What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-12 · 458 added, 408 removed, 429 unchanged (67% of the section changed)

1 unchanged sentence

Eton Pharmaceuticals, Inc.

Condensed Balance Sheets

Condensed Balance Sheet

(in thousands, except share and per share amounts)

September 30, 2024

March 31, 2025

December 31, 2024

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Accounts receivable, net

Inventories, net

13,621 15,232

Prepaid expenses and other current assets

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Intangible assets, net

33,880 34,881

Operating lease right-of-use assets, net

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$ 4,872 $ 4,167

Debt, net of unamortized discount

Accrued Medicaid rebates

Other accrued liabilities

Accrued liabilities

Total current liabilities

25,350 19,947

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

29,992 29,811

Operating lease liabilities, net of current portion

Other long-term liabilities

Total liabilities

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50,000,000 shares authorized;

25,836,204 and 25,688,062 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

26,817,535 and 26,709,084 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

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For the three months ended

For the nine months ended

September 30,

Licensing revenue

$ 500 $ — $ 500 $ 5,500

Product sales and royalties

9,824 7,028 26,864 18,829

Product sales and royalties, net

Total net revenues

10,324 7,028 27,364 24,329

Cost of sales:

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Product sales and royalties

3,752 2,625 10,159 6,898

Total cost of sales

4,022 2,625 10,429 6,898

6,302 4,403 16,935 17,431

Operating expenses:

Research and development

505 615 4,126 2,275

General and administrative

5,288 4,336 16,035 14,355

Total operating expenses

5,793 4,951 20,161 16,630

Income (loss) from operations

509 ( 548 ) ( 3,226 ) 801

Other income (expense):

Interest expense, net

( 8 ) ( 31 ) ( 71 ) ( 281 )

Total other income (expense)

( 8 ) ( 31 ) ( 71 ) 519

Income (loss) before income tax expense

501 ( 579 ) ( 3,297 ) 1,320

Income tax expense (benefit)

Loss from operations

( 470 ) ( 800 )

Net income (loss)

Other expense:

Interest and other expense, net

( 1,028 ) ( 11 )

Net income (loss) per share, basic

Loss before income tax expense

( 1,498 ) ( 811 )

Weighted average number of common shares outstanding, basic

Income tax expense

$ ( 1,572 ) $ ( 811 )

Net income (loss) per share, diluted

Net loss per share, basic and diluted

$ ( 0.06 ) $ ( 0.03 )

Weighted average number of common shares outstanding, diluted

Weighted average number of common shares outstanding, basic and diluted

26,886 25,763

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Condensed Statements of Stockholders ’ Equity

For the three months ended September 30, 2024 and 2023

(in thousands, except share amounts)

Additional Paid-in

Total Stockholders’

Balances at June 30, 2024

Stock-based compensation

Stock option exercises and vesting of restricted stock units

Relative fair value of warrants issued in connection with debt

Balances at September 30, 2024

Additional Paid-in

Total Stockholders’

Balances at June 30, 2023

Stock-based compensation

Stock option exercises and vesting of restricted stock units

Balances at September 30, 2023

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders ’ Equity

For the nine months ended September 30, 2024 and 2023

For the three months ended March 31, 2025 and 2024

(in thousands, except share amounts)

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Balances at December 31, 2024

26,709,084 $ 27 $ 132,294 $ ( 107,893 ) $ 24,428

Stock-based compensation

Employee stock purchase plan

Stock option exercises and vesting of restricted stock units

Relative fair value of warrants issued in connection with debt

Balances at September 30, 2024

— — 1,200 — 1,200

Stock option exercises

108,451 — 394 — 394

— — — ( 1,572 ) ( 1,572 )

Balances at March 31, 2025

26,817,535 $ 27 $ 133,888 $ ( 109,465 ) $ 24,450

Additional Paid-in

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Balances at December 31, 2023

25,688,062 $ 26 $ 119,521 $ ( 104,070 ) $ 15,477

Stock-based compensation

Employee stock purchase plan

Stock option exercises and vesting of restricted stock units

Shares withheld related to net share settlement of stock option exercises

Balances at September 30, 2023

— — 821 — 821

Stock option exercises

2,500 — 7 — 7

— — — ( 811 ) ( 811 )

Balances at March 31, 2024

25,690,562 $ 26 $ 120,349 $ ( 104,881 ) $ 15,494

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

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(In thousands)

Nine months ended

September 30, 2024

September 30, 2023

Three months ended

March 31, 2025

March 31, 2024

Cash flows from operating activities

Net Income (loss)

$ ( 1,572 ) $ ( 811 )

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

Adjustments to reconcile net loss to net cash from operating activities:

Stock-based compensation

Depreciation and amortization

Inventory step-up

Non-cash lease expense

Debt discount amortization

Debt discount amortization and non-cash interest expenses

Changes in operating assets and liabilities:

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Accrued Medicaid rebates

Other accrued liabilities

Accrued liabilities

( 1,373 ) ( 1,639 )

Other non-current assets and liabilities

Net cash from operating activities

2,090 ( 2,473 )

Cash flows from investing activities

4 unchanged sentences

Repayment of long-term debt

( 1,155 ) ( 770 )

Proceeds from employee stock purchase plan and stock option exercises

Payment of tax withholding related to net share settlement of stock option exercises

Proceeds from stock option exercises

Net cash from financing activities

( 979 ) ( 663 )

Change in cash and cash equivalents

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Cash paid for income taxes

Right-of-use assets and liabilities obtained due to lease renewal

Supplemental disclosures of non-cash transactions in investing and financing activities

Relative fair value of warrants issued in connection with debt

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

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Note 1 — Company Overview

Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases.

The Company currently has five commercial rare disease products:

ALKINDI SPRINKLE® for the treatment of pediatric adrenocortical insufficiency;

Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency;

Betaine Anhydrous for the treatment of homocystinuria;

Nitisinone for the treatment of hereditary tyrosinemia type 1 (HT- 1 );

and PKU GOLIKE® medical formula for patients with phenylketonuria (“PKU”).

The Company has three additional product candidates in late-stage development:

ET- 400, ET- 600, and ZENEO® hydrocortisone autoinjector.

Eton Pharmaceuticals, Inc.

is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases.

The Company currently has seven commercial rare disease products:

INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone.

The Company has six additional product candidates in late-stage development:

ET- 400, ET- 600, Amglidia®, ET- 700, ET- 800 and ZENEO® hydrocortisone autoinjector.

Note 2 — Liquidity Considerations

The Company believes its existing cash and cash equivalents of $ 20,261 as of September 30, 2024 in addition to revenues from products will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report.

The Company believes its existing cash and cash equivalents of $ 17,420 as of March 31, 2025 in addition to revenues from products will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report.

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

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If the Company experiences delays in product development or sales growth, obtaining regulatory approval for its other product candidates, or is unable to secure such additional financing, it might need to scale back operations.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies

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The Company has prepared the accompanying condensed financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).

Certain prior period amounts, have been reclassified to conform to current year presentation in the condensed financial statements and notes to financial statements and these reclassifications had no impact to prior period condensed 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 financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2024 , and the results of its operations and its cash flows for the periods ended September 30, 2024 and 2023 .

The financial data and other information disclosed in these notes related to the three -month and nine -month periods ended September 30, 2024 and 2023 are also unaudited.

The results for the three -month and nine -month periods ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 , any other interim periods, or any future year or period.

The accompanying interim condensed financial statements are unaudited and have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2025, and the results of its operations and its cash flows for the periods ended March 31, 2025 and 2024.

The financial data and other information disclosed in these notes related to the three -month periods ended March 31, 2025 and 2024 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 18, 2025.

The results for the three -month periods ended March 31, 2025 are not necessarily indicative of results to be expected for the year ending December 31, 2025, 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, provisions for uncollectible receivables, chargebacks and sales returns, Medicaid program rebates, valuation of inventories, useful lives of assets and the recoverability of long-lived assets, valuation of deferred tax assets, the accrual of research and development expenses and milestones, and the valuation of stock options, warrants, and restricted stock units (“RSUs”).

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.

