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Eton Pharmaceuticals, Inc. (ETON)

CIK: 0001710340. SIC: 2834 Pharmaceutical Preparations. Latest 10-K as of: 2026-03-19.

SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2834 Pharmaceutical Preparations

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1710340. Latest filing source: 0001437749-26-009059.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue79,950,000USD20252026-03-19
Net income-4,601,000USD20252026-03-19
Assets92,114,000USD20252026-03-19

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-19. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001710340.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Metric201720182019202020212022202320242025
Revenue959,00039,00021,832,00021,251,00031,642,00039,011,00079,950,000
Net income-12,740,000-18,320,000-27,970,000-1,955,000-9,021,000-936,000-3,823,000-4,601,000
Operating income-10,321,000-18,601,000-27,111,000-1,495,000-8,260,000-1,192,000-2,597,000-844,000
Gross profit506,000-397,00019,005,00014,318,00021,061,00023,411,00042,740,000
Operating cash flow-8,145,000-18,026,000-22,346,000-4,721,0004,821,0006,815,000969,00010,524,000
Capital expenditures236,0001,096,00050,0009,00038,0000.0026,000333,000
Assets13,443,00028,327,00017,072,00026,319,00027,465,00025,030,00031,740,00076,123,00092,114,000
Liabilities1,313,0002,024,0006,522,00010,656,0009,835,00011,952,00016,263,00051,695,00065,960,000
Stockholders' equity-6,874,00026,303,00010,550,00017,630,00017,630,00013,078,00015,477,00024,428,00026,154,000
Cash and cash equivalents13,156,00026,735,00012,066,00021,295,00014,406,00016,305,00021,388,00014,936,00025,942,000
Free cash flow-8,381,000-19,122,000-22,396,000-4,730,0004,783,0006,815,000943,00010,191,000

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Metric201720182019202020212022202320242025
Net margin-8.95%-42.45%-2.96%-9.80%-5.75%
Operating margin-6.85%-38.87%-3.77%-6.66%-1.06%
Return on equity-48.44%-173.65%-158.65%-11.09%-68.98%-6.05%-15.65%-17.59%
Return on assets-44.97%-107.31%-106.27%-7.12%-36.04%-2.95%-5.02%-4.99%
Liabilities / equity0.080.620.600.560.911.052.122.52
Current ratio16.7613.597.656.515.183.101.652.061.57

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-14. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001710340.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2021-Q12021-03-310.19reported discrete quarter
2021-Q22021-06-30-0.08reported discrete quarter
2022-Q12022-03-31-0.21reported discrete quarter
2022-Q22022-06-30-0.06reported discrete quarter
2022-Q32022-09-30-0.12reported discrete quarter
2023-Q22023-06-3011,997,0004,559,0000.18reported discrete quarter
2023-Q32023-09-307,028,000-579,000-0.02reported discrete quarter
2023-Q42023-12-317,313,000-2,256,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-03-317,966,000-811,000-0.03reported discrete quarter
2024-Q22024-06-309,074,000-3,041,000-0.12reported discrete quarter
2024-Q32024-09-3010,324,000627,0000.02reported discrete quarter
2024-Q42024-12-3111,647,000-598,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-3117,282,000-1,572,000reported discrete quarter
2025-Q22025-06-3018,928,000-2,585,000reported discrete quarter
2025-Q32025-09-3022,459,000-1,927,000-0.07reported discrete quarter
2025-Q42025-12-3121,281,0001,483,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-3124,266,0001,554,0000.05reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-017064.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-14. Report date: 2026-03-31.

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with (i) our unaudited interim condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations Included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 19, 2026 (the “2025 10-K”).

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan,” “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider other matters set forth in our SEC filings, including the Risk Factors set forth in Part I, Item 1A of our 2025 10-K.

