eton20260331

eton20260331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _________________ to _______________________

Commission file number: 001-38738

ETON PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		37-1858472
(State of incorporation)		(I.R.S. Employer Identification Number)

21925 W. Field Parkway, Suite 235

Deer Park, Illinois 60010-7278

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (847) 787-7361

Securities registered pursuant to Section

12(b) of the Act

Trading Symbol

Name of each exchange on which

registered

Common stock, $0.001 par value per share

ETON

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 12, 2026, Eton Pharmaceuticals, Inc. had outstanding 27,392,358 shares of common stock, $0.001 par value.

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Eton Pharmaceuticals, Inc.

TABLE OF CONTENTS

Part No	Item No	Description	Page No.

I		FINANCIAL INFORMATION	1

	1	Financial Statements	1

		Condensed Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025	1

		Unaudited Condensed Statements of Operations for the three months ended March 31, 2026 and 2025	2

		Unaudited Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2026 and 2025	3

		Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2026 and 2025	4

		Notes to Condensed Financial Statements	5

	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	3	Quantitative and Qualitative Disclosures About Market Risk	22

	4	Controls and Procedures	23

II		OTHER INFORMATION	24

	1	Legal Proceedings	24

	1A	Risk Factors	24

	2	Unregistered Sales of Equity Securities and Use of Proceeds	24

	3	Defaults Upon Senior Securities	24

	4	Mine Safety Disclosures	24

	5	Other Information	24

	6	Exhibits	24

		Exhibit Index	25

		Signatures	26

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eton Pharmaceuticals, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

	*March 31, 2026*			*December 31, 2025*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	19,661		$	25,942
Accounts receivable, net		13,408			11,757
Inventories, net		14,467			15,419
Prepaid expenses and other current assets		5,709			7,463
Total current assets		53,245			60,581

Property and equipment, net		372			326
Intangible assets, net		43,738			30,878
Operating lease right-of-use assets, net		301			310
Other long-term assets, net		54			19
Total assets	$	97,710		$	92,114

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	13,485		$	10,976
Short-term debt, net of debt discount		11,808			8,789
Accrued Medicaid rebates		11,140			9,317
Accrued liabilities		7,746			9,408
Total current liabilities		44,179			38,490

Long-term debt, net of current portion and debt discount		18,939			21,769
Operating lease liabilities, net of current portion		440			460
Other long-term liabilities		3,537			5,241
Total liabilities		67,095			65,960

Commitments and contingencies (Note 13)

Stockholders’ equity
Common stock, $0.001 par value; 50,000,000 shares authorized; 27,359,791 and 27,047,061 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		27			27
Additional paid-in capital		141,528			138,621
Accumulated deficit		(110,940	)		(112,494	)
Total stockholders’ equity		30,615			26,154

Total liabilities and stockholders’ equity	$	97,710		$	92,114

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

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Eton Pharmaceuticals, Inc.

Condensed Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	*For the three months ended*
	*March 31,*			*March 31,*
	*2026*			*2025*
Revenues:
Licensing revenue	$	—		$	3,286
Product sales and royalties, net		24,266			13,996
Total net revenues		24,266			17,282

Cost of sales:
Licensing revenue		—			825
Product sales and royalties		9,531			6,596
Total cost of sales		9,531			7,421

Gross profit		14,735			9,861

Operating expenses:
Research and development		1,875			1,161
General and administrative		10,446			9,170
Total operating expenses		12,321			10,331

Income (loss) from operations		2,414			(470	)

Other expense:
Interest and other expense, net		(840	)		(1,028	)

Income (loss) before income tax expense		1,574			(1,498	)

Income tax expense		20			74

Net income (loss)	$	1,554		$	(1,572	)
Net income (loss) per share, basic	$	0.06		$	(0.06	)
Weighted average number of common shares outstanding, basic		27,285			26,886
Net income (loss) per share, diluted	$	0.05		$	(0.06	)
Weighted average number of common shares outstanding, diluted		31,547			26,886

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

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Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders’ Equity

For the three months ended March 31, 2026 and 2025

(in thousands, except share amounts)

(Unaudited)

	*Common Stock*				*Additional Paid-in*		*Accumulated*			*Total Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances at December 31, 2025		27,047,061	$	27	$	138,621	$	(112,494	)	$	26,154

Stock-based compensation		—		—		1,518		—			1,518

Stock option exercises and vesting of restricted stock		312,730		—		1,389		—			1,389