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Actual results could differ from those estimates or assumptions.

The Company evaluates each of its acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805” ), to determine whether the transaction is a business combination or an asset acquisition.

In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first performs a screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition.

If this is not the case, the Company then further evaluates whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

If so, the Company concludes that the acquired set is a business.

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 these assumptions 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.

During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

Segment Information

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

The Company’s chief operating decision-maker is the Chief Executive Officer (“CEO”), who evaluates the Company as a single operating segment.

The Company operates the business on the basis of a single reportable segment, which includes seven commercial rare disease products:

INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone.

The Company derives revenues from product sales to specialty pharmacy customers, who then provide order fulfillment, inventory storage and distribution services.

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 balance sheet 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 and Optime Care for the Company's INCRELEX®, ALKINDI SPRINKLE®, Carglumic Acid, GALZIN® and Betaine Anhydrous products, as well as from Pentec Heath for sales of the Company’s PKU GOLIKE® product.

For the three months ended March 31, 2025 and 2024, AnovoRx product sales represented 90.8 % and 97.7 % of net product revenues, respectively.

As of March 31, 2025 and December 31, 2024 , AnovoRx product sales represented 59.2 % and 92.2 % of net accounts receivable.

As of March 31, 2025 and December 31, 2024 , all long-lived assets were domiciled within the U.S.

Cash and Cash Equivalents

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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.

As of September 30, 2024 , the Company’s cash is in a non-interest-bearing account and a government money market fund.

financial institutions or invested in high-grade money market funds.

As of March 31, 2025 and December 31, 2024, the Company’s cash is in a non-interest-bearing account and a high-grade money market fund.

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

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

Accounts receivable are recorded net of allowances for credit losses, cash discounts for prompt payment, distribution fees, chargebacks, rebates, and returns.

The total for these reserves amounted to $ 229 and $ 129 as of September 30, 2024 and December 31, 2023 , respectively.

The Company considers historical collection rates and the current financial status of its customers, as well as information from internal and external sources, macroeconomic and industry-specific factors, current conditions, and reasonable and supportable forecasts when evaluating potential credit losses.

Accounts receivable are recorded net of allowances for credit losses, cash discounts for prompt payment, distribution fees, chargebacks and returns and allowances.

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.

Historically, the Company's accounts receivable balances have been highly concentrated with a select number of customers, consisting primarily of specialty pharmacies and large wholesale pharmaceutical distributors.

Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

The total for all accounts receivable reserves was $ 262 and $ 238 as of March 31, 2025 and December 31, 2024 , respectively.

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 will record a write-down if an impairment is identified.

Inventories at September 30, 2024 and December 31, 2023 , consist solely of purchased finished goods.

At September 30, 2024 and December 31, 2023 , inventories are shown net of reserves for ALKINDI SPRINKLE® of $ 72 and $ 76 , respectively, due to the risk of expiry before this entire stock of inventories is sold.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

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, 2025 and December 31, 2024 , inventories consisted of purchased finished goods, semi-finished goods and raw materials.

At March 31, 2025 , inventories are shown net of a reserve for Nitisinone, Betaine Anhydrous, GALZIN®, ALKINDI SPRINKLE® and PKU GOLIKE® inventory.

As of March 31, 2025 and December 31, 2024, inventories included $ 5,000 in prepaid raw materials acquired in the INCRELEX® business acquisition as the Company will take title and possession to the raw materials on June 19, 2025.

At December 31, 2024 inventories are shown net of a reserve for Nitisinone, Betaine Anhydrous, ALKINDI SPRINKLE® and PKU GOLIKE® inventory.

There was an inventory reserve of $ 695 and $ 605 at March 31, 2025 and December 31, 2024 , respectively.

Property and Equipment

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Equipment, furniture and fixtures is depreciated over five years.

and leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter.

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.

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

Depreciation expense for the three -month periods ended March 31, 2025 and 2024 was $ 12 and $ 14 , respectively.

Intangible Assets

The Company capitalizes payments it makes for licensed products when the payment relates to a U.S.

Food and Drug Administration (“FDA”)-approved 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.

The 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 or the product acquisition date in accordance with 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 years.

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In March 2024 , the Company purchased the rights for its PKU GOLIKE® product which resulted in a $ 1,868 intangible asset that is being amortized over ten years.

The intangible assets, net on the Company’s balance sheet, reflected $ 2,039 of accumulated amortization as of September 30, 2024 .

The Company recorded $ 267 and $ 753 , respectively, of amortization expense for the three and nine -month periods ended September 30, 2024 .

In December 2024, the Company completed a business combination of INCRELEX® (mecasermin injection) that included a marketed product intangible of $ 21,250 and that cost is being amortized over ten years.

In December 2024, the Company acquired GALZIN® (zinc acetate) for $ 8,119 and that cost is being amortized over ten years.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

The intangible assets, net on the Company’s Condensed Balance Sheet, reflected $ 3,382 and $ 2,381 of accumulated amortization as of March 31, 2025 and December 31, 2024 .The Company recorded $ 1,001 and $ 220 , respectively, of amortization expense for the three months ended March 31, 2025 and 2024 , respectively.

The table below shows the estimated remaining amortization for these products for each of the five years from 2025 to 2029 and thereafter.

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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 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 nine -month periods ended September 30, 2024 or 2023 .

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, 2025 or 2024 .

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 balance sheets.

Costs incurred to issue debt are deferred and recorded as a reduction to the debt balance in the accompanying Condensed Balance Sheet.

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 interested method.

The fair value of warrants related to the issuance of a delayed draw term loan commitment is capitalized as short-term assets.

Once a draw is made, the unamortized asset is reclassified as a reduction to the related debt balance and amortized into interest expense under the effective interest method.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

The Company accounts for leases in accordance with ASC Topic 842 — Leases.

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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 balance sheets as operating lease right-of-use assets, current accrued liabilities, and long-term operating lease liabilities.

The Company did not have any finance leases as of September 30, 2024 or December 31, 2023 .

Operating leases are reflected on the Condensed Balance Sheet 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, 2025 and December 31, 2024 .

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.

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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 statements of operations on a straight-line basis over the lease term.

such lease costs are recorded in the Condensed Statements of Operations on a straight-line basis over the lease term.

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.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

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 high-grade money market funds and short-term U.S.

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 is exposed to credit risk in the event of a default by the financial institutions holding its cash and cash equivalents to the extent recorded on the balance sheets.

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 is exposed to credit risk in the event of a default by the financial institutions holding its cash and cash equivalents to the extent recorded on the Condensed Balance Sheet.

The Company believes the associated credit risk to be minimal.

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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.

Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

Based upon the review of these factors, the Company did not record an allowance for credit losses at September 30, 2024 or 2023 .

The accounts receivable balance at September 30, 2024 and December 31, 2023 , and product sales revenue recognized during the nine -month periods ended September 30, 2024 and 2023 , primarily consist of sales to and amounts due from AnovoRx for sales of the Company’s ALKINDI SPRINKLE® and Carglumic Acid products.

AnovoRx sales made up 93.6 % of total net revenues recognized in the nine -month period ended September 30, 2024 and 98.5 % of net accounts receivable as of September 30, 2024 , and 72.9 % of total net revenues recognized in the nine -month period ended September 30, 2023 , and 97.4 % of net accounts receivable as of December 31, 2023 .

Given the size and creditworthiness of these customers, we have not experienced and do not expect to experience material credit losses.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 3 — Summary of Significant Accounting Policies (continued)

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, 2025 or December 31, 2024 .

Revenue Recognition for Contracts with Customers

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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 the entity expects to receive in exchange for those goods or services.

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:

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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 determines those that are performance obligations to assess whether each promised good or service is distinct.

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 determines 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.

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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.

The Company recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

Any amounts received prior to revenue recognition will be recorded as deferred revenue.

Amounts expected to be recognized as revenue within the twelve months following the balance sheet date will be classified as current portion of deferred revenue in the Company’s balance sheets.

Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as long-term deferred revenue, net of current portion.

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.

Renewal options that provide a material right are treated as a separate performance obligation, allocated a portion of the transaction price and related revenue is deferred until the option is exercised or the option expires unused.

