Eton Pharmaceuticals, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ETON PHARMACEUTICALS, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (Grant Thornton LLP - PCAOB ID: 248 ) 39 Report of Independent Registered Public Accounting Firm (Crowe LLP - PCAOB ID: 173) 40 Report of Independent Registered Public Accounting Firm (KMJ Corbin & Company LLP - PCAOB ID: 170) 41 Balance Sheets 42 Statements of Operations 43 Statements of Stockholders’ Equity 44 Statements of Cash Flows 45 Notes to Financial Statements 46 38 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Eton Pharmaceuticals Inc. Opinion on the financial statements We have audited the accompanying balance sheet of Eton Pharmaceuticals, Inc. (the “Company”) as of December 31, 2025, the related statement of operations, stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Medicaid Rebates and Related Liability As described further in Note 3 to the financial statements, the Company recognizes revenue from product sales net of estimated sales deductions, including state Medicaid rebates. 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. We identified Medicaid rebates as a critical audit matter. The principal considerations for our determination that Medicaid rebates and the related liability represent a critical audit matter were (i) the significant judgment applied by management in estimating and accruing Medicaid rebates and (ii) the high degree of auditor judgment and effort required to evaluate the assumptions underlying the estimate. In addition, timing differences may arise between when product sales occur and when the Company receives related state Medicaid rebate invoices, which vary based on individual state Medicaid program requirements. Our audit procedures related to Medicaid rebates and the related liability included, among others, the following: ● Obtaining an understanding of the design of relevant controls over the estimation and recording of Medicaid rebates and the related liability. ● Evaluating state Medicaid rebate invoices received and related payments made during the year and their potential impact on the accrual at December 31, 2025. ● Testing the completeness and accuracy of Medicaid rebate‑eligible product sales by agreeing underlying sales data to supporting documentation. ● Recalculating the estimated Medicaid rebate liability using management’s assumptions (rebate rates, patient coverage, timing of invoices and billing variability) and inputs, which we assessed for reasonableness based on historical experience and other data. ● Agreeing rebates paid under state Medicaid programs during 2025 to supporting documentation. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2025. Chicago, Illinois March 19, 2026 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and the Board of Directors of Eton Pharmaceuticals, Inc. Deer Park, Illinois Opinion on the Financial Statements We have audited the accompanying balance sheets of Eton Pharmaceuticals, Inc. (the "Company") as of December 31, 2024, the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Crowe LLP We served as the Company's auditor from 2024 to 2025 Oakbrook Terrace, Illinois March 18, 2025 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Eton Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying statements of operations, stockholders’ equity, and cash flows of Eton Pharmaceuticals, Inc. (the “Company”) for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ KMJ Corbin & Company LLP We served as the Company's auditor from 2018 to 2024. Glendora, California March 14, 2024 41 Eton Pharmaceuticals, Inc. BALANCE SHEETS (in thousands, except share and per share amounts) December 31, December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 25,942 $ 14,936 Accounts receivable, net 11,757 5,361 Inventories, net 15,419 15,232 Prepaid expenses and other current assets 7,463 5,492 Total current assets 60,581 41,021 Property and equipment, net 326 34 Intangible assets, net 30,878 34,881 Operating lease right-of-use assets, net 310 175 Other long-term assets, net 19 12 Total assets $ 92,114 $ 76,123 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 10,976 $ 4,167 Current portion of long-term debt, net of discount 8,789 — Accrued Medicaid rebates 9,317 6,866 Accrued liabilities 9,408 8,914 Total current liabilities 38,490 19,947 Long-term debt, net of discount and including accrued fees 21,769 29,811 Operating lease liabilities, net of current portion 460 107 Other long-term liabilities 5,241 1,830 Total liabilities 65,960 51,695 Commitments and contingencies (Note 16) Stockholders’ equity Common stock, $ 0.001 par value; 50,000,000 shares authorized; 27,047,061 and 26,709,084 shares issued and outstanding at December 31, 2025 and 2024, respectively 27 27 Additional paid-in capital 138,621 132,294 Accumulated deficit ( 112,494 ) ( 107,893 ) Total stockholders’ equity 26,154 24,428 Total liabilities and stockholders’ equity $ 92,114 $ 76,123 The accompanying notes are an integral part of these financial statements. 42 Eton Pharmaceuticals, Inc. STATEMENTS OF OPERATIONS (In thousands, except per share amounts) For the years ended December 31, December 31, December 31, 2025 2024 2023 Revenues: Licensing revenue $ 3,286 $ 500 $ 5,500 Product sales and royalties, net 76,664 38,511 26,142 Total net revenues 79,950 39,011 31,642 Cost of Sales: Licensing revenue 825 270 1,000 Product sales and royalties 36,385 15,330 9,581 Total cost of sales 37,210 15,600 10,581 Gross profit 42,740 23,411 21,061 Operating expenses: Research and development 7,765 3,255 3,322 General and administrative 35,819 22,753 18,931 Total operating expenses 43,584 26,008 22,253 Loss from operations ( 844 ) ( 2,597 ) ( 1,192 ) Other income (expense): Interest and other (expense) income, net ( 3,714 ) ( 1,211 ) 503 Loss before income tax expense ( 4,558 ) ( 3,808 ) ( 689 ) Income tax expense 43 15 247 Net loss $ ( 4,601 ) $ ( 3,823 ) $ ( 936 ) Net loss per share, basic and diluted $ ( 0.17 ) $ ( 0.15 ) $ ( 0.04 ) Weighted average number of common shares outstanding, basic and diluted 26,908 25,895 25,645 The accompanying notes are an integral part of these financial statements. 43 Eton Pharmaceuticals, Inc. STATEMENTS OF STOCKHOLDERS ’ EQUITY (in thousands, except share amounts) Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balances at December 31, 2022 25,353,119 $ 25 $ 116,187 $ ( 103,134 ) $ 13,078 . Stock-based compensation — — 3,137 — 3,137 Stock option exercises and vesting of restricted stock units 299,028 1 148 — 149 Employee stock purchase plan 86,782 — 229 — 229 Shares withheld related to net share settlement of stock option exercises ( 50,867 ) — ( 180 ) — ( 180 ) Net loss — — — ( 936 ) ( 936 ) Balances at December 31, 2023 25,688,062 26 119,521 ( 104,070 ) $ 15,477 Common stock issued in private placement offering 583,334 1 6,999 — 7,000 Stock-based compensation — — 3,165 — 3,165 Stock option exercises and vesting of restricted stock units 356,755 — 1,191 — 1,191 Employee stock purchase plan 80,933 — 248 — 248 Relative fair value of warrants issued in connection with debt — — 1,170 — 1,170 Net loss — — — ( 3,823 ) ( 3,823 ) Balances at December 31, 2024 26,709,084 27 132,294 ( 107,893 ) $ 24,428 Stock-based compensation — — 5,512 — 5,512 Employee stock purchase plan 16,894 0 217 — 217 Stock option exercises and vesting of restricted stock units 321,083 0 598 — 598 Net loss — — — ( 4,601 ) ( 4,601 ) Balances at December 31, 2025 27,047,061 $ 27 $ 138,621 $ ( 112,494 ) $ 26,154 The accompanying notes are an integral part of these financial statements. 