Net income		—		—		—		1,554			1,554

Balances at March 31, 2026		27,359,791	$	27	$	141,528	$	(110,940	)	$	30,615

	*Common Stock*				*Additional Paid-in*		*Accumulated*			*Total Stockholders’*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balances at December 31, 2024		26,709,084	$	27	$	132,294	$	(107,893	)	$	24,428

Stock-based compensation		—		—		1,200		—			1,200

Stock option exercises and vesting of restricted stock		108,451		—		394		—			394

Net loss		—		—		—		(1,572	)		(1,572	)

Balances at March 31, 2025		26,817,535	$	27	$	133,888	$	(109,465	)	$	24,450

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

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Eton Pharmaceuticals, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

	*Three months ended*			*Three months ended*
	*March 31, 2026*			*March 31, 2025*
Cash flows from (used in) operating activities
Net income (loss)	$	1,554		$	(1,572	)

Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:
Stock-based compensation		1,518			1,200
Depreciation and amortization		1,131			1,013
Inventory step-up		350			1,142
Excess and obsolete inventory reserve		227			110
Debt discount amortization and non-cash interest expenses		118			294
Non-cash lease expense		9			17
Other operating activity		7			—
Changes in operating assets and liabilities:
Accounts receivable		(1,651	)		(11,039	)
Inventories		1,406			358
Prepaid expenses and other assets		1,754			2,973
Accounts payable		2,508			705
Accrued Medicaid rebates		1,824			6,071
Accrued liabilities		(1,532	)		(1,373	)
Other non-current assets and liabilities		(1,818	)		2,191
Net cash from operating activities		7,405			2,090

Cash flows used in investing activities
Purchases of product license rights		(15,000	)		—
Purchases of property and equipment		(75	)		—
Net cash used in investing activities		(15,075	)		—

Cash flows from financing activities
Proceeds from stock option exercises		1,389			394
Net cash from financing activities		1,389			394

Change in cash and cash equivalents		(6,281	)		2,484
Cash and cash equivalents at beginning of period		25,942			14,936
Cash and cash equivalents at end of period	$	19,661		$	17,420

Supplemental disclosures of cash flow information
Cash paid for interest	$	881		$	642
Cash paid for income taxes	$	37		$	8

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

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 1 — Company Overview

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

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying condensed financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain prior period amount have been reclassified to conform to current year presentation in the condensed financial statements and notes to financial statements.

Unaudited Interim Financial Information

The accompanying interim condensed financial statements are unaudited and have been prepared on the same basis as the audited annual financial statements of the Company and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2026, and the results of its operations and its cash flows for the periods ended March 31, 2026 and 2025. The financial data and other information disclosed in these notes related to the three months ended March 31, 2026 and 2025 are also unaudited. The interim financial statements are condensed and generally do not repeat the disclosures in the annual financial statements. As such, the interim financial statements herein should be read in conjunction with the Company’s latest annual financial statements filed on Form 10-K on March 19, 2026. The results for the three months ended March 31, 2026, are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period.

Use of Estimates

The 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, Medicaid program rebates, valuation of inventories, useful lives of assets and the recoverability of long-lived assets, valuation of deferred tax assets, and the valuation of common stock, stock options, warrants, and restricted stock units (“RSUs”). 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.

Acquisitions

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 accounts for acquisitions that do not meet the definition of a business as an asset acquisition. The determination of whether a transaction represents a business combination or an asset acquisition requires significant judgment, including an evaluation of whether the acquired set includes a substantive process and whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. For transactions accounted for as asset acquisition, the Company allocates the purchase price, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. This allocation requires management to make significant estimates and assumptions, including the selection of valuation methodologies, discount rates, projected cash flows, and useful lives of acquired assets. Changes in these assumptions could result in materially different allocations of the purchase price, which may impact future amortization expense. In addition, because goodwill is not recognized in asset acquisitions, the assignment of value to identifiable intangible assets may be greater than in a business combination.

The Company amortizes 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 the Company’s results of operations. Critical estimates in valuing certain of the intangible assets acquired include:

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 2 — Summary of Significant Accounting Policies (continued)

●

future expected cash flows from customer contracts and license agreements;

●

historical and expected customer attrition rates and anticipated growth in revenues from acquired customers; and

●

discount rates.