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.

Milestone Payments – If a commercial contract arrangement includes development 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.

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.

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.

Significant Financing Component – In determining the transaction price, the Company will adjust consideration for the effects of the time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees will be more than one year.

The Company sells its ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, Nisitinone, and PKU GOLIKE® products to pharmacy distributor customers which provide order fulfilment and inventory storage/distribution services.

The Company sells its INCRELEX®, ALKINDI SPRINKLE®, 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 may sell products in the U.S.

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

For its ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, Nisitinone, and PKU GOLIKE® 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 estimated and 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.

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.

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.

Eton Pharmaceuticals, Inc.

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Note 3 — Summary of Significant Accounting Policies (continued)

The Company stores its ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, Nisitinone, and PKU GOLIKE® inventory at its pharmacy distributor customer locations, and revenue is recorded when stock is pulled and shipped to fulfill specific orders.

For its INCRELEX®, ALKINDI SPRINKLE®, 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.

Selling prices initially billed to wholesalers may be 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.

The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns.

The Company stores its INCRELEX®, ALKINDI SPRINKLE®, 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.

The Company may recognize revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location.

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Upon recognition of revenue from product sales, the estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, state Medicaid and GPO fees are included in sales reserves, accrued liabilities and net accounts receivable.

As of September 30, 2024 and December 31, 2023 , estimated state Medicaid liability was $ 8,047 and $ 3,627 , respectively.

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

If these amounts end up differing from its estimates, it will make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings in the period of adjustment.

The 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

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

Cost of licensing revenue consists of the profit-sharing fees related to the Company’s product licensing and development partners.

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.

For the three months ended March 31, 2025, the Company recognized $ 825 in license cost of sales associated with the recognition of a development milestone related to the August 2024 sale of its DS- 200 product candidate.

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, stock-based compensation, and other costs to support the Company’s R&D operations.

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 relies upon estimates of those costs applicable to the stage of completion of each project.

Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

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.

Upfront payments and milestone payments made for the licensing of products that are not yet approved by the FDA are expensed as R&D in the period in which they are incurred.

Upfront payments and milestone payments made for the licensing of technology for products that are not yet approved by the FDA are expensed as R&D in the period in which they are incurred.

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.

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 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 statements of operations.

As of September 30, 2024 and December 31, 2023 , the Company has established a 100 % valuation reserve against its deferred tax assets.

The Company recorded income tax benefit o f ($ 126 ) an d zero for the three -month periods ended September 30, 2024 and 2023 , respectively.

The Company recorded income tax benefit o f ($ 72 ) an d zero for the nine -month periods ended September 30, 2024 and 2023 , respectively.

Our effective tax rate was ( 25.1 %) for the three -month period ended September 30, 2024 and zero for the three month period ended September 30, 2023.

Our effective tax rate was 2.4 % for the nine -month period ended September 30, 2024 and zero for the nine -month period ended September 30, 2023 .

The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes.

As of September 30, 2024 and December 31, 2023 , there were no unrecognized tax benefits included in the balance sheets that would, if recognized, affect the effective tax rate.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties in its balance sheets at September 30, 2024 and December 31, 2023 , and has not recognized interest and penalties in the statement of operations for the nine -month periods ended September 30, 2024 and 2023 .

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change (by value) in its equity ownership over a three -year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

Income (Loss) Per Share

Basic net income (loss) per share of common stock is computed by dividing net income (loss) attributable to common stockholders for the period by the weighted average number of shares of common stock 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, RSUs and warrants that are outstanding during the period.

Income (Loss) Per Shar e

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.

For the three -month periods ended September 30, 2024 and 2023 , common stock equivalents excluded 4,896,038 and 5,618,663 , respectively, that were anti-dilutive.

For the nine -month periods ended September 30, 2024 and 2023 , common stock equivalents excluded 6,319,907 and 4,821,906 , respectively, that were anti-dilutive.

Included in the basic and diluted net income (loss) per share calculation are RSUs awarded to directors that have vested, but the issuance and delivery of the shares of common stock are deferred until the director retires from service as a director.

No such adjustments were made for 2025 or 2024 as the Company reported a net loss for the three months ended March 31, 2025 and 2024 and including the effects of common stock equivalents in the diluted earnings per share calculation would have been anti-dilutive (see Note 8 ).

Eton Pharmaceuticals, Inc.

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Note 3 — Summary of Significant Accounting Policies (continued)

The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes.

These differences result in deferred tax assets and liabilities, which are included within the Condensed Balance Sheet.

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, 2025 and December 31, 2024 , the Company has established a 100 % valuation reserve against its deferred tax assets.

See Note 9 for further information.

Stock-Based Compensation

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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”).

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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 under the current conditions.

We account for forfeitures as they occur.

The Company accounts for forfeitures as they occur.

Fair Value Measurements

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Impact of Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023 - 07 Segment Reporting - Improving Reportable Segment Disclosures.

The standard requires enhanced disclosures of a public company's significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), and any additional measures of a segment's profit or loss used by the CODM when making resource allocation decisions, including for companies with a single reportable segment.

The standard is effective for public companies for annual periods after December 15, 2023 and in interim periods in 2025, with early adoption permitted.

The Company is continuing to assess the potential impacts of the amendments, and it does not expect this pronouncement to have a material effect on its financial statements as the Company only has one reportable segment.

In December 2023, the FASB issued ASU No.

2023 - 09, Income Taxes - Improvements to Income Tax Disclosures.

The standard requires enhanced income tax disclosures, including the effective tax rate reconciliation and income taxes paid, amongst others.

The standard will be effective for public companies for annual periods beginning in 2025, with early adoption permitted.

The Company is currently assessing the impact of adopting this guidance on its financial statements.

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The amendments are effective for the Company's annual periods beginning January 1, 2025, with early adoption permitted, and may be applied either prospectively or retrospectively.

The Company is assessing the guidance, noting the adoption impacts disclosure only.

In November 2024, the FASB issued 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 assessing the guidance, noting the adoption impacts disclosure only.

Eton Pharmaceuticals, Inc.

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(in thousands, except share and per share amounts)

Note 4 – Property and Equipment

Property and equipment consist of the following:

September 30,

Computer hardware and software

Furniture and fixtures

Leasehold improvements

Construction in Progress

accumulated depreciation

( 434 ) ( 395 )

Property and equipment, net

Depreciation expense for the three -month periods ended September 30, 2024 and 2023 was $ 12 and $ 9 , respectively.

Depreciation expense for the nine -month periods ended September 30, 2024 and 2023 was $ 38 and $ 32 , respectively.

Note 4 — Long-Term Debt

In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Holdings Corporation (“SWK”) which provided for up to $ 10,000 in financing.

The Company received proceeds of $ 5,000 at closing and borrowed an additional $ 5,000 upon the FDA approval of a second product developed by the Company.

In March 2020, the Company and SWK amended the SWK Credit Agreement, and the Company borrowed an additional $ 2,000 in August 2020.

The term of the SWK Credit Agreement is for five years, and borrowings bear interest at a rate of LIBOR 3 -month plus 10.0 %, subject to a stated LIBOR floor rate of 2.0 %.

A 2.0 % unused credit limit fee was assessed during the first twelve months after the date of the SWK Credit Agreement and loan fees include a 5.0 % exit fee based on the principal amounts drawn which is payable at the end of the term of the SWK Credit Agreement.

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 limit additional indebtedness.

In connection with the initial $ 5,000 borrowed under the SWK Credit Agreement, the Company issued warrants to SWK to purchase 51,239 shares of the Company’s common stock with an exercise price of $ 5.86 per share.

The relative fair value of these warrants was $ 226 and was estimated using BSM with the following assumptions:

In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK, which provided $ 10,000 in debt financing.

In March 2020 and April 2022, the Company and SWK entered into amendments to the SWK Credit Agreement.

In November 2019, the Company issued warrants to SWK to purchase 51,239 shares of the Company’s common stock with an exercise price of $ 5.86 per share.