Overview

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

Results of Operations (dollars in thousands)

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

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

 Research and Development Expenses

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

General and Administrative Expenses

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

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Table of Contents

Liquidity and Capital Resources

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

Cash Flows

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

Three months ended

Three months ended

March 31, 2026

March 31, 2025

Net cash from operating activities

$

7,405

$

2,090

Cash used in investing activities

(15,075

)

—

Cash from financing activities

1,389

394

Change in cash and cash equivalents

$

(6,281

)

$

2,484

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

Non-GAAP Financial Measures

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

We believe that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of our financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical financial results and trends and to facilitate comparisons between periods. In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

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

For the three months ended

March 31,

March 31,

2026

2025

GAAP Net income (loss)

$

1,554

$

(1,572

)

Depreciation (1)

22

12

Intangible amortization expense (2)

1,109

1,001

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

1,136

1,163

Income tax expense

20

74

EBITDA

$

3,841

$

678

Other non-GAAP adjustments:

Inventory step-up expense (3)

350

1,142

Stock-based compensation (4)

1,518

1,200

Severance expense (5)

—

335

Acquisition/divestiture-related costs (6)

—

320

Total of Other non-GAAP adjustments

1,868

2,997

Adjusted EBITDA

$

5,709

$

3,675

GAAP Net income (loss)

$

1,554

$

(1,572

)

Non-GAAP adjustments:

Depreciation (1)

22

12

Intangible amortization expense (2)

1,109

1,001

Inventory step-up expense (3)

350

1,142

Stock-based compensation (4)

1,518

1,200

Severance expense (5)

—

335

Acquisition/divestiture-related costs (6)

—

320

Total pre-tax non-GAAP adjustments

2,999

4,010

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

71

43

Total non-GAAP adjustments

2,928

3,967

Non-GAAP Net Income

$

4,482

$

2,395

Weighted average number of common shares outstanding, basic

27,285

26,886

Weighted average number of common shares outstanding, diluted

31,547

31,017

GAAP income (loss) per share - Basic

$

0.06

$

(0.06

)

Non-GAAP adjustments

0.11

0.14

Non-GAAP income per share - Basic

$

0.17

$

0.08

GAAP income (loss) per share - Diluted

$

0.05

$

(0.06

)

Non-GAAP adjustments

0.09

0.13

Non-GAAP income per share - Diluted

$

0.14

$

0.07

(1)

Represents depreciation expense related to our property and equipment.

(2)

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

(3)

During the three months ended March 31, 2026 and 2025, we recognized in cost of sales $350 and $1,142, respectively, for inventory step-up expense primarily attributable to INCRELEX® inventory revalued in connection with this product acquisition.

(4)

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

(5)

Represents severance and benefit expenses associated with role redundancy within commercial operations during the first quarter of 2025.

(6)

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

(7)

Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the effective income tax rate for the period. As discussed further in Note 10, we are in a full income tax valuation allowance position and the income tax effect on pre-tax non-GAAP adjustments is commensurate with the performance measure.

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Table of Contents

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to notes to our financial statements included herein, we believe that the following accounting policies a

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-19. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with our financial statements and the related notes thereto included in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled “Forward Looking Statements.” Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”

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®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone. We have five additional product candidates in late-stage development: ET-600, Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Results of Operations

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

During the twelve months ended December 31, 2025, we had $80.0 million in total revenues that generated a gross profit of $42.7 million, compared to total revenues of $39.0 million during the twelve-months ended December 31, 2024 that generated a gross profit of $23.4 million during the period. During the twelve-months ended December 31, 2025, we had product sales and royalties, net of $76.7 million, compared to product sales and royalties, net of $38.5 million during the twelve-months ended December 31, 2024, an increase of $38.2 million. The increase in product sales and royalties, net was the result of increased sales volume of our INCRELEX®, ALKINDI SPRINKLE® and GALZIN® products in the current year.

Licensing revenue during the twelve-months ended December 31, 2025 was $3.3 million, compared to $0.5 million in licensing revenue during the twelve-months ended December 31, 2024. The increase in licensing revenue during the twelve-months December 31, 2025 was due to $1.8 million from our out-licensing of INCRELEX® rights outside of the U.S. and $1.5 million from the recognition of a development milestone event associated with our divestiture of DS-200. During the twelve-months ended December 31, 2024, we recognized $0.5 million in licensing revenue associated with the sale of our DS-200 product candidate in September 2024.

Cost of Sales

During the twelve-months ended December 31, 2025, total costs of sales was $37.2 million, compared to $15.6 million in total costs of sales during the twelve-months ended December 31, 2024. The increase in total costs of sales during the twelve-months December 31, 2025, was due to increases in INCRELEX® and ALKINDI SPRINKLE® product sales and higher commissions with respect to our out-licensing of INCRELEX® rights outside of the U.S. Gross profit during the twelve-months ended December 31, 2025 was $42.7 million or 53.5% as a percentage of total net revenues, compared to gross profit of $23.4 million or 60.0% as a percentage of total net revenues during the twelve-months ended December 31, 2024. The decrease in gross profit during the twelve-months ended December 31, 2025 was primarily attributable to higher commission with respect to our out-licensing of INCRELEX® rights outside of the U.S.    