Segment Information

The Company operates the business on the basis of a single reportable segment, which includes ten commercial rare disease products: INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone. The Company primarily derives revenues from product sales to a specialty pharmacy customer, AnovoRx, who then provides order fulfillment, inventory storage and distribution services. In September 2025, the Company terminated its agreement with specialty pharmacy, Optime Care, and transitioned order fulfillment, inventory storage and distribution services to AnovoRx. The Company’s chief operating decision-maker (“CODM”) is the Chief Executive Officer, who evaluates the Company’s financial performance and results of operations as a single operating segment. The CODM reviews net income or loss as a measure of segment profit or loss in assessing performance and allocating resources. Segment revenues, expenses and profit or loss is reported on the Condensed Statements of Operations. Additionally, the measure of segment assets is reported on the Company’s Condensed Balance Sheets as total assets.

The Company's revenues and its accounts receivable balances are highly concentrated and consist of sales to and amounts due from AnovoRx for the Company's INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, Carglumic Acid, Betaine Anhydrous and Nitisinone products, as well as from Pentec Health for sales of the Company’s PKU GOLIKE® product. For the three months ended March 31, 2026 and 2025, AnovoRx product sales represented 88.9% and 90.8% of net revenues, respectively. As of March 31, 2026 and December 31, 2025, AnovoRx product sales represented 80.7% and 88.4% of net accounts receivable. During the three months ended March 31, 2026 and 2025, the Company's revenues from external customers were entirely derived from U.S operations. As of March 31, 2026 and December 31, 2025, all long-lived assets were domiciled within the U.S.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in U.S. financial institutions or invested in short-term U.S. 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 minimal.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are recorded net of allowances for credit losses and cash discounts for prompt payment. The Company considers historical collection rates and the current financial status of its customers, as well as macroeconomic and industry-specific factors when evaluating potential credit losses. The Company's accounts receivable balances are highly concentrated with a select number of customers, consisting primarily of specialty pharmacies. Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

Inventories

The Company values its inventories at the lower of cost or net realizable value using the first-in, first-out method of valuation. The Company reviews its inventories for potential excess or obsolete issues on an ongoing basis and records a write-down if an impairment is identified. As of March 31, 2026 and December 31, 2025, inventories consisted of purchased finished goods, semi-finished goods and raw materials.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed utilizing the straight-line method based on the following estimated useful lives. Computer hardware and software is depreciated over three years. Equipment, furniture and fixtures is depreciated over five years. Leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter. Construction in progress is capitalized but not depreciated until it is placed into service.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 2 — Summary of Significant Accounting Policies (continued)

Intangible Assets

The Company has historically capitalized payments it makes for licensed products when the payment is based on Food and Drug Administration (“FDA”) approval or near-term approval for the product and the cost is recoverable based on expected future cash flows from the product. In January 2026, the Company purchased the licensing rights to a product that has not received FDA approval and accordingly, is classified as In-Process Research and Development (“IPR&D”) within Intangible assets, net on the Company's Condensed Balance Sheets as of March 31, 2026. In February 2026, the Company entered into a licensing agreement to acquire the U.S. rights to HEMANGEOL® (propranolol) oral solution from Pierre Fabre Medicament Sas (“Pierre Fabre”), in which the Company paid Pierre Fabre $14,000 upfront. The Company accounted for this transaction as an asset acquisition, and after purchase accounting adjustments for inventory step-up costs of $1,131, and including acquisition related expenses of $100, the Company recorded $12,969 for the HEMANGEOL® intangible asset which is being amortized over its useful life of ten years.

Intangible assets are amortized on a straight-line basis over the estimated useful life of the product commencing on the approval date or the product acquisition date in accordance with ASC 350 — Intangibles - Goodwill and Other. The following table presents the Company's intangible assets as of March 31, 2026 and December 31, 2025:

	Useful Life		Purchase	Purchase		Accumulated		Carrying
Intangible assets as of March 31, 2026	(In years)		Date	Price		Amortization		Value
Carglumic Acid		10	November 2021	$	3,250	$	1,435	$	1,815
Betaine		5	September 2022		2,125		1,505		620
Nitisinone		5	October 2023		650		325		325
GoLike		10	March 2024		1,868		374		1,494
Increlex		10	December 2024		21,250		2,732		18,518
Galzin		10	December 2024		8,119		1,015		7,104
IPR&D asset			January 2026		1,000		—		1,000
HEMANGEOL		10	February 2026		12,969		107		12,862
				$	51,231	$	7,493	$	43,738

	Useful Life		Purchase	Purchase		Accumulated		Carrying
Intangible assets as of December 31, 2025	(In years)		Date	Price		Amortization		Value
Carglumic Acid		10	November 2021	$	3,250	$	1,354	$	1,896
Betaine		5	September 2022		2,125		1,399		726
Nitisinone		5	October 2023		650		292		358
GoLike		10	March 2024		1,868		327		1,541
Increlex		10	December 2024		21,250		2,200		19,050
Galzin		10	December 2024		8,119		812		7,307
				$	37,262	$	6,384	$	30,878

The Company recorded $1,109 and $1,001 of amortization expense for the three months ended March 31, 2026 and March 31, 2025, respectively. The table below shows the estimated remaining amortization for these products for each of the five years from 2026 to 2030 and thereafter.