The relative fair value of these 51,239 warrants was $ 226 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:

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

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and a risk-free interest rate of 1.8 %.

In connection with the additional $ 2,000 borrowed in August 2020, the Company issued warrants for 18,141 shares of its common stock at an exercise price of $ 6.62 per share.

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

In August 2020, the Company issued additional warrants for 18,141 shares of its common stock at an exercise price of $ 6.62 per share.

The relative fair value of the 18,141 warrants was $ 94 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:

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

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and a risk-free interest rate of 0.4 %.

These warrants (the “SWK Warrants”) are exercisable immediately and have a term of seven years from the date of issuance.

The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to adjustment in connection with stock splits, dividends, reclassifications and other conditions.

In September 2024, the Company and SWK entered into a subsequent amendment to the SWK Credit Agreement.

Under the terms of the amendment, the Company expanded its existing credit facility by $ 25,700 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 %.

In connection with the amendment to the SWK Credit Agreement, the Company issued a warrant to the SWK for the purchase of up to 289,736 shares of common stock at a price of $ 5.32 per share.

The relative fair value of these 289,7369 warrants was $ 1,170 and was estimated using the BSM with the following assumptions:

fair value of the Company’s common stock at issuance of $ 6.00 per share with an exercise price of $5.32;

seven -year contractual term;

63.8 % volatility;

0 % dividend rate;

and a risk-free interest rate of 3.67 %.

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 amended 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 Condensed Statement of Operations using the effective interest expense method.

The amended 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 amended SWK Credit Agreement is secured by the Company's assets, contains customary default provisions, which include limits on additional indebtedness.

As of March 31, 2025 and December 31, 2024 , the Company was in compliance with all financial covenants.

The Company recorded interest expense of $ 1,163 and $ 238 for the three months ended March 31, 2025 and 2024, respectively, which included $ 294 and $ 25 , respectively of debt discount and non-cash interest expense.

During the three months ended March 31, 2025, debt discount amortization and accrued exit fees was $ 56 and $ 126 , respectively, associated with the SWK Credit Agreement and $ 112 was associated with interest expense accretion on the $ 5,000 deferred consideration due to Ipsen S.A (See Note 12 for further discussion).

As of March 31, 2025 and December 2024, the Company had accrued interest of $ 409 and $ 182 , respectively, which is included in accrued liabilities in the accompanying Condensed Balance Sheet.

The table below reflects the future payments for the SWK loan principal and interest as of March 31, 2025 .

Total payments

unamortized discount

accrued exit fees at March 31, 2025

Debt, net of unamortized discount and accrued exit fees

Note 5 — 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, 2025 , the Company issued 108,451 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan as amended in December 2020.

In March 31, 2024 the Company issued 2,500 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan.

Eton Pharmaceuticals, Inc.

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(in thousands, except share and per share amounts)

Note 5 — Long-Term Debt (continued)

In April 2022, the Company and SWK further amended the SWK Credit Agreement to allow for a deferral of loan principal payments until May 2023 and reduce the interest rate to LIBOR 3 -month plus 8.0 %, subject to a stated LIBOR floor rate of 2.0 %.

Because LIBOR was phased out as of June 30, 2023, the Company amended the Credit Agreement in August 2023 to refer to the secured overnight financing rate ("Term SOFR"), with an interest rate of Term SOFR plus 8.26 %, subject to a stated Term SOFR floor rate of 5.0 %.

In September 2024, the Company and SWK further amended the SWK Credit Agreement to extend the maturity date of the existing loan to December 31, 2024 and expand the credit facility by $ 25,695 to $ 30,000 , contingent upon closing of the October 2024 purchase agreement for Increlex® (see Note 12 ).

Under the terms of the amendment, the facility’s maturity will be extended to 3 years from closing of the October 2024 purchase agreement and reduce the annual interest rate to Term SOFR plus 6.75 % with no change to the Term SOFR floor rate of 5.0 %.

In accordance with the change, the Company has classified $ 4,125 as principal due in the next 12 months in its balance sheet at September 30, 2024 .

In connection with the additional $ 25,695 to be borrowed at closing of the October 2024 purchase agreement, the Company has agreed to issue warrants for 289,736 shares of its common stock at an exercise price of $ 5.32 per share.

The pro rata fair value of the warrants related to the extension of the debt is deferred and recorded as a reduction to the debt balance in the accompanying balance sheets, and the Company amortizes these costs over the expected term of the related debt under the effective interest method.

The pro rata fair value of the warrants related to the issuance of a delayed draw term loan commitment is capitalized as short-term assets.

Once a draw is made, the unamortized asset is reclassified as a reduction to the related debt balance and amortized into interest expense under the effective interest method.

All warrants (the “SWK Warrants”) are exercisable upon issuance and have a term of seven years from the date of issuance.

The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to change in connection with stock splits, dividends, reclassifications and other conditions.

Interest expense of $ 211 was recorded during the three months ended September 30, 2024 , which included $ 22 of debt discount amortization.

Interest expense of $ 267 was recorded during the three months ended September 30, 2023 , which included $ 29 of debt discount amortization.

Interest expense of $ 672 was recorded during the nine months ended September 30, 2024 , which included $ 70 of debt discount amortization.

Interest expense of $ 805 was recorded during the nine months ended September 30, 2023 , which included $ 90 of debt discount amortization.

As of September 30, 2024 , $ 408 of accrued interest is included in accrued liabilities.

As of December 31, 2023 , $ 332 of accrued interest is included in accrued liabilities.

The table below reflects the future payments for the SWK loan principal and interest as of September 30, 2024 .

Remainder of 2024

amount representing interest

Loan payable, gross

unamortized discount

Debt, net of unamortized discount

Eton Pharmaceuticals, Inc.

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(in thousands, except share and per share amounts)

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 nine months ended September 30, 2024 , the Company issued 2,500 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan as amended in December 2020.

In June 2024 the Company issued 55,240 shares of its common stock to employees in accordance with its 2018 Employee Stock Purchase Plan (“ESPP”) (see Note 8 ), and in July 2024 the Company issued 90,402 shares of its common stock resulting from the vesting of restricted stock units.

During the nine months ended September 30, 2023 , the Company issued 298,528 shares of its common stock resulting from cash and non-cash stock option exercises under its 2018 Equity Incentive Plan (see Note 8 ) and from the vesting of restricted stock units.

The Company withheld 50,867 shares for payroll tax obligations totaling $ 181 for the nine months ended September 30, 2023 .

In June 2023 the Company issued 57,616 shares of its common stock to employees in accordance with its ESPP (see Note 8 ).

Note 6 — Common Stock Warrants

The Company’s outstanding warrants to purchase shares of its common stock at September 30, 2024 are summarized in the table below.

The Company’s outstanding warrants to purchase shares of its common stock at March 31, 2025 are summarized in the table below.

Description of Warrants

Warrant Issuance Date

Exercise Price

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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”) for their shares that are converted to common stock, including demand registration rights and piggyback registration rights.

The holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under 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 third tranche of warrants is not yet exercisable at September 30, 2024 and would become exercisable when the term loan is drawn upon closing of the October 2024 purchase agreement for Increlex® (see Note 5 ).

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 7 — Share-Based Payment Awards

The Company adopted the Eton Pharmaceuticals, Inc.

2017 Equity Incentive Plan (the “2017 Plan”), which authorized the issuance of up to 5,000,000 shares of the Company’s common stock, and in 2018 it adopted the 2018 Equity Incentive Plan as amended December 2020 ( the “2018 Plan”) which replaced the 2017 Plan.

The Company has granted restricted stock awards (“RSAs”), stock options and RSUs for its common stock under both plans as detailed in the tables below.

There were 470,511 shares available for future issuance under the 2018 Plan as of September 30, 2024 .

Share awards that expire, terminate, are 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 annually by 4 % of the total number of shares of common stock outstanding as of the preceding December 31, subject to a reduction at the discretion of the Company’s board of directors.

The 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 990,162 shares available for future issuance under the 2018 Plan as of March 31, 2025.

Shares 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, 2023, the share reserve was increased by 1,014,124 shares based on the 25,353,119 shares of common stock outstanding at December 31, 2022.

