stock (continued)

the years ended December 31, 2022 and 2021, the Company issued 25,000 and 144,233 shares, respectively, of its common stock resulting

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

For the years ended December 31, 2022 and 2021, the Company

issued 69,884 and 49,155 shares, respectively, under the Company’s Employee Stock Purchase Plan (“ESPP”).

2020, the Company issued 15,190 shares of its common stock as an RSA to a new employee.

This RSA vested 25 % every three months and was

100 % vested in April 2021.

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

upon his retirement from the board in connection with previously vested RSUs.

During 2022, there

were 1,067,242 warrants exercised, a portion of which was a cashless exercise, resulting in 632,231 shares of common stock being issued

by the Company.

7 — Common Stock Warrants

below is a summary of warrants outstanding as of December 31, 2022:

Summary of Warrants Outstanding

Advisory Warrants – 2017

Agent Warrants – 2017 Preferred Stock Offering

Agent Warrants - IPO

Warrants – Debt (Tranche #1)

Warrants – Debt (Tranche #2)

Description of Warrants

Exercise Price

Placement Agent Warrants - IPO

SWK Warrants – Debt (Tranche #1)

SWK Warrants – Debt (Tranche #2)

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

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rights are provided under the terms of a registration rights agreement between the Company 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.

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 Statement of Operations for the year ended December 31, 2022.

rollforward of the warrants outstanding is listed in the table below:

Summary of Rollforward of The Warrants Outstanding

as of the beginning of the year

of Placement Agent Warrants – 2017 Preferred Stock Offering

as of the end of the year

were 135,650 warrants exercised (all on a cashless basis) in 2021 resulting in 94,808 shares of common stock being issued by the Company.

There were no warrant exercises is 2020.

The intrinsic value of the warrants exercised in 2021 was $ 806 .

Balance as of the beginning of the year

Exercise of Placement Agent Warrants – 2017 Preferred Stock Offering

( 1,067,242 )

Expiration of Placement Agent Warrants – 2017 Preferred Stock Offering

Balance as of the end of the year

were 1,067,242 warrants exercised in 2022 resulting in 632,231 shares of common stock being issued by the Company.

There were 135,650

warrants exercised in 2021 (all on a cashless basis) resulting in 94,808 shares of common stock being issued by the Company.

The intrinsic

value of the warrants exercised was $ 2,367 in 2022 and $ 806 in 2021.

8 — Share-Based Payment Awards

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 (the “2018 Plan”) which succeeded the 2017 Plan.

The Company has granted RSAs, stock options and RSUs for

its common stock under the 2017 Plan and 2018 Plan as detailed in the tables below.

There were 537,306 shares available for future issuance

under the 2018 Plan as of December 31, 2021.

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 (the “2018 Plan”) which

succeeded the 2017 Plan.

The Company has granted RSAs, stock options and RSUs for its common stock under the 2017 Plan and 2018 Plan

as detailed in the tables below.

There were 239,167 shares

available for future issuance under the 2018 Plan as of December 31, 2022.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

8 — Share-Based Payment Awards (continued)

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

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shares based on the 24,312,808 shares of common stock outstanding at December 31, 2020.

The exercise price for stock options granted

is not less than the fair value of common stock as determined by the board of directors as of the date of grant.

The Company uses the

closing stock price on the date of grant as the exercise price.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

8 — Share-Based Payment Awards (continued)

On January 1, 2022, the share reserve was increased

by 985,040 shares based on the 24,626,004 shares of common stock outstanding at December 31, 2021.

The exercise price for stock options

granted is not less than the fair value of common stock as determined by the board of directors as of the date of grant.

uses the closing stock price on the date of grant as the exercise price.

April 2020, the Company issued 15,190 shares of its common stock as an RSA to a new employee.

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at the dates of grant.

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

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

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.

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 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 these modifications, the Company incurred a modification expense

of approximately $ 104 that is included in general and administration expense on the Statement of Operations for the year

ended December 31, 2022.

the years ended December 31, 2022, 2021, and 2020, the Company’s total stock-based compensation expense was $ 4,218 , $ 3,381 and

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and $ 264 , $ 543 and $ 281 was recorded in R&D expenses, respectively.

summary of stock option activity is as follows:

following table summarizes stock option activity during the year ended December 31, 2022:

Summary of Stock Option Activity

Average Exercise

Average Remaining

outstanding as of January 1, 2021

Weighted Average Exercise

Weighted Average Remaining

Aggregate Intrinsic

Options outstanding as of January 1, 2022

Forfeited/Cancelled

outstanding as of December 31, 2021

exercisable at December 31, 2021

vested and expected to vest at December 31, 2021

Options outstanding as of December 31, 2022

Options exercisable at December 31, 2022

Options vested and expected to vest at December 31, 2022

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

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The intrinsic value of the options exercised during 2022 was $ 31 .

were 144,233 shares issued for exercise of stock options during the year ended December 31, 2021 for proceeds of $ 339 .

assumptions used to calculate the fair value of options granted during the years ended December 31, 2021, 2020, and 2019 under the BSM

were as follows:

Schedule of Assumptions Used to Calculate Fair Value of Options Granted

interest rate

average fair value

Pharmaceuticals, Inc.