	*Amortization*
Year	*Expense*
Remainder of 2026	$	3,976
2027		5,377
2028		5,043
2029		4,946
2030		4,946
Thereafter		19,450
Total estimated amortization expense	$	43,738

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the Company’s Condensed Statements of Operations for the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment was recognized during the three-month periods ended March 31, 2026 or 2025.

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred to issue debt are deferred and recorded as a reduction to the debt balance in the accompanying Condensed Balance Sheets. The Company amortizes these costs over the expected term of the related debt under the effective interest method. Debt discounts related to the relative fair value of warrants issued in conjunction with debt are also recorded as a reduction to the debt balance and accreted over the expected term into interest expense using the effective interest method.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 2 — Summary of Significant Accounting Policies (continued)

Leases

The Company accounts for leases in accordance with ASC Topic 842 — Leases. The Company reviews all relevant facts and circumstances 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 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. The Company does not include the impact for lease term options that would extend or terminate the lease unless it is reasonably certain that it will exercise any such options. The Company accounts for the lease components separately from non-lease components for its operating leases.

The Company measures right-of-use assets based on the corresponding lease liabilities adjusted for (i) any prepayments made to the lessor at or before the commencement date, (ii) initial direct costs it incurs, and (iii) any incentives under the lease. In addition, the Company evaluates the recoverability of its right-of-use assets for possible impairment in accordance with its long-lived assets policy.

Operating leases are reflected on the Condensed Balance Sheets as operating lease right-of-use assets, current accrued liabilities and long-term operating lease liabilities. The Company does not have any finance leases as of March 31, 2026 and December 31, 2025.

The 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 over the term of the lease. Variable lease payments are expensed as incurred.

The Company does not recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less; such lease costs are recorded in the Condensed Statements of Operations on a straight-line basis over the lease term.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the successful award of a patent and the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Concentrations of Credit Risk, Sources of Supply and Significant Customers

The Company is subject to credit risk for its cash and cash equivalents, which are invested in money market funds and U.S. treasury bills from time to time. The Company maintains its cash and cash equivalent balances with one major commercial bank and the deposits held with the financial institution exceed the amount of insurance provided on such deposits and are exposed to credit risk in the event of a default by the financial institution holding its cash and cash equivalents to the extent recorded on the Condensed Balance Sheets. The Company believes the associated credit risk to be minimal.

The Company is dependent on third-party suppliers for its products and product candidates. In particular, the Company relies, and expects to continue to rely, on a small number of suppliers to manufacture key chemicals, approved products and process its product candidates as part of its development programs. These programs could be adversely affected by a significant interruption in the manufacturing process.

The 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. The Company's accounts receivables are evaluated to determine if any allowance should be recorded based on consideration of the current economic environment, expectations of future economic conditions, specific circumstances and the Company's historical collection experience. Additionally, 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 any prior customer credit loss experience. Based upon the review of these factors, the Company recorded no allowance for credit losses at March 31, 2026 or December 31, 2025.

Revenue Recognition for Contracts with Customers

The Company accounts for contracts with its customers in accordance with ASC 606 — Revenue from Contracts with Customers. ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determine those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses whether these options provide a material right to the customer and, if so, they are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 2 — Summary of Significant Accounting Policies (continued)

The Company recognizes 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 the Company's customers.

Milestone Payments – If a commercial contract arrangement includes development and regulatory milestone payments, the Company will evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

Royalties – For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

The Company sells its INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products to pharmacy distributor customers which provide order fulfilment and inventory storage/distribution services. 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.

For the Company's INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, 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®, 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.

The Company estimates the transaction price when it receives each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler/distributor arising from all of the above factors. The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns.

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

The state Medicaid rebate and related liability are estimated based on monthly sales, historical experience of claims submitted by the various states and jurisdictions, historical rebate rates and estimated lag time of the rebate invoices.