On January 1, 2024, the share reserve was increased by 1,027,522 shares based on the 25,688,062 shares of common stock outstanding at December 31, 2023.

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.

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.

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To date, all stock options issued have been non-qualified stock options, and the exercise prices were set at the fair value for the shares at the dates of grant.

Options typically have a ten -year life.

The Company’s previous Chief Financial Officer had 474,295 employee stock options with an exercise price range of $ 1.37 to $ 8.61 which were set to expire three months after his retirement date of May 31, 2022;

however, the Company extended the expiration date to April 10, 2023.

Of these options, 365,858 options were exercised on a cashless basis in January and March 2023, and the remainder expired in April 2023.

No other terms were modified.

In August 2024, the Company’s board of directors approved a modification of certain outstanding awards of a senior executive who retired in August 2024.

The combined awards had an exercise price range of $ 3.47 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 November 2025 in conjunction with ongoing consulting services.

No other terms were modified.

Due to these modifications, the Company incurred a modification expense of $ 75 that is included in general and administration expense on the Consolidated Statements of Operations for the three and nine -month periods ended September 30, 2024, respectively.

For the three and nine months ended September 30, 2024 and 2023 , the Company’s total stock-based compensation expense was $ 2,383 and $ 2,387 , respectively.

Of these amounts, $ 2,138 and $ 2,191 were recorded in general and administrative (“G&A”) expenses, respectively, and $ 245 and $ 196 were recorded in research and development expenses, respectively.

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.

For the three months ended March 31, 2025 and 2024 , the Company’s total stock-based compensation expense was $ 1,200 and $ 821 , respectively.

Of these amounts, $ 1,161 and $ 742 were recorded in general and administrative (“G&A”) expenses during the three months ended March 31, 2025 and 2024, respectively, and $ 39 and $ 79 were recorded in research and development expenses for the three months ended March 31, 2025 and 2024, respectively.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2024 :

The following table summarizes stock option activity during the three months ended March 31, 2025 :

Outstanding as of December 31, 2024

4 unchanged sentences

( 212,092 ) $ 4.92

Outstanding as of September 30, 2024

Outstanding as of March 31, 2025

6,043,157 $ 5.29 6.9 $ 46,581

Exercisable as of September 30, 2024

Options exercisable as of March 31, 2025

4,157,763 $ 4.77 6.1 $ 34,133

Vested and expected to vest at September 30, 2024

Options vested and expected to vest at March 31, 2025

6,043,157 $ 5.29 6.9 $ 46,581

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Note 7 — Share-Based Payment Awards (continued)

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock at September 30, 2024 for those stock options that had strike prices lower than the fair value of the Company’s common stock.

Stock-based compensation related to stock options was $ 559 and $ 639 for the three -month periods ended September 30, 2024 and 2023 , respectively.

Stock based compensation related to stock options was $ 1,991 and $ 2,115 for the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 , there was a total of $ 5,266 of unrecognized compensation costs related to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the nine months ended September 30, 2024 was $ 2.94 per share.

In the nine months ended September 30, 2024 , the Company issued 2,500 shares of its stock resulting from stock option exercises at a weighted average exercise price of $ 2.97 per share with an intrinsic value of $ 2 .

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock at March 31, 2025 for those stock options that had strike prices lower than the fair value of the Company’s common stock.

Stock based compensation related to stock options was $ 929 and $ 705 for the three -month periods ended March 31, 2025 and 2024 , respectively.

As of March 31, 2025 , there was a total of $ 7,546 of unrecognized compensation costs related to non-vested stock option awards.

The weighted average grant date fair value of stock option awards for the three months ended March 31, 2025 was $ 8.35 per share.

During the three months ended March 31, 2025, the Company issued 108,451 shares of its common stock resulting from stock option exercises at a weighted average exercise price of $ 3.63 per share with an intrinsic value of $ 1,167 .

During the three months ended March 31, 2024, the Company issued 2,500 shares of its stock resulting from stock option exercises at a weighted average exercise price of $ 2.97 per share with an intrinsic value of $ 2 .

Restricted Stock Units (RSUs)

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2024 :

The following table summarizes restricted stock unit activity during the three months ended March 31, 2025 :

Number of Units

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( 30,940 ) $ 6.30

Outstanding and unvested as of September 30, 2024

Outstanding and unvested as of March 31, 2025

374,407 $ 8.01

Stock-based compensation related to RSUs was $ 171 and $ 179 for the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 , there was $ 376 of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of approximately 1.8 years.

Stock-based compensation related to RSUs was $ 190 and $ 60 for the three -month periods ended March 31, 2025 and 2024 , respectively.

As of March 31, 2025 , there was $ 2,685 of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted average period of approximately 2.8 years.

Employee Stock Purchase Plan

The Company’s 2018 Employee Stock Purchase Plan (“ESPP”) provides for an initial reserve of 150,000 shares, and this reserve is automatically increased on January 1 of each year by the lesser of 1 % of the outstanding common shares at December 31 of the preceding year or 150,000 shares, subject to reduction at the discretion of the Company’s board of directors.

As of September 30, 2024 , there were 718,274 shares available for issuance under the ESPP.

As of March 31, 2025 , there were 842,581 shares available for issuance under the ESPP.

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

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The terms of the ESPP provide a restart feature if the Company's stock price is lower at the end of a six -month period within the twelve -month offering period than it was at the beginning of the twelve -month offering period.

For the nine -month periods ended September 30, 2024 and 2023 , there were 55,240 and 57,616 share issuances, respectively, under the ESPP.

The weighted average fair value of share awards in the first nine months of 2024 and 2023 was $ 1.34 and $ 1.22 , respectively.

Employees contributed $ 209 and $ 181 via payroll deductions during the three and nine months ended September 30, 2024 and 2023 , respectively.

The Company recorded an expense of $ 145 and $ 93 related to the ESPP in the nine -month periods ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 and December 31, 2023 , the accompanying condensed balance sheets include $ 48 and $ 24 , respectively, in accrued liabilities for employee ESPP contributions.

For the three -month periods ended March 31, 2025 and 2024 , there were no share issuance under the ESPP.

The Company recorded an expense of $ 81 and $ 56 related to the ESPP during the three -month periods ended March 31, 2025 and 2024 , respectively.

As of March 31, 2025 and December 31, 2024 , the accompanying Condensed Balance Sheet include $ 276 and $ 42 , respectively, in accrued liabilities for employee ESPP contributions.

Note 8 — Basic and Diluted Net Loss per Common Share

For the three months ended March 31, 2025, basic and diluted net loss per share is computed using the weighted average number of shares of common stock outstanding during the period and includes common stock equivalents (using the treasury stock and “if converted” method) from stock options, RSUs, and warrants.

For the three months ended March 31, 2025 and 2024, 4,130,700 and 5,942,961 , respectively, in common stock equivalents are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive.

During the three months ended March 31, 2025 and 2024, included in the basic and diluted net loss per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director retires from service as a director.

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

Three Months Ended

$ ( 1,572 ) $ ( 811 )

Weighted average common shares outstanding (basic and diluted)

26,886,427 25,763,337

Net loss per share, basic and diluted

$ ( 0.06 ) $ ( 0.03 )

Eton Pharmaceuticals, Inc.

1 unchanged sentence

(in thousands, except share and per share amounts)

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 9 — Income Taxes

The following table summarizes the Company's income tax expense and effective tax rates for the three months ended March 31, 2025 and 2024:

Three Months Ended

Loss before income taxes

$ ( 1,498 ) $ ( 811 )

Income tax expense

Effective tax rate

(4.9 %) 0.0 %

The Company's quarterly income tax provision is calculated under the discrete method, which treats the interim period as if it were the annual period and determines the income tax expense or benefit on that basis.

The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate.

The Company believes, at this time, the use of the discrete method is more appropriate as the annual effective tax rate cannot be reliably estimated given the Company's full valuation allowance recorded on its deferred tax assets and annual utilization limitations that prevent the Company from fully offsetting its expected current income tax liabilities with its available net operating loss and income tax credits.

