Eton Pharmaceuticals, Inc.

Previous wording

Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases. We currently have eight commercial rare disease products: INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone. We have five additional product candidates in late-stage development: ET-600, Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Current wording

Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases. We currently have ten commercial rare disease products: INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone. We have four additional product candidates in late-stage development: Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Previous wording

During the three months ended September 30, 2025, we had $22,459 in total revenues that generated a gross profit of $7,855 compared to total revenues of $10,324 during the three-month period ended September 30, 2024 that generated a gross profit of $6,302 for the period. The increase in product sales and royalties, net was the result of increased sales of ALKINDI SPRINKLE® and the addition of revenues from INCRELEX® and GALZIN® products in the current period.

Current wording

During the three months ended March 31, 2026, we had $24,266 in total revenues that generated a gross profit of $14,735 compared to total revenues of $17,282 during the three-month period ended March 31, 2025 that generated a gross profit of $9,861 for the period. The increase in product sales and royalties, net was primarily the result of increased sales of INCRELEX®, GALZIN®, ALKINDI SPRINKLE®, and Carglumic Acid, and the addition of KHINDIVI™ sales in the current period.

Previous wording

Licensing revenue during the nine months ended September 30, 2025 was $3,286 compared to $500 in licensing revenue during the nine months ended September 30, 2024. The increase in licensing revenue during the nine months ended September 30, 2025 was due to $1,786 from our out-licensing of INCRELEX® rights outside of the U.S. and $1,500 from the recognition of a development milestone event associated with our divestiture of DS-200.

Current wording

Licensing revenue during the three months ended March 31, 2026 was zero compared to $3,286 in licensing revenue during the three months ended March 31, 2025. Licensing revenue during the three months ended March 31, 2025 was due to $1,786 from our out-licensing of INCRELEX® rights outside of the U.S. and $1,500 from the recognition of a development milestone event associated with our divestiture of DS-200.

Previous wording

During the three months ended September 30, 2025, we incurred $1,112 of research and development (“R&D”) expenses as compared to $505 for the same period in 2024. During the nine months ended September 30, 2025, we incurred $5,985 of R&D expenses as compared to $4,126 for the same period in 2024. The increase was primarily due to a $2,155 NDA filing fee for ET-600 and increased expenses associated with our ET-700 and ET-800 project development activities.

Current wording

During the three months ended March 31, 2026, we incurred $1,875 of research and development (“R&D”) expenses as compared to $1,161 for the same period in 2025. The increase was primarily due to higher clinical study expenses primarily associated with our KHINDIVI™ label expansion and increased expenses associated with our ET-700 project development activities.

Previous wording

G&A expenses consist primarily of employee compensation expenses, legal and professional fees, product marketing expenses, distribution expenses, business insurance, travel expenses, and general office expenses. During the three-month periods ended September 30, 2025 and 2024, we incurred $8,106 and $5,288, respectively, of G&A expenses. During the nine-month periods ended September 30, 2025 and 2024, we incurred $26,963 and $16,035, respectively, of G&A expenses. The increase in G&A expenses during the nine months ended September 30, 2025 was primarily attributable to an increase in product advertising and promotional expenses, higher stock-based compensation expense and an increase in compensation and benefit expenses due to an increase in general and administrative headcount during the current year.

Current wording

G&A expenses consist primarily of employee compensation expenses, legal and professional fees, product marketing expenses, FDA fees, distribution expenses, business insurance, travel expenses, and general office expenses. During the three-month periods ended March 31, 2026 and 2025, we incurred $10,446 and $9,170, respectively, of G&A expenses. The increase in G&A expenses during the three months ended March 31, 2026 was primarily attributable to higher FDA fees as the Company no longer qualifies for the orphan fee exemption and higher employee-related costs due to increased headcount to support the business.

Previous wording

As of September 30, 2025, we had total assets of $104.5 million, cash and cash equivalents of $37.1 million and working capital of $27.8 million. We believe that our cash and cash equivalents on hand, along with continued product revenues, will be sufficient for at least the next twelve months of our operations. However, our projected estimates for our product development spending, administrative expenses, and our working capital requirements could be inaccurate, or we may experience growth more quickly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations.

Current wording

As of March 31, 2026, we had total assets of $97.7 million, cash and cash equivalents of $19.7 million and working capital of $9.1 million.

Previous wording

The following table sets forth a summary of our cash flows for the nine-month periods ended September 30, 2025 and 2024 (dollars in thousands):

Current wording

The following table sets forth a summary of our cash flows for the three-month periods ended March 31, 2026 and 2025 (dollars in thousands):

Previous wording

During the nine months ended September 30, 2025, net cash from operating activities was $22,075 compared to net cash from operating activities of $1,734 during the nine months ended September 30, 2024. The increase in cash from operating activities during the nine months ended September 30, 2025 was primarily due to higher cash collections from product sales, an increase in accrued Medicaid rebates, a filing fee refund from the FDA related to ET-400 and the collection of a licensing milestone payment. During the nine months ended September 30, 2025, net cash used in investing activities was $284 compared to net cash used in investing activities of $1,882 during the nine months ended September 30, 2024. The decrease in net cash used in investing activities was primarily attributable to a $1,868 payment associated with the acquisition of the PKU GOLIKE® product license in March 2024. During the nine months ended September 30, 2025, net cash provided by financing activities was $394 compared to net cash used in financing activities of $979 during the nine months ended September 30, 2024. During the nine months ended September 30, 2025, proceeds from stock option exercises was $394 compared to $176 during the nine months ended September 30, 2024. Additionally, during the nine months ended September 20, 2024, there was $770 in debt repayments compared with zero during the nine months ended September 30, 2025.

Current wording

During the three months ended March 31, 2026, net cash from operating activities was $7,405 compared to $2,090 during the three months ended March 31, 2025. The increase in cash from operating activities during the three months ended March 31, 2026 was primarily due to higher cash collections from product sales and lower cash outlay for inventory purchases. During the three months ended March 31, 2026, net cash used in investing activities was $15,075 and was primarily attributable to a $14,000 payment associated with the acquisition of the U.S. commercial rights to HEMANGEOL® in February 2026 and the $1,000 upfront payment for the licensing of U.S. marketing rights to an ultra-rare disease product candidate (also in February 2026). During the three months ended March 31, 2026, net cash from financing activities was $1,389 compared to $394 during the three months ended March 31, 2025. The increase in net cash from financing activities related to increased proceeds from stock option exercises.

Previous wording

EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share are used and provided by us as non-GAAP financial measures. These non-GAAP financial measures are intended to provide additional information on our performance, operations and profitability. Adjustments to our GAAP figures as well as EBITDA includes non-recurring acquisition or divestiture-related costs, fees related to refinancing activities, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, non-cash interest expense, and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. We maintain an established non-GAAP policy that guides the determination of what costs or gains will be included in non-GAAP adjustments.

Current wording

EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share are used and provided by us as non-GAAP financial measures. These non-GAAP financial measures are intended to provide additional information on our performance, operations and profitability. Adjustments to our GAAP figures as well as EBITDA includes non-recurring acquisition or divestiture-related costs and severance costs, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. We maintain an established non-GAAP policy that guides the determination of what costs or gains will be included in non-GAAP adjustments.

Previous wording

Reconciliations of reported GAAPnet lossto EBITDA, adjusted EBITDA and non-GAAP net income, and the related per share amounts, were as follows (in thousands, except share and per share amounts):

Current wording

Reconciliations of reported GAAPnet income (loss)to EBITDA, adjusted EBITDA and non-GAAP net income, and the related per share amounts, were as follows (in thousands, except share and per share amounts):

Previous wording

While our significant accounting policies are described in more detail in Note 3 to our financial statements included herein, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Current wording

While our significant accounting policies are described in more detail in Note 2 to notes to our financial statements included herein, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Previous wording

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time. For the nine months ended September 30, 2025 and 2024, all revenues recognized in the Condensed Statements of Operations were point in time sales to our customers.

Current wording

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time. For the three months ended March 31, 2026 and 2025, all revenues recognized in the Condensed Statements of Operations were point in time sales to our customers.

Previous wording

Licensing Revenues– The Company recognizes revenues from licensing arrangements primarily associated with product license agreements that could contain development activity milestones and agreements to divest the licensing rights to products or product candidates. At the inception of each licensing agreement, the Company assesses the goods or services promised within the contract to identify performance obligations. If a license to the Company's product rights is determined to be distinct from other promised goods or services, it is accounted for as a separate performance obligation. If a license grants the customer a right to use the Company's product license, revenue is recognized at the point in time when the license is transferred to the customer and the customer has the ability to use and benefit from the product license. Additionally, revenue is recognized from product license agreements with development activity milestones when these development activities occur per the contractual terms of the agreement.