Research and Development Expenses

We currently have twelve employees that support our overall product development function. The majority of our spend in research and development (“R&D”) expenses is to third parties we contract with to develop, test our products and the development of partner milestone payments. During the twelve-months ended December 31, 2025, we incurred $7.8 million of R&D expenses, compared to $3.3 million during the twelve-months ended December 31, 2024. The increase in R&D expenses was primarily due to a $2.2 million NDA filing fee for ET-600 and increased expenses associated with our ET-700 and ET-800 project development activities.

33

General and Administrative Expenses

General and administrative expenses (“G&A”) expenses consist primarily of employee compensation expenses, selling and advertising/promotional expenses, legal and professional fees, business insurance and FDA fees associated with approved products. We anticipate that our G&A expenses will increase to support our business growth, particularly with respect to sales and marketing activities and additional personnel. During the twelve-months ended December 31, 2025 and 2024, we incurred $35.8 million and $22.8 million, respectively, of G&A expenses. The increase in G&A expenses during the twelve-months ended December 31, 2025 was primarily attributable to an increase in product advertising and promotional expenses, higher stock-based compensation expense and an increase in compensation and benefit expenses due to an increase in general and administrative headcount during the current year.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net revenues of $39.0 million in 2024 included $0.5 million of licensing revenue from the sale of our DS-200 product candidate in September 2024. Net revenue of $31.6 million in 2023 included $5.5 million of licensing revenue from the sale of our neurology product royalty streams to Azurity in June 2023. Net product revenue of $38.5 million in 2024 increased by $12.4 million from $26.1 million in 2023 primarily as a result of higher product sales for ALKINDI SPRINKLE® and Carglumic Acid.

Our 2024 gross profit of $23.4 million was up from $21.1 million in 2023 primarily as a result of higher product sales for ALKINDI SPRINKLE® and Carglumic Acid.

For the years ended December 31, 2024 and 2023, we incurred $3.3 million and $3.3 million in R&D expenses, respectively, and $22.8 million and $18.9 million of G&A expenses, respectively. The $3.8 million increase in G&A expenses was primarily due to personnel additions to support our growing business as well as marketing spend on new products. We incurred a net loss of $3.8 million and $0.9 million for the years ended December 31, 2024 and 2023, respectively.

Liquidity and Capital Resources

As of December 31, 2025, we had total assets of $92.1 million, cash and cash equivalents of $25.9 million and working capital of $22.1 million. We believe that our revenues and cash flows from our product portfolio will be sufficient for at least the next twelve months of our operations. However, our projected estimates for our product development spending, administrative expenses and our working capital requirements could change significantly, or we may experience growth more quickly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we would expect to support our operations.

Cash Flows

The following table sets forth a summary of our cash flows for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Year ended

Year ended

Year ended

December 31, 2025

December 31, 2024

December 31, 2023

Net cash from (used in) operating activities

$

10,524

$

969

$

6,815

Net cash from (used in) investing activities

(333

)

(40,014

)

(775

)

Net cash flows from (used in) financing activities

815

32,593

(957

)

Net change in cash and cash equivalents

$

11,006

$

(6,452

)

$

5,083

During the twelve-months ended December 31, 2025, 2024 and 2023, net cash from operating activities was $10.5 million, $1.0 million and $6.8 million, respectively. The increase in cash from operating activities during the twelve-months ended December 31, 2025 was primarily due to higher cash collections from product sales, a filing fee refund from the FDA related to ET-400 and the collection of a licensing milestone payment. The decrease in cash from operating activities during December 31, 2024 as compared to December 31, 2023, was primarily associated with an increase in prepaid expenses associated with FDA filing fees in addition to higher inventory purchases in the current year.

During the twelve-months ended December 31, 2025, 2024 and 2023, net cash used in investing activities was $0.3 million, $40.0 million and $0.8 million, respectively.  The decrease in net cash used in investing activities during the twelve-months ended December 31, 2025 was primarily attributable to one-time cash outflows for the business combination of INCRELEX® and the purchase of product licensing rights associated with GALZIN® and PKU GOLIKE®, which were cash outflows during the twelve-months ended December 31, 2024. During the twelve-months ended December 31, 2023, we purchased the product licensing rights for Nitisinone.