The effective tax rate for the three months ended March 31, 2025 varies from the three months ended March 31, 2024, primarily as a result of the Company's valuation allowance recorded against its net deferred tax assets and annual tax attribute limitations that result in current income tax expense.

Income taxes paid during the three months ended March 31, 2025 and 2024 were $ 8 and $ 0 , respectively.

Note 10 — Related-Party Transactions

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(i) one milestone payment for $ 250 upon regulatory approval in the territory by the FDA of the first single agent product and (ii) one milestone payment for $ 500 following the first commercial sale of the first single agent product in the territory.

From the effective date of the Amended Agreement, the Company has realized a total of $ 1,840 of the non-royalty and royalty revenue through September 30, 2024 .

From the effective date of the Amended Agreement, the Company has realized a total of $ 1,840 of the non-royalty and royalty revenue through March 31, 2025 .

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, would be split between Eyemax and the Company.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of September 30, 2024 , and Bausch Health discontinued sales of Alaway® Preservative Free effective March 24, 2023.

There were no amounts due to Eyemax under the terms of the Amended Agreement as of March 31, 2025 , and Bausch Health discontinued sales of Alaway® Preservative Free effective March 24, 2023.

The CEO has a partial interest in a company that the Company has entered into an agreement with as described below.

1 unchanged sentence

On August 30, 2024, the Company amended the Selenix Agreement in tandem with an agreement to sell DS- 200 in August 2024 ( see Note 12 ).

Pursuant to the terms of the amended Selenix Agreement, Selenix waived its rights to future milestone payments and 50 % of DS- 200 profit in exchange for 45 % of proceeds received by Eton from the DS- 200 sale agreement.

Selenix is 50 % owned by Messa Holdings LLC (“Messa”), which is 100 % owned by the CEO.

As of September 30, 2024 , the Company’s balance sheet reflected a $ 220 payment due to Selenix in accrued liabilities.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

As of March 31, 2025 , the Company’s Condensed Balance Sheet reflected a $ 675 payment due to Selenix in accrued liabilities.

Note 11 — Leases

1 unchanged sentence

In June 2024, the Company renewed its office lease for a two -year period through March 2027 and recorded $ 219 in ROU assets and $219 in operating lease liabilities in association with the lease extension.

The Company’s operating lease cost as presented as G&A in the condensed statements of operations was $ 61 for the nine months ended September 30, 2024 , and $ 57 for the nine months ended September 30, 2023 .

Cash paid for amounts included in the measurement of operating lease liabilities was $ 35 for the nine months ended September 30, 2024 , and $ 66 for the nine months ended September 30, 2023 .

The ROU asset non-cash lease expense was $ 53 and $ 50 for the nine -month periods ended September 30, 2024 and 2023 , respectively, and is reflected within non-cash lease expense on the Company’s condensed statements of cash flows.

As of September 30, 2024 , the weighted-average remaining lease term was 2.50 years, and the weighted-average incremental borrowing rate was 8.6 %.

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of September 30, 2024 (in thousands).

The Company’s operating lease cost as presented as G&A in the Condensed Statements of Operations was $ 22 and $ 20 , respectively.

For the three months ended March 31, 2025 and 2024 , cash paid for amounts included in the measurement of operating lease liabilities was $ 23 and $ 10 , respectively.

The ROU asset non-cash lease expense for the three months ended March 31, 2025 and 2024 was $ 17 and $ 18 , respectively, and is reflected within non-cash lease expense on the Company’s Condensed Statements of Cash Flows.

As of March 31, 2025 , the remaining lease term was 2.0 years and the weighted average discount rate was 8.6 %.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Note 11 — Leases (continued)

The table below presents the lease-related assets and liabilities recorded on the balance sheet as of March 31, 2025 and December 31, 2024 (in thousands).

Classification

7 unchanged sentences

Total operating lease liabilities

The Company’s future lease commitments as of September 30, 2024 , are as indicated below:

Operating Lease Liabilities

2024 (remainder of 2024)

The Company’s future lease commitments as of March 31, 2025 , are as indicated below:

2025 (Remainder)

Undiscounted lease payments

$ 179 $ 66 $ 90 $ 23

Imputed interest

Total operating lease liabilities

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Total lease liabilities

Note 12 — Commitments and Contingencies

2 unchanged sentences

License and product development agreements

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

The three oral solution pediatric neurology product candidates discussed below, Topiramate, Zonisamide, and Lamotrigine were developed by the Company and its various product candidate development partners, and the Company subsequently sold certain rights and interests in these three products to Azurity in 2021, but retained rights to certain royalties.

The Company has recognized $ 27,500 in milestone revenues to date from these three products, and in June 2023 the Company amended its asset purchase agreement with Azurity and sold the remaining royalty interests it received back to Azurity for $ 5,500 .

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

In March 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.

The Company has entered into various agreements which are described below.

In March 2020, the Company entered into an Exclusive License and Supply Agreement (the “Alkindi License Agreement”) with Diurnal for marketing ALKINDI SPRINKLE® in the United States.

In September 2020, ALKINDI SPRINKLE®’s New Drug Application (NDA) was approved by the FDA as a replacement therapy for pediatric patients with adrenocortical insufficiency.

For the initial licensing milestone fee, the Company paid Diurnal $ 3,500 in cash and issued 379,474 shares of its common stock to Diurnal, which were valued at $ 1,264 based on the Company’s closing stock price of $ 3.33 on March 26, 2020 .

The Company paid Diurnal $ 1,000 for a 2023 sales milestone in January 2024 that was recorded as licensing cost of sales in December 2023, and will also pay Diurnal $ 2,500 if the product obtains orphan drug exclusivity status from the FDA.

The Company paid Diurnal $ 1,000 for a 2023 sales milestone in January 2024 that was recorded as licensing cost of sales in December 2023 and could pay up to $ 44,000 in additional commercial net sales milestones.

The Company will pay tiered royalties of 11.5 % to 17.0 % on net sales and could pay Diurnal $2,500 if the product obtains orphan drug exclusivity status from the FDA.

In December 2024, the Company and Diurnal entered into an amendment to the Alkindi License Agreement to extend the agreement terms to incorporate both ALKINDI SPRINKLE® and ET- 400 in the existing agreement terms.

In June 2021, the Company acquired U.S.

1 unchanged sentence

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.

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

marketing rights to Carglumic Acid Tablets.

The product’s Abbreviated New Drug Application (“ANDA”), which is owned by Novitium Pharma, was approved by the FDA on October 12, 2021.

The product is an AB-rated, substitutable generic version of Carbaglu®.

The Company paid $ 3,250 upon signing and retains 50 % of the product profits with the balance being distributed to the licensor and manufacturer.

The Company launched this product in December 2021.

March 2023, the Company acquired rare disease endocrinology product candidate ET-

600 from Tulex.

The Company paid

$ 450 to Tulex in

July 2023 as a result of successful manufacturing of registration batches.

The Company will pay Tulex

$ 200 upon acceptance by the FDA of the NDA for the product,

first commercial sale of the product, and tiered royalties of

17.0 % on net sales.

In March 2024, the Company acquired the U.S.

rights to PKU GOLIKE® from Relief Therapeutics Holding SA.

The Company paid $ 2,200 and could pay up to $ 2,000 in additional commercial milestones.

The Company will pay the seller a royalty of 30 % of net sales, which will include the cost of the product.

In August 2024 , the Company entered into an agreement to sell its DS- 200 product candidate.

The Company received $ 500 upfront, and in March 2025 the Company recognized licensing revenue of $ 1,500 from a development milestone and the $ 1,500 is reflected in the Company's accounts receivable balance as of March 31, 2025.

The Company could receive additional payments of up to $ 5,000 based on the achievement of certain future development and commercial milestones related to DS- 200 .

The Company will retain 45 % of the proceeds from the transaction with the balance being distributed to other partners.

In November 2024, the Company entered into a licensing agreement with AMMTeK.

pursuant to which the Company has agreed to acquire the U.S.

rights to Amglidia (glyburide oral suspension).