44 Eton Pharmaceuticals, Inc. STATEMENTS OF CASH FLOWS (In thousands) For the years ended December 31, December 31, December 31, 2025 2024 2023 Cash flows from (used in) operating activities Net loss $ ( 4,601 ) $ ( 3,823 ) $ ( 936 ) Adjustments to reconcile net loss to net cash from (used in) operating activities: Stock-based compensation 5,512 3,165 3,137 Depreciation and amortization 4,044 1,146 901 Inventory step-up 5,094 — — Excess and obsolete inventory reserve 594 529 15 Debt discount amortization 696 1,109 117 Non-cash lease expense 44 70 67 Changes in operating assets and liabilities, net of impact of business acquisition: Accounts receivable ( 6,396 ) ( 3,118 ) ( 1,559 ) Inventories ( 5,876 ) ( 1,839 ) ( 369 ) Prepaid expenses and other assets ( 1,971 ) ( 3,349 ) 94 Accounts payable 6,808 2,318 53 Accrued Medicaid rebates 2,451 3,239 2,818 Accrued liabilities 1,011 1,484 2,477 Other non-current assets and liabilities 3,114 38 — Net cash from (used in) operating activities 10,524 969 6,815 Cash from (used in) investing activities Purchases of property and equipment ( 333 ) ( 26 ) — Acquisition of business — ( 30,000 ) — Purchase of product licensing rights — ( 9,988 ) ( 775 ) Net cash from (used in) investing activities ( 333 ) ( 40,014 ) ( 775 ) Cash flows from (used in) financing activities Net proceeds from the issuance of long-term debt — 25,309 — Repayment of long-term debt — ( 1,155 ) ( 1,155 ) Common stock issued in private placement offering — 7,000 — Proceeds from stock option exercises 598 1,191 149 Payment of tax withholding related to net share settlement of stock option exercises — — ( 180 ) Employee stock purchase plan 217 248 229 Net cash from (used in) financing activities 815 32,593 ( 957 ) Change in cash and cash equivalents 11,006 ( 6,452 ) 5,083 Cash and cash equivalents at beginning of year 14,936 21,388 16,305 Cash and cash equivalents at end of year $ 25,942 $ 14,936 $ 21,388 Supplemental disclosures of cash flow information Cash paid for interest $ 3,325 $ 665 $ 842 Cash paid for income taxes $ 118 $ 82 $ 247 Supplemental disclosures of non-cash investing and financing activities: Debt issuance costs $ — $ 386 $ — Fair value of warrants issued in connection with debt agreement $ — $ 1,170 $ — Adjustment of operating lease right-of-use assets and liabilities due to tenant allowance $ — $ — $ 29 Right-of-use assets obtained in exchange for lease liabilities $ 333 $ 219 $ — The accompanying notes are an integral part of these financial statements. 45 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 1 — Company Overview Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases. We currently have eight commercial rare disease products: INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone. We have five additional product candidates in late-stage development: ET- 600, Amglidia®, ET- 700, ET- 800 and ZENEO® hydrocortisone autoinjector. Note 2 — Liquidity Considerations As of December 31, 2025 , the Company had an accumulated deficit of $ 112,494 and for the year ended December 31, 2025 the Company had a net loss of $ 4,601 . To date, the Company has generated revenues from multiple products and expects further growth in 2026 and beyond in accordance with additional market penetration from these products plus revenues from additional products where it anticipates FDA approval. The Company currently believes its existing cash and cash equivalents of $ 25,942 as of December 31, 2025 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of issuance of these financial statements. This estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage its spending. The Company could use its available capital resources sooner than currently expected. Accordingly, the Company could seek to obtain additional capital through equity financings, the issuance of debt or other arrangements. However, there can be no assurance that the Company will be able to raise additional capital if needed or under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding common shares. The Company’s existing long-term debt obligation contains covenants and limits the Company’s ability to pay dividends or make other distributions to stockholders. If the Company experiences delays in product sales growth and completing its product development and obtaining regulatory approval for its other product candidates and is unable to obtain such additional financing, operations would need to be scaled back or discontinued. Note 3 — Summary of Significant Accounting Policies Basis of Presentation The Company has prepared the accompanying financial statements in accordance with GAAP. Certain prior period amounts, have been reclassified to conform to current year presentation in the financial statements and notes to the financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, Medicaid program rebates, valuation of inventories, useful lives of assets and the recoverability of long-lived assets, valuation of deferred tax assets, and the valuation of common stock, stock options, warrants, and restricted stock units (“RSUs”). Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates or assumptions. Acquisitions The Company 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. 46 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 3 — Summary of Significant Accounting Policies (continued) 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. Segment Information The Company operates the business on the basis of a single reportable segment, which includes eight commercial rare disease products: INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , 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 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®, KHINDIVI TM , GALZIN®, Carglumic Acid, Betaine Anhydrous and Nitisinone products, as well as from Pentec Health for sales of the Company’s PKU GOLIKE® product. For the years ended December 31, 2025, 2024 and 2023 , AnovoRx product sales represented 84.6 %, 93.6 % and 78.2 % of net revenues, respectively. As of December 31, 2025 and 2024 , AnovoRx product sales represented 88.4 % and 96.2 % of net accounts receivable. For the year ended December 31, 2025, the Company's revenues from external customers were derived from U.S operations and included product sales to U.S. and foreign countries. During the years ended December 31, 2024 and 2023, the Company's revenues from external customers were entirely derived from U.S operations and did not include any foreign countries. As of December 31, 2025 and 2024 , all long-lived assets were domiciled within the U.S. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in U.S. financial institutions or invested in short-term U.S. treasury bills or high-grade money market funds. From time to time, amounts deposited with its bank exceed federally insured limits. The Company believes the associated credit risk to be minimal. Accounts Receivable Accounts receivable are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are recorded net of allowances for credit losses, 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 $ 272 and $ 238 as of December 31, 2025 and 2024 , respectively. Inventories The Company values its inventories at the lower of cost or net realizable value using the first -in, first -out method of valuation. The Company reviews its inventories for potential excess or obsolete issues on an ongoing basis and records a write-down if an impairment is identified. As of December 31, 2025 and December 31, 2024 , inventories consisted of purchased finished goods, semi-finished goods and raw materials. There was an inventory reserve of $ 1,199 and $ 605 at December 31, 2025 and 2024 , respectively. As of December 31, 2024 , inventories included $ 5,000 in prepaid raw materials acquired in the INCRELEX® business acquisition. 47 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 3 — Summary of Significant Accounting Policies (continued) Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed utilizing the straight-line method based on the following estimated useful lives. Computer hardware and software is depreciated over three years. Equipment, furniture and fixtures is depreciated over five years. Leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter. Construction in progress is capitalized but not depreciated until it is placed into service. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. Intangible Assets 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. The following table presents the Company's intangible asset as of December 31, 2025 and 2024: Useful Life Purchase Purchase Accumulated Carrying Intangible asset (In years) Date Price Amortization Value Carglumic Acid 10 November 2021 $ 3,250 $ 1,354 $ 1,896 Betaine 5 September 2022 2,125 1,399 726 Nitisinone 5 October 2023 650 292 358 GoLike 10 March 2024 1,868 327 1,541 Increlex 10 December 2024 21,250 2,200 19,050 Glazin 10 December 2024 8,119 812 7,307 $ 37,262 $ 6,384 $ 30,878 Useful Life Purchase Purchase Accumulated Carrying Intangible asset (In years) Date Price Amortization Value Carglumic Acid 10 November 2021 $ 3,250 $ 1,029 $ 2,221 Betaine 5 September 2022 2,125 974 1,151 Nitisinone 5 October 2023 650 162 488 GoLike 10 March 2024 1,868 140 1,728 Increlex 10 December 2024 21,250 76 21,174 Glazin 10 December 2024 8,119 — 8,119 $ 37,262 $ 2,381 $ 34,881 T he Company recorded $ 4,003 , $ 1,096 , and $ 790 of amortization expense for the years ended December 31, 2025, 2024 and 2023 respectively. The table below shows the estimated remaining amortization for these products for each of the five years from 2026 to 2030 and thereafter. Year Amortization Expense 2026 $ 4,004 2027 3,880 2028 3,546 2029 3,449 2030 3,449 Thereafter 12,550 Total estimated amortization expense $ 30,878 Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the Company’s 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 years ended December 31, 2025, 2024 and 2023 . 48 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Debt Issuance Costs and 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. The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts relate to the relative fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and accreted over the expected term of the debt to interest expense using the effective interest method. Note 3 — Summary of Significant Accounting Policies (continued) Leases The Company accounts for leases in accordance with ASC Topic 842 — Leases. The Company reviews all relevant facts and circumstances of a contract to determine if it is a lease whereby the terms of the agreement convey the right to control the direct use and receive substantially all the economic benefits of an identified asset for a period of time in exchange for consideration. The associated right-of-use assets and lease liabilities are recognized at lease commencement. The Company measures lease liabilities based on the present value of the lease payments over the lease term discounted using the rate it would pay on a loan with the equivalent payments and term for the lease. The Company does not include the impact for lease term options that would extend or terminate the lease unless it is reasonably certain that it will exercise any such options. The Company accounts for the lease components separately from non-lease components for its operating leases. The Company measures right-of-use assets based on the corresponding lease liabilities adjusted for (i) any prepayments made to the lessor at or before the commencement date, (ii) initial direct costs it incurs, and (iii) any incentives under the lease. In addition, the Company evaluates the recoverability of its right-of-use assets for possible impairment in accordance with its long-lived assets policy. Operating leases are reflected on the balance sheets as operating lease right-of-use assets, current accrued liabilities and long-term operating lease liabilities. The Company does not have any finance leases as of December 31, 2025 and 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. Variable lease payments are expensed as incurred. The Company does not recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less; such lease costs are recorded in the Statements of Operations on a straight-line basis over the lease term. Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the successful award of a patent and the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Concentrations of Credit Risk, Sources of Supply and Significant Customers The Company is subject to credit risk for its cash and cash equivalents, which are invested in money market funds and U.S. treasury bills from time to time. The Company maintains its cash and cash equivalent balances with one major commercial bank and the deposits held with the financial institution exceed the amount of insurance provided on such deposits and 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 believes the associated credit risk to be minimal. The Company is dependent on third -party suppliers for its products and product candidates. In particular, the Company relies, and expects to continue to rely, on a small number of suppliers to manufacture key chemicals, approved products and process its product candidates as part of its development programs. These programs could be adversely affected by a significant interruption in the manufacturing process. The Company is also subject to credit risk from its accounts receivable related to product sales as it extends credit based on an evaluation of the customer’s financial condition, and collateral is not required. The Company's accounts receivables are evaluated to determine if any allowance should be recorded based on consideration of the current economic environment, expectations of future economic conditions, specific circumstances and the Company's historical collection experience. Additionally, Management monitors its exposure to accounts receivable by periodically evaluating the collectability of the account receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and any prior customer credit loss experience. Based upon the review of these factors, the Company recorded no allowance for credit losses at December 31, 2025 or 2024 . Revenue Recognition for Contracts with Customers The Company accounts for contracts with its customers in accordance with ASC 606 — Revenue from Contracts with Customers. ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determine those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses whether these options provide a material right to the customer and, if so, they are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes. 49 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 3 — Summary of Significant Accounting Policies (continued) The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time. For the years ended December 31, 2023 , 2024 and 2025 , all revenues recognized in the Statements of Operations were point in time sales to the Company's customers. Milestone Payments – If a commercial contract arrangement includes development and regulatory milestone payments, the Company will evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. Royalties – For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. The Company sells its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products to pharmacy distributor customers which provide order fulfilment and inventory storage/distribution services. The Company uses a third -party logistics ( “3PL” ) vendor to process and fulfill orders and has concluded it is the principal in the sales to wholesalers because it controls access to the 3PL vendor services rendered and directs the 3PL vendor activities. For its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , 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 estimates the transaction price when it receives each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler/distributor arising from all of the above factors. The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone. sales are not subject to returns. The Company stores its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , 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. At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership and have an enforceable obligation to pay the Company. They also have the ability to direct sales of product to their customers on terms and at prices they negotiate. Although wholesalers have product return rights, the Company does not believe they have a significant incentive to return the product. 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. 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 Product Sales Cost of product sales consists of the profit-sharing and royalty fees with the Company’s product licensing and development partners, the purchase costs for finished products from third -party manufacturers, the amortization of certain intangible assets, and freight and handling/storage costs from the Company’s 3PL logistics service providers. The cost of sales for profit-sharing and royalty fees and costs for purchased finished products and the associated inbound freight expense is recorded when the associated product sale revenue is recognized in accordance with the terms of shipment to customers while outbound freight and handling/storage fees charged by the 3PL service provider are expensed as they are incurred. Cost of sales also reflects any write-downs or reserve adjustments for the Company’s inventories. 