During the twelve-months ended December 31, 2025 and 2024, net cash from financing activities was $0.8 million and $32.6 million, respectively, compared to net cash used in financing activities during the twelve months ended December 31, 2023 of $1.0 million. The decrease in cash from financing activities during the twelve-months ended December 31, 2025 was primarily associated with net proceeds received from expanding our credit agreement with SWK Holdings Corporation ("SWK") and proceeds from common stock issued in a private placement offering in 2024. During the twelve-months ended December 31, 2023, net cash used in financing activities primarily represented $1.2 million in debt repayments to SWK, partially offset by proceeds received from stock option exercises and employee stock purchase plan proceeds.

Non-GAAP Financial Measures

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

34

We believe that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of our financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical financial results and trends and to facilitate comparisons between periods. In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

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

December 31,

December 31,

2025

2024

GAAP net loss

$

(4,601

)

$

(3,823

)

Depreciation

41

50

Intangible amortization expense

4,003

1,096

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

4,781

2,005

Income tax expense

43

15

EBITDA

$

4,267

$

(657

)

Other non-GAAP adjustments:

Inventory step-up expense (1)

5,094

—

Stock-based compensation (2)

5,512

3,165

Severance expense (3)

335

—

Acquisition/divestiture-related costs (4)

581

415

Total of Other non-GAAP adjustments

11,522

3,580

Adjusted EBITDA

$

15,789

$

2,923

GAAP loss before income tax

$

(4,558

)

$

(3,808

)

Non-GAAP adjustments:

Depreciation (5)

41

50

Intangible amortization expense (6)

4,003

1,096

Inventory step-up expense (1)

5,094

-

Stock-based compensation (2)

5,512

3,165

Severance expense (3)

335

—

Acquisition/divestiture-related costs (4)

581

415

Total pre-tax non-GAAP adjustments

15,566

4,726

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

235

49

Total non-GAAP adjustments

15,331

4,677

Non-GAAP Net Income

$

10,773

$

869

Weighted average number of common shares outstanding, basic

26,908

25,895

Weighted average number of common shares outstanding, diluted

31,046

27,458

GAAP income (loss) per share - Basic

$

(0.17

)

$

(0.15

)

Non-GAAP adjustments

0.57

0.18

Non-GAAP earnings per share - Basic

$

0.40

$

0.03

GAAP income (loss) per share - Basic

$

(0.17

)

$

(0.15

)

Non-GAAP adjustments

0.49

0.17

Non-GAAP earnings per share - Diluted

$

0.32

$

0.02

(1) During the twelve months ended December 31, 2025, we recognized in cost of sales $5,094 for inventory step-up expense primarily attributable to INCRELEX® inventory revalued in connection with this business combination.

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

(3) Represents severance and benefit expenses associated with role redundancy within commercial operations during the first quarter of 2025.

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

(5) Represents depreciation expense related to our property and equipment.

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

(7) Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the effective income tax rate for the period. As discussed further in Note 14, we are in a full income tax valuation allowance position and the income tax effect on pre-tax non-GAAP adjustments is commensurate with the performance measure.

35

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Revenue Recognition for Contracts with Customers

We account for contracts with our customers in accordance with Accounting Standards Codification (“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, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods. 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 we determine the contract falls within the scope of ASC 606, we assess the goods promised within each contract and determine those that are performance obligations and assesses whether each promised good is distinct. We then recognize 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 that are exercisable at a customer’s discretion are generally considered options. We assess whether these options provide a material right to the customer and, if so, they are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.

We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time. For the years ended December 31, 2023, 2024 and 2025, all revenues recognized in the Statements of Operations were point in time sales to our customers. 

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

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

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

The Company sells its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, 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. 

36

For its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products, the Company bills at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment. 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®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns. 

The Company stores its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVITM, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone inventory at its pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders. The Company recognizes revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location. At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership and have an enforceable obligation to pay the Company. They also have the ability to direct sales of product to their customers on terms and at prices they negotiate. Although wholesalers have product return rights, the Company does not believe they have a significant incentive to return the product.

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.

Acquisitions

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

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

* future expected cash flows from customer contracts and license agreements;

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

* discount rates. 

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 fair value of these awards and assumptions inputs are measured using the Black-Scholes option-pricing model (“BSM”).

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

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.