Cost of Sales

Cost 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, freight and handling/storage from the Company’s 3PL logistics service providers and inventory step-up expense, and amortization expense of certain intangible assets. The costs of sales for profit-sharing, royalty fees, purchased finished products, and the associated inbound freight expense are 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. Intangible assets are amortized on a straight-line basis over the estimated useful life of the product. Cost of product sales also reflects any write-downs or reserve adjustments for the Company’s inventories.

Licensing cost of sales may consist of supply agreements and profit-sharing agreements associated with the Company’s sale of its product licenses to customers. The costs of sales for profit-sharing agreements are recognized upon the achievement of certain development and commercial milestones.

Research and Development Expenses

Research and development (“R&D”) expenses include both internal R&D activities and external contracted services. Internal R&D activity expenses include salaries, benefits and stock-based compensation and other costs to support the Company’s R&D operations. External contracted services include product development efforts such as certain product licensor milestone payments, clinical trial activities, manufacturing and control-related activities and regulatory costs. R&D expenses are charged to operations as incurred. The Company reviews and accrues R&D expenses based on services performed and may, from time to time, make estimates of those costs applicable as to the stage of completion of each project. Actual results could differ from the Company’s estimates. Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses and are expensed as the related goods are delivered or the services are performed.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 2 — Summary of Significant Accounting Policies (continued)

Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as unvested restricted stock, stock options and warrants that are outstanding during the period. Common stock equivalents are excluded from the computation when their inclusion would be anti-dilutive. No such adjustments were made for the three months ended March 31, 2025 as including the effects of common stock equivalents in the diluted earnings per share calculation would have been anti-dilutive. See Note 9 for further information.

Income Taxes

The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes. As part of the process of preparing the Company’s financial statements, the Company must estimate the actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Condensed Balance Sheets. The Company must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, a valuation allowance must be established. To the extent the Company establishes a valuation allowance or increase or decrease to this allowance in a period, the impact will be included in income tax expense in the Condensed Statements of Operations. As of March 31, 2026 and December 31, 2025, the Company has established a 100% valuation reserve against its deferred tax assets. See Note 10 for further information.

Stock-Based Compensation

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.

The Company estimates the fair value of stock-based option awards using the Black-Scholes option-pricing model (“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 initial public offering (“IPO”), which we believe represents the most accurate basis for estimating expected future volatility under the current conditions. The Company accounts for forfeitures as they occur.

Fair Value Measurements

We measure certain of our assets and liabilities at fair value. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value accounting requires characterization of the inputs used to measure fair value into a three-level fair value hierarchy as follows:

Level 1 — Inputs based on quoted prices in active markets for identical assets or liabilities. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Observable inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent from the entity.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available.

Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below take into account the market for the Company’s financials, assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt obligation. The carrying amounts of these financial instruments 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 debt obligation approximates its fair value.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40). Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The standard provides guidance to expand disclosures related to the disaggregation of income statement expenses. The standard requires, in the notes to the financial statements, disclosure of specified information about certain costs and expenses, which includes purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its condensed financial statements.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which makes narrow-scope amendments to various topics within the Accounting Standards Codification to clarify and improve existing guidance. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after January 1, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its condensed financial statements.

Note 3 — Long-Term Debt

SWK Loan

In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Funding LLC (“SWK”), which provided for up to $10,000 in debt financing. As a result of subsequent amendments to the SWK Credit Agreement, the Company expanded its credit facility to $30,000, extended the facility’s maturity to three years from closing with a loan maturity date of December 17, 2027, and reduced the facility’s annual interest rate to Secured Overnight Financing Rate (“SOFR”) plus 6.75%.

Interest payments are payable quarterly, with quarterly principal payments of $3,000 beginning in May 2026 with a final principal payment of $9,000 due at maturity in December 2027. The SWK Credit Agreement includes a 5.0% exit fee payable at maturity and this exit fee payable will be accreted to interest expense in the Company's Statement of Operations using the effective interest expense method. The SWK Credit Agreement contains a mandatory prepayment clause that can compel the Company to partially prepay the loan upon certain triggering events, which the Company has deemed to be remote. Borrowing under the SWK Credit Agreement is secured by the Company's assets, contains customary default provisions, which include limits on additional indebtedness. As of March 31, 2026 and December 31, 2025, the Company was in compliance with all financial covenants.

During the three months ended March 31, 2026 and 2025, the Company recorded interest expense of $1,136 and $1,163, respectively, which included $118 and $294, respectively, of debt discount amortization and non-cash interest expense. The Company had accrued interest of $431 and $425 as of March 31, 2026 and December 31, 2025, respectively, which is included in accrued liabilities in the accompanying Condensed Balance Sheets.