50 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 3 — Summary of Significant Accounting Policies (continued) Research and Development Expenses Research and development (“R&D”) expenses include both internal R&D activities and external contracted services. Internal R&D activity expenses include salaries, benefits and stock-based compensation and other costs to support the Company’s R&D operations. External contracted services include product development efforts such as certain product licensor milestone payments, clinical trial activities, manufacturing and control-related activities and regulatory costs. R&D expenses are charged to operations as incurred. The Company reviews and accrues R&D expenses based on services performed and may, from time to time, make estimates of those costs applicable as to the stage of completion of each project. Actual results could differ from the Company’s estimates. 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. Income (Loss) Per Share Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as unvested restricted stock, stock options and warrants that are outstanding during the period. Common stock equivalents are excluded from the computation when their inclusion would be anti-dilutive. No such adjustments were made for 2025 , 2024 or 2023 as the Company reported a net loss for the years ended December 31, 2025, 2024 and 2023 and including the effects of common stock equivalents in the diluted earnings per share calculation would have been anti-dilutive (see Note 11 ) . Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation – Stock Compensation. The guidance under ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant and record expense over the related service periods, which are generally the vesting period of the equity awards. Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed. The Company estimates the fair value of stock-based option awards using the Black-Scholes option-pricing model (“BSM”). The BSM requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined from the implied yields for zero -coupon U.S. government issues with a remaining term approximating the expected life of the options or warrants. Dividends on common stock are assumed to be zero for the BSM valuation of the stock options. The expected term of stock options granted is based on vesting periods and the contractual life of the options. Expected volatilities are based on the Company's historical volatility subsequent to our IPO, which we believe represents the most accurate basis for estimating expected future volatility under the current conditions. The Company accounts for forfeitures as they occur. Income Taxes As part of the process of preparing the Company’s financial statements, the Company must estimate the actual current tax liabilities and assess temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the 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 December 31, 2025 and 2024 , the Company has established a 100 % valuation reserve against its deferred tax assets. The Company accounts for income taxes under the provisions of ASC 740 - Income Taxes. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. For the years ended December 31, 2025 2024 and 2023, the Company recognized interest and penalties in the Statements of Operations for $ 3 , $ 6 and $ 0 , respectively. As of December 31, 2025 , the Company is subject to taxation in the United States and certain individual states – primarily Illinois and Tennessee. The Company’s tax losses from 2017 through 2025 are subject to examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses (“NOLs”). Fair Value Measurements We measure certain of our assets and liabilities at fair value. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value accounting requires characterization of the inputs used to measure fair value into a three -level fair value hierarchy as follows: Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Observable inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent from the entity. Level 3 – Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available. 51 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 3 — Summary of Significant Accounting Policies (continued) Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below takes into account the market for the Company’s financials, assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt obligation. The carrying amounts of these financial instruments, except for the long-term debt obligation, approximate their fair values due to the short-term maturities of these instruments. Based on borrowing rates currently available to the Company, the carrying value of the long-term debt obligation approximate its fair value. Impact of Recent Accounting Pronouncements The Company’s management has evaluated all of the recently issued, but not yet effective, accounting standards that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position, results of operations and cash flows. New Pronouncements Adopted 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 has adopted this new guidance in its financial statements on a prospective basis. New Pronouncements Issued 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 currently evaluating the effect of this new guidance on its financial statements. Note 4 – Business Combination On October 2, 2024, the Company and Ipsen Biopharmaceuticals, Inc. (“Ipsen”), a subsidiary of Ipsen S.A., entered into an Asset Purchase Agreement (the “Purchase Agreement”), whereby the Company agreed to acquire Increlex® (mecasermin injection) from Ipsen. Increlex® is a biologic product used to treat children and adolescents from two -to 18 -years-old who suffer from severe primary insulin-like growth factor 1 deficiency (SPIGFD). The primary reason for the Increlex® product acquisition was due to the Company’s expertise and strong relationships in pediatric endocrinology in addition to leveraging the Company’s existing sales team to increase awareness of SPIGFD. Under the terms of the Purchase Agreement, the Company acquired Increlex® for $ 22,500 at closing, plus an additional $ 7,500 for product inventory. The Company will also make payments to Ipsen of $ 2,500 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 €15,000. The Company also entered into an amendment to its existing credit agreement with SWK Holdings Corporation (“SWK”) that was contingent upon the closing of the Purchase 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, and reduced the facility’s annual interest rate to Secured Overnight Financing Rate (“ SOFR ”) plus 6.75 %. - refer to Note 7, “Debt” for further details. In connection with the closing of Purchase Agreement, the Company issued a warrant to the lender for the purchase of up to 289,736 shares of common stock at a price of $ 5.32 per share. On December 19, 2024, the Company completed the acquisition of Increlex®. The Company determined that the asset purchase agreement met the definition of a business under ASC 805; therefore, the Company accounted for the Purchase Agreement as a business combination and applied the acquisition method of accounting. 52 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 4 – Business Combination (continued) The allocation of the purchase consideration was as follows: Purchase Price Allocation Cash consideration $ 30,000 Deferred payments (1) 4,276 Total consideration $ 34,276 Inventory (2) 13,010 Intangible assets (3) 21,250 Goodwill (4) 16 Assets acquired 34,276 Net assets acquired $ 34,276 ( 1 ) Deferred payments represent the acquisition date fair value of the $ 5,000 in deferred consideration to be paid to Ipsen. The Company will make payments of $ 2,500 on each of the first and second anniversaries of closing, which the closing date of the acquisition was December 19, 2024. The Company will accrete the $ 724 , which represents the difference between the total deferred payments amount due of $ 5,000 and the acquisition date fair value of $ 4,276 , to interest expense in its Statements of Operations over the course of the two -year period using the effective interest rate methodology. ( 2 ) Inventory consists of raw materials, semi-finished goods and finished goods. Finished goods, semi-finished goods and raw materials inventory were valued on the acquisition date at fair value and resulted in a $ 5,510 step-up in inventory value compared to a $ 7,500 carrying value. Determining the fair value of inventory included making estimates of costs to complete and to sell semi-finished and finished goods inventory. ( 3 ) Intangible assets consist of the transferred intellectual property as a part of the license agreement. The estimated fair value of the intangible asset was determined using the multi-period excess earnings method (“MPEEM”), which is a form of income approach, which incorporates the estimated future cash flows to be generated from the product utilizing the existing customer base. Excess earnings are the earnings remaining after deducting the market rates of return on the estimated value of contributory assets, including debt-free net working capital, tangible assets, other long-term assets and other identifiable intangible assets. The excess earnings are thereby calculated from each year of a multi-year projection period and discounted to present value. The primary components of this method consist of the discount rate and contributory asset charges. The imputed fair value of the Increlex® intangible asset of $ 21,250 will be amortized over its useful life of ten years. ( 4 ) Goodwill represents the excess of the purchase price consideration over the fair value of the net assets acquired. Due to the immateriality of the implied value of goodwill, the Company elected to expense the $ 16 in goodwill, which was expensed to general and administrative expenses for the year ended December 31, 2024 in the Company Statements of Operations. Transition services agreement Concurrent with the Purchase Agreement, the Company entered into a transition services agreement (the “TSA”) with Ipsen to govern Ipsen providing transitional pharmaceutical marketing services, distribution services and other related support and assistance with operations outside the U.S. The services being provided under the TSA have been priced at market rates, and the Company is not receiving a discount from Ipsen for these services. As a result, there was no portion of the purchase price allocated to the TSA consideration. The separate consideration under the TSA will be expensed as occurred and when services are received. Acquisition/divestiture related costs For the years ended December 31, 2025 and December 31, 2024 , the Company incurred acquisition and divestiture related costs of $ 581 and $ 415 , respectively, which were expensed as incurred and included in general and administrative expenses in the Statements of Operations. 53 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 5 – Property and Equipment Property and equipment consist of the following: December 31, December 31, 2025 2024 Computer hardware and software $ 200 $ 200 Furniture and fixtures 265 125 Equipment 52 52 Leasehold improvements 295 103 Property and equipment, gross 812 480 Less: accumulated depreciation and amortization ( 486 ) ( 446 ) Property and equipment, net $ 326 $ 34 Depreciation expense for the years ended December 31, 2025, 2024 and 2023 was $ 41 , $ 50 and $ 44 , respectively. Note 6 – Inventory Inventory consisted of the following: December 31, December 31, 2025 2024 Raw materials $ 557 $ 5,355 Semi-finished goods 9,431 3,288 Finished goods 6,630 7,194 Less: excess and obsolete inventory reserve ( 1,199 ) ( 605 ) Inventory, net $ 15,419 $ 15,232 During the years ended December 31, 2025, 2024 and 2023 , provision reserves for excess and obsolete inventory was $ 594 , $ 529 and $ 15 , respectively. Note 7 – Debt SWK Loan In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK, which provided for up to $ 10,000 in debt financing. As a result of subsequent amendments to the SWK Credit Agreement, the Company expanded its credit facility to $ 30,000 , extended the facility’s maturity to three years from closing with a loan maturity date of December 17, 2027, and reduced the facility’s annual interest rate to Secured Overnight Financing Rate (“ SOFR ”) plus 6.75 %. Interest payments are payable quarterly, with quarterly principal payments of $ 3,000 beginning in May 2026 with a final principal payment of $ 9,000 due at maturity in December 2027. The SWK Credit Agreement includes a 5.0 % exit fee payable at maturity and this exit fee payable will be accreted to interest expense in the Company's Statement of Operations using the effective interest expense method. The SWK Credit Agreement contains a mandatory prepayment clause that can compel the Company to partially prepay the loan upon certain triggering events, which the Company has deemed to be remote. Borrowing under the SWK Credit Agreement is secured by the Company's assets, contains customary default provisions, which include limits on additional indebtedness. As of December 31, 2025 and 2024 , the Company was in compliance with all financial covenants. The Company recorded interest expense of $ 4,781 , $ 2,005 and $ 1,060 in 2025, 2024 and 2023 , respectively, which included $ 696 , $ 1,109 and $ 117 , respectively, of debt discount amortization. For the year ended December 31, 2024 , debt discount included $ 1,170 , which was associated with the issuance of warrants to SWK. The Company had accrued interest of $ 425 and $ 182 as of December 31, 2025 and 2024 , respectively, which is included in accrued liabilities in the accompanying Balance Sheets. As of December 31, 2025 and 2024, the effective interest rate was 14.62 % and 14.46 %, respectively. 54 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) The table below reflects the future annual payments for the SWK loan principal as of December 31, 2025 . Amount 2026 $ 9,000 2027 21,000 Total payments 30,000 Less: unamortized discount ( 330 ) Plus: accrued exit fees at December 31, 2025 888 Debt, net of unamortized discount and accrued exit fees $ 30,558 Note 8 — 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. For the years ended December 31, 2025, 2024 and 2023 , the Company issued 161,933 , 266,353 and 207,626 (net shares issued after a portion of 407,808 shares was a cashless exercise), respectively, of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan (see Note 10 ). The Company withheld 50,867 shares for payroll tax obligations totaling $ 180 for the year ended December 31, 2023. For the years ended December 31, 2025, 2024 and 2023 , the Company issued 16,894 , 80,933 shares and 86,782 , respectively, under the Company’s Employee Stock Purchase Plan (“ESPP”). For the years ended December 31, 2025, 2024 and 2023 , the Company issued 159,150 , 90,402 and 91,402 respectively, in shares of its common stock due to the vesting of restricted stock units. On December 10, 2024, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company issued 583,334 shares of its common stock at an offering price of $ 12.00 per common share for gross proceeds to the Company of $ 7,000 before deducting any related offering expenses. Note 9 — Common Stock Warrants Warrants outstanding as of December 31, 2025 is listed in the table below: Description of Warrants Warrant Issuance Date No. of Shares Exercise Price SWK Warrants – Debt (Tranche #1) 11/13/2019 51,239 $ 5.86 SWK Warrants – Debt (Tranche #2) 8/11/2020 18,141 $ 6.62 SWK Warrants – Debt (Tranche #3) 9/30/2024 289,736 $ 5.32 Total shares and weighted average exercise price 359,116 $ 5.46 The holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under the Securities Act of 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 holders. On September 30, 2024, in c onnection with the Company's amendment to expand its existing credit facility to $ 30.0 million with SWK, the Company issued 289,736 warrants to SWK at a price of $ 5.32 per share. The fair value of these 289,736 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 %. There were no warrants exercised in 2023, 2024 or 2025. Note 10 — Share-Based Payment Awards 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 2,099,847 shares available for future issuance under the 2018 Plan as of December 31, 2025 . 55 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 10 — Share-Based Payment Awards (continued) 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, 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 1,068,363 shares based on the 26,709,084 shares of common stock outstanding at December 31, 2024. On January 1, 2026, the share reserve was increased by 1,081,882 shares based on the 27,047,061 shares of common stock outstanding at December 31, 2025.The exercise price for stock options granted is not less than the fair value of common stock as determined by the board of directors as of the date of grant. The Company uses the closing stock price on the date of grant as the exercise price. Stock options typically have a ten -year life, are issued in the form of non-qualified stock options, and the exercise prices were set at the fair value for the shares at the dates of grant. 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 Statements of Operations for the year ended December 31, 2024. For the years ended December 31, 2025, 2024 and 2023 , the Company’s total stock-based compensation expense was $ 5,512 , $ 3,165 and $ 3,137 , respectively. Of these amounts, $ 5,330 , $ 2,899 , and $ 2,864 was recorded in general and administrative expenses, respectively, and $ 182 , $ 266 , and $ 273 was recorded in R&D expenses, respectively. The tax deductions related to stock compensation expense during the years ending December 31 2025, 2024 and 2023, were approximately $ 1,006 , $ 530 , and $ 486 , respectively, on a tax-effected basis. Stock Options The following table summarizes stock option activity during the year ended December 31, 2025 : Weighted Average Weighted Average Remaining Exercise Contractual Aggregate Intrinsic Shares Price Term Value Options outstanding as of January 1, 2025 5,918,616 $ 4.65 Issued 471,059 13.12 Exercised ( 161,933 ) 3.70 Forfeited/Cancelled ( 316,220 ) 4.99 Options outstanding as of December 31, 2025 5,911,522 $ 5.35 6.1 $ 68,325 Options exercisable at December 31, 2025 4,684,707 $ 4.94 5.6 $ 56,093 Options vested and expected to vest at December 31, 2025 5,911,521 $ 5.35 6.1 $ 68,325 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 for those stock options that had strike prices lower than the fair value of the Company’s common stock at December 31. The intrinsic value of the options exercised during the twelve -months ended December 31, 2025 and 2024 was $ 1,852 and $ 1,867 , respectively. For the years ended December 31, 2025, 2024 and 2023 , there were 161,933 , 266,353 and 207,626 , shares issued for exercise of stock options, respectively for proceeds of $ 598 , $ 1,191 and $ 149 , respectively. The assumptions used to calculate the estimated fair value of options granted during the years ended December 31, 2025, 2024 and 2023 under the BSM were as follows: December 31, 2025 December 31, 2024 December 31, 2023 Expected dividends — % — % — % Expected volatility 65 % 70 % 70 % Risk-free interest rate 3.9 - 4.7 % 3.5 - 4.4 % 3.5 - 4.7 % Expected term (in years) 6.1 6.2 6.3 Weighted average grant date fair value $ 8.44 $ 3.22 $ 2.32 Expected Term — The Company has opted to use the “simplified method” for estimating the expected term of options granted to employees and directors, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). The expected term of options granted to non-employees equals the contractual life of the options. Expected Volatility — 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. Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of the Company’s stock options. 56 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Expected Dividend — The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the options and therefore has estimated the dividend yield to be zero. Fair value of Common Stock —The Company uses the closing stock price on the date of grant for the fair value of the common stock. As of December 31, 2025 , there was a total of $ 4,995 of unrecognized compensation costs related to non-vested stock option awards which will be recognized over a weighted average period of 2.5 years. Restricted Stock Units (RSUs) The following table summarizes restricted stock unit activity during the years ended December 31, 2025 and 2024: Number of Weighted Average Grant-Date Shares Fair Value Per Unit Outstanding and unvested as of January 1, 2024 274,204 $ 2.63 Granted 65,266 $ 6.74 Vested ( 90,402 ) $ 2.63 Forfeited ( 23,000 ) $ 2.63 Outstanding and unvested as of December 31, 2024 226,068 $ 3.82 Granted 255,956 $ 14.02 Vested ( 159,150 ) $ 9.29 Forfeited ( 44,373 ) $ 6.92 Outstanding and unvested as of December 31, 2025 278,501 $ 9.57 Stock-based compensation related to RSUs was $ 1,985 , $ 241 and $ 239 for the years ended December 31, 2025, 2024 and 2023 , respectively. As of December 31, 2025 , there was $ 2,032 of unrecognized stock-based compensation expense related to unvested RSUs which will be recognized over a weighted average period of 2.4 years. Employee Stock Purchase Plan In December 2018, the Company’s board of directors adopted an initial offering of the Company’s common stock under the Company’s ESPP. The Company’s 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. The terms of the ESPP permit employees of the Company to use payroll deductions to purchase stock at a price per share that is at least the lesser of ( 1 ) 85 % of the fair market value of a share of common stock on the first date of an offering or ( 2 ) 85 % of the fair market value of a share of common stock on the date of purchase. After the initial offering period, subsequent twelve -month offering periods automatically commence over the term of the ESPP on the day that immediately follows the conclusion of the preceding offering, each consisting of two purchase periods approximately six months in duration ending on or around June 10 and December 10 each year, subject to a restart feature if the Company’s stock price drops at the end of a six -month period within the twelve -month offering period. The Company recorded an expense of $ 97 , $ 205 , and $ 135 in 2025, 2024 and 2023 , respectively, related to the ESPP. For the years ended December 31, 2025, 2024 and 2023 , there were 16,894 , 80,933 and 86 ,782 share issuances, respectively, under the ESPP. The weighted average grant date fair value of share awards in 2025, 2024 and 2023 was $ 12.83 , $ 1.35 , and $ 1.17 per share, respectively. Employees contributed $ 217 , $ 283 and $ 230 to the ESPP during 2025, 2024 and 2023 , respectively. Of these amounts, $ 45 and $ 42 at December 31, 2025 and 2024 , respectively, are included in accrued liabilities in the accompanying balance sheets. As of December 31, 2025 , there were 825,687 shares available for issuance under the ESPP. 57 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 11 — Basic and Diluted Net Loss per Common Share Basic and diluted net loss per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock and “if converted” method) from stock options, RSUs, and warrants at December 31, 2025, 2024 and 2023 were 7,780,895 , 6,389,345 , and 5,418,251 respectively, and are excluded from the calculation of diluted net loss per share because the effect is anti-dilutive. 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: Year ended Year ended Year ended December 31, December 31, December 31, 2025 2024 2023 Net loss $ ( 4,601 ) $ ( 3,823 ) $ ( 936 ) Weighted average common shares outstanding (basic and diluted) 26,907,725 25,895,086 25,645,366 Net loss per common share (basic and diluted) $ ( 0.17 ) $ ( 0.15 ) $ ( 0.04 ) Note 12 — Related-Party Transactions Chief Executive Officer The CEO has a partial interest in a company that the Company has partnered with for its EM- 100/Alaway Preservative Free eye allergy product. Previously, the Company acquired DS- 200 and all related intellectual property pursuant to an asset purchase agreement (the “Selenix Agreement”) dated June 23, 2017 between the Company and Selenix LLC (“Selenix”), an entity affiliated with the CEO. 