Amglidia was approved by the European Medicines Agency in 2018 and has been granted Orphan Drug Designation by the U.S.

has conducted a post-approval study tracking five years of real-world safety and efficacy in European patients, which will be used to support the Company's s New Drug Application (“NDA”) submission.

The Company intends to hold a meeting with the FDA in 2025.

Under the terms of the licensing agreement, the Company will not make any upfront payments and retains the right to terminate the licensing agreement based on FDA meeting results prior to any payments being owed.

The Company could pay up to $ 2,350 as follows:

$ 500 following the receipt of FDA minutes;

$ 550 upon NDA acceptance for review by FDA;

and $ 1,300 upon NDA approval by the FDA and first commercial sale.

The Company would also be required to pay a royalty of 14 % of net sales to AMMTek.

Eton Pharmaceuticals, Inc.

2 unchanged sentences

Note 12 — Commitments and Contingencies (continued)

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

The ANDA was approved by the FDA in January 2022.

The Company paid $ 2,000 to the seller upon signing and an additional $ 125 in November 2023, and could pay up to $ 1,000 in commercial milestones based on future product sales.

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

In March 2023, the Company acquired rare disease endocrinology product candidate ET- 600 from Tulex Pharmaceuticals.

The Company paid $ 450 to Tulex in July 2023 as a result of successful manufacturing of registration batches.

The Company will pay Tulex $ 200 upon acceptance by the FDA of the NDA for the product, $ 250 upon first commercial sale of the product, and tiered royalties of 12.5 % to 17.0 % on net sales.

In October 2023, the Company acquired an FDA-approved ANDA for Nitisinone.

The ANDA was approved by the FDA in May 2023.

The Company paid $ 150 to the seller and an additional $ 500 of cure amounts owed to the manufacturer upon signing.

The Company will retain 80 % of the product profits with the balance being distributed to the manufacturer.

In March 2024, the Company acquired the rights to PKU GOLIKE® medical formula.

The Company paid $ 2,350 to the seller upon signing, which was allocated as $ 482 of inventory and $ 1,868 of an intangible asset (product licensing rights) based on the relative fair value of the purchased assets.

The Company could pay up to $ 2,000 in commercial milestones based on future product sales and will pay the seller a royalty of 30 % of net sales, which will include the cost of the product.

In August 2024, the Company entered into an agreement to sell its DS- 200 product candidate.

The Company received $ 500 upfront and could receive additional payments of up to $ 6,500 based on the achievement of certain future regulatory and commercial milestones related to DS- 200.

The Company will retain 45 % of the proceeds from the transaction with the balance being distributed to other partners.

In December 2024, the Company acquired GALZIN® (zinc acetate) from Teva Pharmaceuticals USA, Inc and assumed the commercialization of the product in the U.S.

during March of 2025.

The Company accounted for the purchase as a product acquisition and paid $ 7,000 and paid an additional $ 200 for product inventory.

The Company will pay the seller a royalty of 10 % of U.S.

net sales through the tenth anniversary of the Company's first commercial sales of the product in the U.S.

In December 2024, the Company acquired INCRELEX® (mecasermin injection) from Ipsen S.A.

The Company paid $ 22,500 and paid an additional $ 7,500 for product inventory.

The Company will also make payments to seller of $ 2,500 on each of the first and second anniversaries of closing.

The Company determined that the asset purchase agreement met the definition of a business under ASC 805;

therefore, the Company accounted for the asset purchase agreement as a business combination and applied the acquisition method of accounting.

In March 2025, the Company out-licensed the commercial rights to Increlex® in territories outside of the U.S.

to Esteve Pharmaceuticals, S.A.

Under the terms of the licensing agreement, Esteve will pay the Company €4,000 up front to license the rights to Increlex® for up to ten years, and Esteve is also receiving an option to acquire the international rights in the future for a purchase price of up to €6,000.

In addition, the Company also entered into a supply agreement and will supply product to Esteve at a fixed transfer price.

In accordance with the accounting pronouncement guidance in ASC 606 with respect to the license and supply agreements between the Company and Esteve, the Company recognized as of and for the three months ended March 31, 2025, $ 4,327 in accounts receivable, licensing revenues of $ 1,786 and deferred revenues of $ 2,541 .

With respect to the $ 2,541 in deferred revenues, $ 330 and $ 2,211 are reflected in accrued liabilities and other long-term liabilities, respectively in the Company Condensed Balance Sheet as of March 31, 2025.

Deferred revenues will be amortized to licensing revenues over the course of the agreements based on quarterly Increlex® product sales, and at the end of the license agreement, a deferred revenue residual will be recognized at the end of the initial term of the license agreement.

Indemnification

2 unchanged sentences

The Company believes the fair value of the indemnification rights and agreements is minimal.

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of September 30, 2024 or December 31, 2023 .

Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of March 31, 2025 or December 31, 2024 .

Note 13 — Subsequent Events

On October 2, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Ipsen Biopharmaceuticals Inc.

(the “Seller”), pursuant to which the Company has agreed to acquire Increlex® (mecasermin injection) from Seller.

Increlex is a biologic product used to treat children who suffer from severe primary insulin-like growth factor 1 deficiency (SPIGFD) because their bodies do not produce enough insulin-like growth factor 1 (IGF- 1 ).

The product is approved in 40 territories, including the United States and the European Union.

Under the terms of the Purchase Agreement, the Company will purchase Increlex® for $ 22.5 million at closing and will pay an additional $ 7.5 million for product inventory.

The Company will also make payments to Seller of $ 2.5 million on each of the first and second anniversaries of closing.

In addition, the Company will be obligated to purchase additional inventory over 30 months, in an amount not to exceed €15.0 million.

The acquisition is structured as an all-cash purchase without any financing contingencies (see Note 5 ) and is expected to close near year-end 2024, subject to customary closing conditions.

Each of the Company and Seller have made customary representations, warranties, covenants and indemnities in the Purchase Agreement.

As part of the acquisition, the parties have entered into a transition services agreement, whereby Seller will continue to distribute the product in markets outside the United States for a period of six months following the closing.

The Company will immediately commercialize the product within the United States upon closing.

On April 28, 2025, the Company submitted an NDA to the FDA for ET- 600, the Company's proprietary, patented oral solution of desmopressin under development for the treatment of central diabetes insipidus.

The Company expects the application to be assigned a 10 -month FDA review, allowing for potential approval and launch in the first quarter of 2026.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

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

7 unchanged sentences

Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases.

The Company currently has five commercial rare disease products:

ALKINDI SPRINKLE® for the treatment of pediatric adrenocortical insufficiency;

Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency;

Betaine Anhydrous for the treatment of homocystinuria;

Nitisinone for the treatment of hereditary tyrosinemia type 1 (HT-1);

and PKU GOLIKE® medical formula for patients with phenylketonuria (“PKU”).

The Company has three additional product candidates in late-stage development:

ET-400, ET-600, and ZENEO® hydrocortisone autoinjector.

We currently have seven commercial rare disease products:

INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone.

We have six additional product candidates in late-stage development:

ET-400, ET-600, Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Results of Operations (dollars in thousands)

For the three months ended September 30, 2024, we had $10,324 in total revenue that generated a gross profit of $6,302.

We had total revenue of $7,028 for the three-month period ended September 30, 2023 that generated a gross profit of $4,403 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products, along with sales volume from Nitisinone and PKU GOLIKE® products launched in 2024 and licensing revenue of $500 from the sale of its DS-200 product candidate in September 2024.

For the nine months ended September 30, 2024, we had $27,364 in total revenue that generated a gross profit of $16,935.

We had total revenue of $24,329 for the nine-month period ended September 30, 2023 that generated a gross profit of $17,431 for the period.

The increase was primarily due to increased sales volume of the Company's ALKINDI SPRINKLE® and Carglumic Acid products, along with sales volume from Nitisinone and PKU GOLIKE® products launched in 2024, which were offset by decreased licensing revenue of $5,500 from the sale of royalty interests to Azurity in June 2023.

During the three months ended March 31, 2025, we had $17,282 in total revenues that generated a gross profit of $9,861 compared to total revenues of $7,966 during the three-month period ended March 31, 2024 that generated a gross profit of $5,007 for the period.