2 unchanged sentences

8 — Share-Based Payment Awards (continued)

were 25,000 shares issued for exercise of stock options during the year ended December 31, 2022 for proceeds of $ 35 .

assumptions used to calculate the fair value of options granted during the years ended December 31, , 2022, 2021, and 2020 under the

BSM were as follows:

Schedule of Assumptions Used to Calculate Fair Value of Options Granted

December 31, 2022

December 31, 2021

December 31, 2020

Expected dividends

Expected volatility

Risk-free interest rate

Expected term

Weighted average fair value

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

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

summary of activity for RSAs is as follows:

of December 31, 2022, there was a total of $ 3,868 of unrecognized compensation costs related to non-vested stock option awards which

will be recognized over a weighted average period of 2 years.

Stock Units (RSUs)

following table summarizes restricted stock unit activity during the year ended December 31, 2022:

Summary of Activity for Restricted Stock Awards

as of January 1, 2021

Forfeited/Cancelled

as of December 31, 2021

grant date fair value per share for the RSA issued in 2020 was $ 3.95 .

No RSAs were issued in 2021 or 2019.

The fair value of the RSAs

vested during the years ended December 31, 2021, 2020 and 2019 was $ 30 , $ 30 and $ 66 , respectively.

of December 31, 2021, there was a total of $ 6,025 of unrecognized compensation costs related to non-vested stock option awards.

Number of Units

Weighted Average Grant-Date Fair Value Per Unit

Outstanding and unvested as of January 1, 2022

Outstanding and unvested as of December 31, 2022

compensation related to RSUs was $ 114 for the year ended December 31, 2022.

As of December 31, 2022, there was $ 858 of unrecognized stock-based

compensation expense related to unvested RSUs which will be recognized over a weighted average period of 3.5 years.

Pharmaceuticals, Inc.

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8 — Share-Based Payment Awards (continued)

Employee Stock Purchase Plan

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

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reduction at the discretion of the Company’s board of directors .

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

The initial offering consisted of two purchase periods, with

the first purchase period ended on June 10, 2019 and the second purchase period ended on December 10, 2019.

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, 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 ending on or around June 10 and December 10 each year, subject to a restart feature if the Company’s

stock price drops at the end of a six-month period within the twelve-month offering period .

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, 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 ending on or around June 10 and December 10 each year, subject to a restart

feature if the Company’s stock price drops at the end of a six-month period within the twelve-month offering period .

Company recorded an expense of $ 128 , $ 73 and $ 71 in 2022, 2021, and 2020, respectively, related to the ESPP.

The weighted average grant

date fair value of share awards in 2021, 2020 and 2019 was $ 2.50 , $ 2.32 and $ 2.56 per share, respectively.

Employees contributed $ 205

and $ 115 to the ESPP during 2021 and 2020, respectively.

Of these amounts, $ 22 and $ 18 at December 31, 2021 and 2020, respectively, is

included in accrued liabilities in the accompanying balance sheets.

For the years ended December

31, 2022 and 2021, there were 69,884 and 49,155 share issuances, respectively, under the ESPP.

The weighted average grant date fair value

of share awards in 2022, 2021, and 2020 was $ 1.17 , $ 2.50 and $ 2.32 per share, respectively.

Employees contributed $ 234 and $ 205 to the

ESPP during 2022 and 2021, respectively.

Of these amounts, $ 23 and $ 22 at December 31, 2022 and 2021, respectively, are included in accrued

liabilities in the accompanying balance sheets.

As of December 31, 2022, there were 560,296 shares available for issuance under the ESPP.

9 — Basic and Diluted Net Loss per Common Share

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following table shows the computation of basic and diluted net loss per common share:

Computation of Basic and Diluted Net Loss Per Common Share

average common shares outstanding (basic and diluted)

loss per common share (basic and diluted)

of Basic and Diluted Net Loss Per Common Share

Weighted average common shares outstanding (basic and diluted)

Net loss per common share (basic and diluted)

Pharmaceuticals, Inc.

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10 — Related-Party Transactions

was issued 3,500,000

shares of the Company’s common stock at

the formation of the Company at the $ 0.001

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

contribution from Harrow.

In April 2021, Harrow sold 1,518,000

shares of the Eton common stock it owned in an

underwritten public offering.

As of December 31, 2021, Harrow owned 1,982,000

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 RSUs that were previously fully vested.

As of December 31, 2022, Harrow

owned 1,982,000

shares of Eton’s common shares which represents

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

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

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

“Eyemax Agreement”) dated August 11, 2017 between the Company and Eyemax LLC (“Eyemax”), an entity affiliated

with the Company’s CEO.

The Company also held a right of first refusal to obtain the exclusive license rights for geographic areas

outside of the United States.

Pursuant to the Eyemax Agreement, the Company was responsible for all costs of testing and FDA approval

of the product, other than the FDA filing fee which was paid by Eyemax.

The Company was also to be responsible for commercializing the

product in the United States at its expense.

The Company paid Eyemax $ 250 upon execution of the Eyemax Agreement, which was recorded

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 .

There were no amounts due under the terms of the Eyemax Agreement as of December 31, 2021

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

10 — Related Party Transactions (continued)

In 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.

Chief Executive Officer

The 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.

The Company acquired the exclusive

rights to sell the EM-100 product in the United States pursuant to a sales and marketing agreement (the “Eyemax Agreement”)

dated August 11, 2017 between the Company and Eyemax LLC (“Eyemax”), an entity affiliated with the Company’s CEO.

Company also held a right of first refusal to obtain the exclusive license rights for geographic areas outside of the United States.

to the Eyemax Agreement, the Company was responsible for all costs of testing and FDA approval of the product, other than the FDA filing

fee which was paid by Eyemax.

The Company was also to be responsible for commercializing the product in the United States at its expense.

The Company paid Eyemax $ 250 upon execution of the Eyemax Agreement, which was recorded as a component of R&D expense.

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 .

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

5 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”).

After the Company has retained the

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

(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 $ 1,818

of the non-royalty and royalty revenue as of December 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 EM-100, which was approved by the FDA in September 2020,

will be split between Eyemax and the Company.

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

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

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

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

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

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.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of Dec ember

31, 2022 or December 31, 2021.

Company recognizes a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases,

5 unchanged sentences

its office lease for a two-year period through March 31, 2023 and recorded $ 195 in ROU assets and $ 195 in operating lease liabilities

associate with the lease extension.

On March 7, 2018, the Company entered into a lease for laboratory space at a complex in Lake Zurich,

The lease commenced on March 7, 2018 and was scheduled to expire in February 2021.

In November 2020, this laboratory lease

was extended to June 2021 and was not extended after that date as the Company completed an evaluation its laboratory operations requirements

and determined it would discontinue the laboratory activities and outsource its requirements.

in association with the lease extension.

In November 2022, the Company renewed its office lease for a two-year period through March 31,

2025 and recorded $ 188 in ROU assets and $ 188 in operating lease liabilities in association with the lease extension.

On March 7, 2018,

the Company entered into a lease for laboratory space at a complex in Lake Zurich, Illinois.

The lease commenced on March 7, 2018 and

was scheduled to expire in February 2021.

In November 2020, this laboratory lease was extended to June 2021 and was not extended after

that date as the Company completed an evaluation its laboratory operations requirements and determined it would discontinue the laboratory

activities and outsource its requirements.

Company does not have any lease contracts that contain:

11 unchanged sentences

2020, the new discount rate for the office lease extension was estimated at 5.4 %.

The incremental borrowing rate was estimated by determining

the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the

lease payments in a similar economic environment.

the years ended December 31, 2021, 2020 and 2019, the Company recorded $ 113 , $ 139 , and $ 140 , respectively, in rent expense.

In November 2022, the new discount rate for an additional

office lease extension was estimated at 8.6 %.

The incremental borrowing rate was estimated by determining the rate of interest that the

Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar

economic environment.

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

captions in the statements of operations was $ 9 ,

for the years ended December 31, 2021, 2020 and

captions in the statements of operations was $ 0 , $ 9 and $ 55 and $ 82 , $ 86 and $ 84 for the years ended December 31, 2022, 2021 and 2020,

respectively.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 83

for years ended December 31, 2021 and 2020, respectively.

The ROU asset amortization for years ended December 31, 2021, 2020 and 2019 was $ 88 ,

respectively, and is reflected in depreciation and amortization in the Company’s statements of cash flows.

As of December 31, 2021,

the weighted-average remaining lease term was 1.25

years, and the weighted-average discount rate

For the years ended December 31, 2022, 2021, and 2020, the Company recorded $ 87 , $ 113 , and $ 139 , respectively, in rent

Cash paid for amounts included in the measurement of operating lease liabilities was $ 88 and $ 83 for years ended December 31,

2022 and 2021, respectively.

The ROU asset amortization for years ended December 31, 2022, 2021, and 2020 was $ 82 , $ 88 and $ 129 , respectively,

and is reflected in depreciation and amortization in the Company’s statements of cash flows.

As of December 31, 2022, the weighted-average

remaining lease term was 2.25 years, and the weighted-average discount rate was 8.6 %.

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

11 — Leases (continued)

table below presents the lease-related assets and liabilities recorded on the balance sheet as of December 31, 2022:

Schedule of Lease-related Assets and Liabilities

of Lease-related Assets and Liabilities

Classification

lease right-of-use assets

lease right-of-use assets, net

leased assets

lease liabilities, current

lease liabilities, noncurrent

lease liabilities, net of current portion

operating lease liabilities

Operating lease right-of-use assets

Operating lease right-of-use assets, net

Total leased assets

Operating lease liabilities, current

Accrued liabilities

Operating lease liabilities, noncurrent

Operating lease liabilities, net of current portion

Total operating lease liabilities

Company’s future annual lease commitments as of December 31, 2022 are as indicated below:

of Future Lease Commitments

lease payments

Undiscounted lease payments

Imputed interest

lease liabilities

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

Total lease liabilities

12 – Income Taxes

provision for income taxes for the Company consists of the following for the years ended December 31, 2022, 2021 and 2020:

Schedule of Provision for Income Taxes

current expense

in valuation allowance

deferred expense

of Provision for Income Taxes

Total current expense

Change in valuation allowance

Total deferred expense

Total provision

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

significant components of the Company’s deferred tax assets as of December 31, 2021 and 2020 are as follows:

Schedule of Deferred Tax Assets

operating losses

deferred tax assets

on the uncertainty of future taxable income at this time management believes a 100 %

valuation reserve for the $ 18,548

deferred tax assets at December 31, 2021 and

2020, respectively, is appropriate.

reconciliation of the statutory federal tax rate to effective tax rate is shown below:

Schedule of Reconciliation of Statutory Federal Tax Rate

ended December 31

ended December 31,

at statutory rate

items (primarily warrants and stock compensation)

Establishment

of valuation allowance

Pharmaceuticals, Inc.

2 unchanged sentences

12 – Income Taxes (continued)

significant components of the Company’s deferred tax assets as of December 31, 2022 and 2021 are as follows:

of Deferred Tax Assets

Net operating losses

Stock-based expenses

Accruals and other

Total deferred tax assets

Valuation allowance

Net deferred tax assets

on the uncertainty of future taxable income at this time management believes a 100 % valuation reserve for the $ 21,632 and $ 18,548 deferred

tax assets at December 31, 2022 and 2021, respectively, is appropriate.

reconciliation of the statutory federal tax rate to effective tax rate is shown below:

of Reconciliation of Statutory Federal Tax Rate

Year ended December 31

Year ended December 31,

Benefit at statutory rate

Permanent items (primarily warrants and stock compensation)

State tax benefit

Federal rate change

Increase in valuation allowance

Income tax expense

Company has a federal and state NOL carryforward of $ 60,281

as of December 31, 2022.

Under the Tax Act,

federal NOLs incurred in taxable years ending after December 31, 2017 in the amount of $ 50,023

may be carried forward indefinitely, but

the deductibility of federal NOLs generated in tax years beginning before December 31, 2017 in the amount of $ 5,652

Under the Tax Act, federal NOLs incurred in taxable years ending after December 31, 2017 in the amount of

may be carried forward indefinitely and are subject to an 80% usage limitation.

The deductibility of federal NOLs generated in

tax years beginning before December 31, 2017 in the amount of $ 5,652

will expire in 2037.

The state NOL carry forward

will begin to expire in 2029.

The state NOL carry forward will begin to expire

addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if

18 unchanged sentences

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.

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

Sintetica SA (“Sintetica”) for marketing rights in the United States to Biorphen® which is used for the treatment of

clinically important hypotension resulting primarily from vasodilation in the setting of anesthesia.

The product was submitted to the

FDA for review and subsequently received FDA approval on October 21, 2019.

Pursuant to the terms of the ET-202 License Agreement, the

Company is responsible for marketing activities and Sintetica is responsible for development, manufacturing, and the regulatory activities

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.