The table below reflects the future payments for the SWK loan principal as of March 31, 2026.

	*Amount*
2026	$	9,000
2027		21,000
Total payments		30,000
Less: unamortized discount		(273	)
Plus: accrued exit fees at March 31, 2026		1,020
Debt, net	$	30,747

Note 4 — Property and Equipment

Property and equipment consist of the following:

	March 31,			December 31,
	2026			2025
Computer hardware and software	$	200		$	200
Furniture and fixtures		262			265
Equipment		87			52
Leasehold improvements		331			295
Property and equipment, gross		880			812
Less: accumulated depreciation and amortization		(508	)		(486	)
Property and equipment, net	$	372		$	326

Depreciation expense for the three months ended March 31, 2026 and 2025 was $22 and $12, respectively.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 5 — Inventory

As of March 31, 2026 and December 31, 2025, inventory consisted of the following

	March 31,			December 31,
	2026			2025
Raw materials	$	542		$	557
Semi-finished goods		7,444			9,431
Finished goods		7,129			6,630
Less: excess and obsolete inventory reserve		(649	)		(1,199	)
Inventory, net	$	14,467		$	15,419

Inventory reserves were $649 and $1,199 at March 31, 2026 and December 31, 2025, respectively.

Note 6 — Common Stock

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

During the three months ended March 31, 2026, the Company issued 312,730 shares of its common stock resulting from stock option exercises and vesting of restricted stock units under its 2018 Equity Incentive Plan as amended in December 2020 (the “2018 Plan”). During the three months ended March 31, 2025 the Company issued 108,451 shares of its common stock resulting from stock option exercises under its 2018 Plan.

Note 7 — Common Stock Warrants

The Company’s outstanding warrants to purchase shares of its common stock at March 31, 2026 are summarized in the table below.

Description of Warrants	*Warrant Issuance Date*	*No. of Shares*		*Exercise Price*
SWK Warrants – Debt – Tranche #1	11/13/2019		51,239	$	5.86
SWK Warrants – Debt – Tranche #2	8/11/2020		18,141	$	6.62
SWK Warrants – Debt – Tranche #3	9/30/2024		289,736	$	5.32
*Total shares and weighted average exercise price*			359,116	$	5.46

The holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under the Securities Act of 1933, as amended (the “Securities Act”)of their shares that are converted to common stock, including demand registration rights and piggyback registration rights. These rights are provided under the terms of a registration rights agreement between the Company and the investors. The issuance of these warrants was accounted for as equity and the fair value of the warrants issued were classified to additional paid-in capital in the Company's Condensed Balance Sheets.

Note 8 — Share-Based Payment Awards

In November 2018, the Company’s stockholders and board of directors approved the 2018 Plan which succeeded the 2017 Plan. The 2018 Plan was amended by the board of directors in December 2020. 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 1,301,548 shares available for future issuance under the 2018 Plan as of March 31, 2026.

All stock options issued have been non-qualified stock options and the exercise price was the closing stock price of the Company's common stock on the date of grant. Non-qualified stock options typically have a ten-year life and non-qualified stock options that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards under the 2018 Plan. In addition, the 2018 Plan provides that commencing January 1, 2019 and through January 1, 2028, the share reserve will be increased by 4% of the total number of shares outstanding as of the preceding December 31, subject to a reduction at the discretion of the Company’s board of directors. On January 1, 2025, the share reserve was increased by 1,068,323 shares based on the 26,709,084 shares of common stock outstanding at December 31, 2024. On January 1, 2026, the share reserve was increased by 1,081,882 shares based on the 27,047,061 shares of common stock outstanding at December 31, 2025.The exercise price for stock options granted is not less than the fair value of common stock as of the date of grant. The Company uses the closing stock price on the date of grant as the exercise price.

For the three months ended March 31, 2026 and 2025, the Company’s total stock-based compensation expense was $1,518 and $1,200, respectively. Of these amounts, $1,469 and $1,161 were recorded in general and administrative (“G&A”) expenses during the three months ended March 31, 2026 and 2025, respectively, and $49 and $39 were recorded in research and development expenses for the three months ended March 31, 2026 and 2025, respectively.

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Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 8 — Share-Based Payment Awards (continued)

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2026:

Weighted

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

Shares

Price

Term (Yrs)

Value

Outstanding as of December 31, 2025

5,911,521

5.35

Issued

504,674

16.01

Exercised

SEC Form 10-Q filed by Eton Pharmaceuticals Inc.