Current wording

Licensing Revenues– We recognize revenues from licensing arrangements primarily associated with product license agreements that could contain development activity milestones and agreements to divest the licensing rights to products or product candidates. At the inception of each licensing agreement, we assess the goods or services promised within the contract to identify performance obligations. If a license to our product rights is determined to be distinct from other promised goods or services, it is accounted for as a separate performance obligation. If a license grants the customer a right to use our product license, revenue is recognized at the point in time when the license is transferred to the customer and the customer has the ability to use and benefit from the product license. Additionally, revenue is recognized from product license agreements with development activity milestones when these development activities occur per the contractual terms of the agreement.

Previous wording

Principal Versus Agent– Under the terms of the transitional services agreement (“TSA”) between us and Ipsen S.A, we evaluate whether our performance obligation is a promise to transfer product to a customer as the principal, or to arrange for product to be provided by another party using a control model as the agent. This evaluation determined that we are not in control of establishing the transaction price, managing all aspects of the shipment process and taking the risk of loss for delivery, collection and returns. Based on the our evaluation of the control model, we determined that our responsibilities under the TSA was as an agent and not the principal, and correspondingly, such revenue related to products sold by Ipsen S.A are reported on a net versus a gross basis.

Current wording

Principal Versus Agent– Under the terms of the transitional services agreement (“TSA”) between us and Ipsen S.A, we evaluated whether our performance obligation is a promise to transfer product to a customer as the principal, or to arrange for product to be provided by another party using a control model as the agent. This evaluation determined that we are not in control of establishing the transaction price, managing all aspects of the shipment process and taking the risk of loss for delivery, collection and returns. Based on our evaluation of the control model, we determined that our responsibilities under the TSA was as an agent and not the principal, and correspondingly, such revenue related to products sold by Ipsen S.A are reported on a net versus a gross basis.

Previous wording

For its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone 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. INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone sales are not subject to returns. Upon recognition of revenue from product sales, the estimated amounts of chargebacks, prompt payment discounts and state Medicaid are included in sales reserves, accrued liabilities and net accounts receivable.

Current wording

For our INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products, we bill 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. INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone product sales are not subject to returns. Upon recognition of revenue from product sales, the estimated amounts of chargebacks, prompt pay discounts and state Medicaid are in sales reserves, accrued liabilities and net accounts receivable.

Previous wording

The Company stores its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone inventory at its pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

Current wording

We store our INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone products inventory at our pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

Previous wording

The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company’s estimates of fair value are based upon assumptions believed to be reasonable but that are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. The Company also uses best estimates and assumptions to determine the useful lives of those acquired intangible assets that have a finite life.

Current wording

We account for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Our estimates of fair value are based upon assumptions believed to be reasonable but that are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.

Previous wording

Critical estimates in valuing certain of the intangible assets acquired include:

Current wording

We amortize finite-lived intangible assets over their estimated useful lives and evaluates indefinite-lived assets for impairment. The determination of useful lives and the timing of impairment assessments require significant judgment and may materially affect our results of operations. Critical estimates in valuing certain of the intangible assets acquired include:

Previous wording

The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation – Stock Compensation. The guidance under ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant and record expense over the related service periods, which are generally the vesting period of the equity awards. Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model (“BSM”).

Current wording

We account for stock-based compensation under the provisions of ASC 718 Compensation – Stock Compensation. The guidance under ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant and record expense over the related service periods, which are generally the vesting period of the equity awards. Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed. The fair value of these awards and assumption inputs are measured using the Black-Scholes option-pricing model (“BSM”).

Previous wording

The Company estimates the fair value of stock-based option awards using the BSM. The BSM requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined from the implied yields for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options or warrants. Dividends on common stock are assumed to be zero for the BSM valuation of the stock options. The expected term of stock options granted is based on vesting periods and the contractual life of the options. Expected volatilities are based on the Company's historical volatility subsequent to our IPO, which we believe represents the most accurate basis for estimating expected future volatility. We account for forfeitures as they occur.

Current wording

We estimate the fair value of stock-based option awards using the BSM. The BSM requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined from the implied yields for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options or warrants. Dividends on common stock are assumed to be zero for the BSM valuation of the stock options. The expected term of stock options granted is based on vesting periods and the contractual life of the options. Expected volatilities are based on our historical volatility subsequent to our IPO, which we believe represents the most accurate basis for estimating expected future volatility. We account for forfeitures as they occur.