There was a gross loss for Biorphen for the years ended December 31, 2021 and 2020 due to

slower than anticipated sales and a product price reduction through the Company’s wholesale customers.

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

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

for use in the hospital setting.

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

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

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

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

The Rezipres product was successfully resubmitted

in late 2020 and the Company paid a $ 600 milestone fee in July 2021 and will pay $ 750 upon the commercial sale of the product.

supplies Rezipres to the Company at its direct costs.

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

Sintetica will be entitled

to receive the first $ 500 of product profits.

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

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

Pharmaceuticals, Inc.

TO FINANCIAL STATEMENTS

thousands, except share and per share amounts)

14 — Commitments and Contingencies (continued)

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

1 unchanged sentence

these three products to Azurity in 2021.

The Company has recognized $ 17,000 in milestone

revenues to date from these three products and may receive up to $ 25,000 in additional milestone revenues related to FDA product approvals

and the future sales levels for the products.

The Company has recognized $ 22,000

in milestone revenues to date from these three products (including $ 5,000 received in 2022) and may receive up to $ 20,000

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

the years ended December 31, 2021 and 2020 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.

January 23, 2019, the Company entered into a Licensing and Supply Agreement (the “Agreement”) with LMW for Zonisamide oral

liquid, a development stage product candidate (“ET-104”).

Pursuant to the terms of the Agreement, the Company was to be responsible

for regulatory and marketing activities.

LMW will be responsible for development and manufacturing of ET-104.

The Company paid the licensor

$ 350 upon execution of the Agreement and an additional $ 350 after receiving successful bioequivalence study results, and $ 325 upon the

FDA’s acceptance of the NDA for review and will pay $ 325 upon FDA approval of the NDA, $ 650 upon issuance of patent covering ET-104

listed in the FDA’s Orange Book and $ 500 in the event that product sales in excess of $ 10,000 were achieved within a calendar year.

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

The Agreement was for an initial

term of 10 years from the date of the first commercial sale of the product.

The Company was to retain sole ownership of the NDA after

expiration of the Agreement.

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

Aucta Pharmaceuticals, Inc.

(“Aucta”) for marketing rights in the United States to Lamotrigine, an oral suspension product

candidate for use as an adjunct therapy for partial seizures, primary generalized tonic-clonic seizures, and generalized seizures of

Lennox-Gastaut syndrome in patients two years of age and older.

Pursuant to the terms of the ET-105 License Agreement, the Company was

to be responsible for marketing activities and Aucta will be responsible for development, manufacturing, and regulatory activities related

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,

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:

(“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

In November 2021, the product received approval from the FDA and was launched by Azurity in December 2021.

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 Liquimeds Worldwide (“LMW”)

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

Pursuant to the terms of the Agreement, the

Company was to be responsible for regulatory and marketing activities and LMW was responsible for development and manufacturing of ET-104.

The Company paid $ 650

to Azurity upon issuance of patent covering ET-104

listed in the FDA’s Orange Book in November 2022 and will pay $ 500

in the event that product sales in excess of

were achieved within a calendar year.

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

with Aucta Pharmaceuticals, Inc.

(“Aucta”) for marketing rights in the United States to Lamotrigine, an oral suspension

product candidate for use as an adjunct therapy for partial seizures, primary generalized tonic-clonic seizures, and generalized

seizures of Lennox-Gastaut syndrome in patients two years of age and older.

Pursuant to the terms of the ET-105 License Agreement,

the Company was to be responsible for marketing activities and Aucta will be responsible for development, manufacturing, and

regulatory activities related 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.

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 ,

when net sales exceed $20 million in a calendar year .

Azurity will assume royalty

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

Pharmaceuticals, Inc.

2 unchanged sentences

14 — Commitments and Contingencies (continued)

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

volume targets.

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

Diurnal for marketing ALKINDI SPRINKLE® in the United States.

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

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

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

ALKINDI SPRINKLE®’s New Drug Application (NDA) was approved

by the FDA on September 29, 2020 as a replacement therapy for 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

7 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 and could pay up to $ 4,500

in development milestones and up to $ 6,000 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 $ 3,500 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 will retain 50 % of future 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

In June 2022, the Company sold

its rights in Cysteine Hydrochloride, Biorphen®, and Rezipres® to Dr.

Under the terms of the transaction, Dr.

Reddy’s assumed immediate ownership of Eton’s rights and interest in the products.

The Company received $ 5,000 at closing,

recorded as licensing revenue in the twelve months ended December 31, 2022, and could receive up to $ 42,500 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 twelve months ended December 31, 2022.

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.

Indemnification

9 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data