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 the Company from the DS- 200 sale agreement. Selenix is 50 % owned by Messa Holdings LLC (“Messa”), which is 100 % owned by the CEO. In March 2025, the Company recognized licensing revenue of $ 1,500 and $ 675 in cost of sales from a development milestone. In June 2025, the Company paid $ 675 to Selenix. Note 13 — Leases The Company recognizes a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, including operating leases, and separates lease components from non-lease components related to its office space lease. In May 2025, the Company entered into an amendment to its office lease agreement to expand its office space, from 5,507 square feet, to 8,079 square feet and to renew its lease term. The amendment to the lease agreement is effective September 1, 2025 and the renewal period for the office lease is for a sixty-five month period through January 2031 and which includes tenant improvement allowances. The Company removed its existing ROU asset and liability and recorded $ 333 in ROU assets, $ 189 in tenant improvement allowances and $ 522 in operating lease liabilities in association with the lease extension. 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 Statements of Operations was $ 92 , $ 82 and $ 67 for the years ended December 31, 2025, 2024 and 2023 , respectively. For the years ended December 31, 2025, 2024 and 2023 , cash paid for amounts included in the measurement of operating lease liabilities was $ 68 , $ 58 and $ 88 , respectively. The ROU asset non-cash lease expense was $ 44 , $ 70 and $ 67 for the years ended December 31, 2025, 2024 and 2023 , respectively, and is reflected within non-cash lease expense on the Company’s Statements of Cash Flows. As of December 31, 2025 and 2024 , the average remaining lease term was 5.17 and 2.25 years, respectively and as of December 31, 2025 and 2024 , the average discount rate was 11.8 % and 8.6 %. respectively, for each period. The table below presents the lease-related assets and liabilities recorded on the balance sheet as of December 31, 2025 and December 31, 2024: December 31, December 31, Assets Classification 2025 2024 Operating lease right-of-use assets Operating lease right-of-use assets, net $ 310 $ 175 Total leased assets $ 310 $ 175 Liabilities Operating lease liabilities, current Accrued liabilities $ 65 $ 76 Operating lease liabilities, noncurrent Operating lease liabilities, net of current portion 460 107 Total operating lease liabilities $ 525 $ 183 58 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) The Company’s future annual lease commitments as of December 31, 2025 are as indicated below: Total 2026 2027 2028 2029 2030 & thereafter Undiscounted lease payments $ 710 $ 123 $ 134 $ 138 $ 142 $ 173 Less: Imputed interest ( 185 ) Total lease liabilities $ 525 Note 14 – Income Taxes The provision for income taxes for the Company consists of the following for the years ended December 31, 2025, 2024 and 2023 : Year ended December 31, December 31, December 31, 2025 2024 2023 Current: Federal $ ( 16 ) $ 24 $ 61 State 59 ( 9 ) 186 Total current expense 43 15 247 Deferred: Federal — ( 223 ) ( 85 ) State — 1,150 ( 31 ) Change in valuation allowance — ( 927 ) 116 Total deferred expense — — — Total provision $ 43 $ 15 $ 247 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes. The significant components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are as follows: December 31, December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 14,089 $ 14,145 Stock-based compensation 2,551 2,021 Research & development capitalization 1,286 2,007 Research & development credits 1,438 42 Medicare reserves 2,390 1,767 Accruals and other 2,829 1,011 Total deferred tax assets 24,583 20,993 Valuation allowance ( 23,101 ) ( 20,589 ) Deferred tax assets $ 1,482 $ 404 Deferred tax liabilities: Prepaid expenses $ ( 838 ) $ ( 174 ) IRC 481(a) adjustments ( 483 ) — Deferred consideration discount ( 62 ) ( 182 ) Right-of-use assets ( 79 ) ( 45 ) Other deferred tax liabilities ( 20 ) ( 3 ) Deferred tax liabilities $ ( 1,482 ) $ ( 404 ) Net deferred tax assets (liabilities) $ — $ — In assessing the realizability of deferred tax assets, the Company considers all available positive and negative evidence to evaluate whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025 , the Company believes it is more likely than not that the Company's net deferred tax assets would not be realized and continues to record a full valuation allowance on its net deferred tax assets. The Company's valuation allowance represents the amount of tax benefits that are likely to not be realized. The Company has gross federal net operating losses of $ 49,697 , which can be carried forward indefinitely, and gross state net operating losses of $ 52,400 , which begin to expire in 2035. The Company's federal net operating losses, and certain state net operating losses, are subject to an 80% annual utilization limitation. 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. 59 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income taxes after the adoption of ASU 2023 - 09 is as follows: Year ended December 31, 2025 Amount % U.S federal statutory tax rate $ ( 957 ) 21.00 % State and local income taxes (1) State income tax, net of federal tax benefit ( 170 ) 3.75 % Change in valuation allowance 207 ( 4.54 %) Change in state tax rate 21 ( 0.47 %) Change in uncertain tax position reserve ( 22 ) 0.48 % Return to provision related to tax credit study 23 ( 0.51 %) Income tax credits Research and development tax credits ( 63 ) 1.37 % Orphan drug tax credits ( 391 ) 8.58 % Return to provision related to tax credit study ( 741 ) 16.25 % Changes in valuation allowance 2,305 ( 50.59 %) Nontaxable or nondeductible items Section 162(m) limitation 389 ( 8.53 %) Stock-based compensation ( 424 ) 9.30 % Return to provision adjustments 64 ( 1.41 %) Other 9 ( 0.15 %) Changes in unrecognized tax benefits ( 207 ) 4.53 % Effective tax rate $ 43 ( 0.94 %) ( 1 ) The state jurisdiction that contributes to the majority (greater than 50% ) of the tax effect in this category is Tennessee. A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes after the adoption of ASU 2023 - 09 is as follows: Year ended December 31, December 31, 2024 2023 Benefit based on federal statutory rate $ ( 800 ) $ ( 145 ) Stock-based compensation 880 254 Change in state tax rate 814 - State income tax, net of federal tax benefit ( 31 ) ( 45 ) Section 162(m) limitation 169 - Other permanent differences 18 299 Research and development credits ( 277 ) - Change in uncertain tax position reserve 382 - Return to provision ( 213 ) - Change in valuation allowance ( 927 ) ( 116 ) Income tax expense $ 15 $ 247 The Company recognizes tax benefits from uncertain positions if it is more likely than not that the tax position will be sustained by the tax authority upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more likely than not threshold, the Company measures the tax position as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. A reconciliation of uncertain tax positions at the beginning and end of the years below is as follows: Year ended December 31, December 31, December 31, 2025 2024 2023 Beginning balance $ 382 $ — $ — Gross increases (decreases) related to prior year positions ( 61 ) 243 - Gross increases (decreases) related to current year positions 113 139 - Ending balance $ 434 $ 382 $ — 60 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) As of December 31, 2025, approximately $ 434 , would reduce the Company’s annual effective tax rate, if recognized. The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties related to uncertain tax positions are recorded as a component of income tax expense. The Company accrued for interest and penalties associated with unrecognized tax benefits for the years ended December 31, 2025 and 2024 in the amount of $ 3 and $ 6 , respectively. No interest or penalties associated with unrecognized tax benefits were accrued for in the year ended December 31, 2023. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With the exception of tax attributes created in prior years that may potentially be adjusted, the federal statute of limitations remains open for the 2022 tax year to present and the state statutes of limitations generally remain open for the 2021 tax year to present. The amounts of cash income taxes, net of refunds, paid by the Company during the year ended December 31, 2025 was as follows: Federal $ — Tennessee 75 Other states 43 Total net payments (refunds) $ 118 The amount of cash income taxes, net of refunds, paid by the Company during the years ended December 31, 2024 and 2023 was $ 82 and $ 247 , respectively. Note 15 - Employee Savings Plan The Company established an employee savings plan pursuant to Section 401 (k) of the Internal Revenue Code, effective January 1, 2018. The plan allows participating employees to deposit into tax deferred investment accounts up to 100 % of their salary, subject to annual limits. The Company makes certain matching contributions to the plan in amounts up to 4 % of the participants’ annual cash compensation, subject to annual limits. For the years ended December 31, 2025, 2024 and 2023 , the Company made $ 350 , $ 259 , and $ 242 , respectively, in matching contributions. Note 16 — Commitments and Contingencies Legal The Company is subject to legal proceedings and claims that may arise in the ordinary course of business. The Company is not aware of any pending or threatened litigation matters at this time that may have a material impact on the operations of the Company. License and Product Development Agreements 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 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 KHINDIVI TM in the existing agreement terms. In June 2021, the Company acquired U.S. and Canadian rights to Crossject’s ZENEO® hydrocortisone needleless autoinjector, which is under development as a rescue treatment for adrenal crisis. The Company paid Crossject $500 upon signing, $500 in March 2022 upon a completion of a successful technical batch and could pay up to $3,500 in additional development milestones and up to $6,000 in commercial milestones, as well as a 10% royalty on net sales. In 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, $ 250 upon first commercial sale of the product, and tiered royalties of 12.5 % to 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. 61 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) 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. In addition, the Company could receive additional milestone payments of up to $ 5,000 based on the achievement of certain future development and commercial milestones related to DS- 200, of which the Company could recognize 45 % of the proceeds from future milestone 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. FDA. AMMTeK. 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 NDA submission. In July 2025, the Company paid $ 500 to AMMTek upon the receipt of FDA meeting minutes and under the terms of the licensing agreement, the Company could pay up to $1,850 as follows: $ 550 upon NDA acceptance for review by the 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. 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 for the product and paid an additional $ 7,500 for product inventory. 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 addition, the Company will also make payments to seller of $ 2,500 on each of the first and second anniversaries of closing, of which $ 2,500 was paid to Ipsen S.A. in December 2025. As of December 31, 2025, the present value of the deferred consideration was $ 2,259 , with $ 241 to be accreted to interest expense over the remainder of the deferred consideration term using the effective interest rate method. As of December 31, 2025, $ 2,259 was classified as accrued liabilities in the accompanying Balance Sheets. In connection with the INCRELEX® product acquisition, the Company assumed the commercial manufacturing and supply agreement between Baxter Oncology GmbH and Ipsen Pharma SAS. The commercial manufacturing and supply agreement was executed in November 2020 and expires in November 2027. The commercial manufacturing and supply agreement is associated with the production of INCRELEX® for commercial usage and contains an annual production obligation and a maximum annual obligation. For each contract year, there is an annual obligation of two batches, with a maximum obligation of three batches at batch price of 5,000 Euros. Additionally, in connection with the INCRELEX® product acquisition, the Company assumed a manufacturing services agreement between Lonza Ltd and Ipsen Pharma SAS, as amended. The manufacturing services agreement was executed in December 2022 and expires in December 2026. The manufacturing services agreement is associated with the production of INCRELEX® bulk drug substance and contains an annual production obligation and a maximum obligation. For each contract year, there is an annual obligation and the fixed pricing for each batch that will vary according to the yield on that particular batch and in accordance with the target yield in kilograms and number of ordered batches. In March 2025, the Company out-licensed the commercial rights to INCRELEX® in territories outside of the U.S. to Esteve Pharmaceuticals, S.A. (“Esteve”). Under the terms of the licensing agreement, Esteve paid the Company in July 2025 €4,000 to license the rights to INCRELEX® for up to ten years, and Esteve also received an option to acquire the international rights in the future for a purchase price of up to €6,000. 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 in March 2025, $ 4,327 in accounts receivable, licensing revenues of $ 1,786 and deferred revenues of $ 2,541 . With respect to deferred revenues, $ 457 and $ 1,762 are reflected in accrued liabilities and other long-term liabilities, respectively in the Company's Balance Sheets as of December 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. In addition, the Company also entered into a supply agreement with Esteve, and beginning in the third quarter of 2025, the Company began supplying product to Esteve at a fixed transfer price. During the twelve months ended December 31, 2025, the Company recognized $ 322 in deferred revenues associated with the supply agreement. In June 2025, in connection with the asset purchase agreement with Ipsen S.A, the Company purchased $ 11,540 in inventory. Under the terms of the inventory purchase agreement, the Company will be required to make eight equal quarterly installment payments to Ipsen S.A, beginning in the third quarter of 2025. Accordingly, as of December 31, 2025, the Company has classified $ 6,926 in accounts payable and $ 3,463 as other long-term liabilities in in the accompanying Balance Sheets. During the twelve months ended December 31, 2025, the Company recognized $ 5,094 in inventory step-up expense associated with the inventory purchase from Ipsen S.A. Indemnification As permitted under Delaware law and in accordance with the Company’s Amended and Restated Bylaws, the Company is required to indemnify its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity . The Company is also party to indemnification agreements with its directors and officers. 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 December 31, 2025 or 2024 . 62 Eton Pharmaceuticals, Inc NOTES TO FINANCIAL STATEMENTS (in thousands, except share and per share amounts) Note 17 — Subsequent Events In January 2026, the Company entered into a licensing and supply agreement for the U.S. marketing rights for an ultra-rare disease metabolic product candidate. Under the terms of the licensing and supply agreement, the Company paid $ 1,000 upon execution of the agreement and will pay seller $ 1,000 upon approval of the Abbreviated New Drug Application and commercial launch. The Company will pay profit sharing of 30.0 % on net sales of the product candidate. In February 2026, the Company announced that the FDA approved an NDA for DESMODA™ (desmopressin acetate) Oral Solution for the management of central diabetes insipidus, also known as arginine vasopressin deficiency, as antidiuretic replacement therapy for patients of all ages. In February 2026, the Company entered into a license agreement with Pierre Fabre Medicament Sas (“Pierre Fabre”) for the exclusive rights to Hemangeol®, a product used for the treatment of proliferating infantile hermangioma. Under of the terms of the license agreement, the Company paid $ 14,000 and will also purchase approximately $ 1,500 of inventory. The Company will also purchase approximately $ 700 in additional inventory in May 2026. The Company will pay royalties to Pierre Fabre of 8.0 % on net sales of Hemangeol®. 63 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.