During the three months ended March 31, 2025, we had product sales and royalties, net of $13,996, compared to product sales and royalties, net of $7,966 during the three months ended March 31, 2024, an increase of $6,030.

The increase in product sales and royalties, net was the result of increased sales of our INCRELEX®, ALKINDI SPRINKLE® and Carglumic Acid products in the current period, along with sales volume from Nitisinone and PKU GOLIKE® products launched in 2024.

Licensing revenue during the three months ended March 31, 2025 was $3,286, compared to zero licensing revenue during the three months ended March 31, 2024.

The increase in 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.

Research and Development Expenses

For the three months ended September 30, 2024, we incurred $505 of research and development (“R&D”) expenses as compared to $615 for the same period in 2023.

The decrease was primarily due to decreased expenses associated with ET-400 project development activities.

For the nine months ended September 30, 2024, we incurred $4,126 of research and development (“R&D”) expenses as compared to $2,275 for the same period in 2023.

The increase was primarily due to increased expenses associated with ET-400 project development activities.

During the three months ended March 31, 2025, we incurred $1,161 of research and development (“R&D”) expenses as compared to $651 for the same period in 2024.

The increase was primarily due to increased expenses associated with our ET-700 and ET-800 project development activities.

General and Administrative Expenses

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.

For the three-month periods ended September 30, 2024 and 2023, we incurred $5,288 and $4,336, respectively, of G&A expenses.

The increase in G&A expenses was mainly due to increased sales and marketing expenses and employee related expenses.

For the nine-month periods ended September 30, 2024 and 2023, we incurred $16,035 and $14,355, respectively, of G&A expenses.

The increase in G&A expenses was mainly due to increased sales and marketing expenses, legal fees, and employee related expenses.

During the three-month periods ended March 31, 2025 and 2024, we incurred $9,170 and $5,156, respectively, of G&A expenses.

The increase in G&A expenses during the three months ended March 31, 2025 was primarily attributable to an increase in product advertising and promotional expenses, an increase in product development expenses and an increase in compensation and benefit expenses due to an increase in general and administrative headcount.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Liquidity and Capital Resources

As of September 30, 2024, we had total assets of $35.8 million, cash and cash equivalents of $20.3 million and working capital of $10.0 million.

As of March 31, 2025, we had total assets of $84.0 million, cash and cash equivalents of $17.4 million and working capital of $24.6 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.

The following table sets forth a summary of our cash flows for the nine-month periods ended September 30, 2024 and 2023 (dollars in thousands):

Nine months ended

September 30, 2024

September 30, 2023

The following table sets forth a summary of our cash flows for the three-month periods ended March 31, 2025 and 2024 (dollars in thousands):

Three months ended

March 31, 2025

March 31, 2024

Net cash from operating activities

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Change in cash and cash equivalents

The decrease in cash from operating activities was primarily due to a $5,500 sale of royalty interests to Azurity in June 2023, a $1,000 milestone payment related to 2023 ALKINDI SPRINKLE® sales in January 2024, and increased inventory purchases for ALKINDI SPRINKLE®, Carglumic Acid, Nitisinone, and PKU GOLIKE® in 2024.

The decrease in cash from investing activities was due to a $1,868 payment related to the acquisition of the PKU GOLIKE® product license in March 2024.

The decrease in cash from financing activities was primarily due to payments on the Company's long-term debt.

The increase in cash from operating activities during the three months ended March 31, 2025 was primarily due to higher cash collections from product sales and a filing fee refund from the FDA related to ET-400.

During the three months ended March 31, 2024, net cash from investing activities was $1,882, which reflected $1,868 payment associated with the acquisition of the PKU GOLIKE® product license in March 2024.

During the three months ended March 31, 2025, net cash provided by financing activities was $394 and was associated with proceeds from stock option exercises, compared to net cash used by financing activities of $378, which reflected $385 repayment of debt and proceeds of $7 from stock option exercises during the three months ended March 31, 2024.

Non-GAAP Financial Measures

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.

We believe that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of our financial and operating performance.

The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical financial results and trends and to facilitate comparisons between periods.

In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Reconciliations of reported GAAP net 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):

For the three months ended

GAAP net loss

Depreciation (1)

Intangible amortization expense (2)

Interest expense (including debt discount amortization and non-cash interest expenses)

Income tax expense

Other non-GAAP adjustments:

Inventory step-up expense (3)

Stock-based compensation (4)

Severance expense (5)

Divestiture-related costs (6)

Total of Other non-GAAP adjustments

Adjusted EBITDA

GAAP loss before income tax

Non-GAAP adjustments:

Depreciation (1)

Intangible amortization expense (2)

Inventory step-up expense (3)

Share-based compensation (4)

Severance expense (5)

Divestiture-related costs (6)

Total pre-tax non-GAAP adjustments

Income tax effect of pre-tax non-GAAP adjustments (7)

Total non-GAAP adjustments

Non-GAAP Net Income

Weighted average number of common shares outstanding, basic

Weighted average number of common shares outstanding, diluted

GAAP loss per share - Basic

Non-GAAP adjustments

Non-GAAP earnings per share - Basic

GAAP loss per share - Basic

Non-GAAP adjustments

Non-GAAP earnings per share - Diluted

Represents depreciation expense related to our property and equipment.

Intangible amortization expenses are associated with our intellectual property rights related to INCRELEX®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone.

During the three months ended March 31, 2025, we recognized in cost of sales $1,142 for inventory step-up expense primarily attributable to INCRELEX® inventory revalued in connection with this product acquisition.

Represents share-based compensation expense associated with our stock option and restricted stock unit stock unit grants to our employees and non-employee directors and our employee share purchase plan.

Represents severance and benefit expenses associated with role redundancy within commercial operations during the three months ended March 31, 2025.

Represents legal expense and other divestiture-related costs associated with the out-licensing of the INCRELEX® commercial rights in territories outside of the U.S.

Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the effective income tax rate for the period.

As discussed further in Note 9, we are in a full income tax valuation allowance position and the income tax effect on pre-tax non-GAAP adjustments is commensurate with the performance measure.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

Critical Accounting Policies

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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.

Revenue Recognition

Revenue Recognition for Contracts with Customers

We account for contracts with our customers in accordance with Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers.

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We assess 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.

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 or over time, and if over time this is based on the use of an output or input method.

Any amounts received prior to revenue recognition will be recorded as deferred revenue.

Amounts expected to be recognized as revenue within the twelve months following the balance sheet date will be classified as current portion of deferred revenue in our balance sheets.

Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as long-term deferred revenue, net of current portion.

Milestone Payments – If a commercial contract arrangement includes development and regulatory milestone payments, we 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.

Renewal options that provide a material right are treated as a separate performance obligation, allocated a portion of the transaction price, and related revenue is deferred until the option is exercised or the option expires unused.

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, 2025 and 2024, all revenues recognized in the Condensed Statements of Operations were point in time sales to our customers.

Milestone Payments – If a commercial contract arrangement includes development milestone payments, we 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 our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

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.

Additionally, revenue is recognized from product license agreements with development activity milestones when these development activities occur per the contractual terms of the agreement.

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, we 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.

Significant Financing Component – In determining the transaction price, we will adjust consideration for the effects of the time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees will be more than one year.

The Company may sell products in the U.S.

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

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 the Company issues credits on returned product.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays.

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

The Company may recognize revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location.

The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns.

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.

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Stock-Based Compensation

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.

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

future expected cash flows from customer contracts and license agreements;

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

discount rates.

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

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”).

The Company estimates the fair value of stock-based option awards using the BSM.

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We account for forfeitures as they occur.

Research and Development Expenses

R&D expenses include both internal R&D activities and external contracted services.

Internal R&D activity expenses include salaries, benefits, stock-based compensation, and other costs to support our R&D operations.

External contracted services include product development efforts including 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.

We review and accrue R&D expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project.

Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

Actual results could differ from our estimates.

Upfront payments and milestone payments made for the licensing of products that are not yet approved by the FDA are expensed as R&D in the period in which they are incurred.

Off Balance Sheet Transactions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements