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 eleven commercial rare disease products: INCRELEX®, HEMANGEOL®, ALKINDI SPRINKLE®, KHINDIVI™, DESMODA™, GALZIN®, PKU GOLIKE®, IMPAVIDO®, Carglumic Acid, Betaine Anhydrous and Nitisinone, with IMPAVIDO® scheduled for commercialization in September 2026. 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 June 30, 2026, we had $37,589 in total revenues that generated a gross profit of $25,413 compared to total revenues of $18,928 during the three-month period ended June 30, 2025 that generated a gross profit of $11,924 for the period. The increase in product sales, net was primarily the result of increased sales of INCRELEX®, GALZIN®, Carglumic Acid and the addition of HEMANGEOL® product sales in the current period. During the six months ended June 30, 2026, we had $61,855 in total revenues that generated a gross profit of $40,148 compared to total revenues of $36,210 during the six-month period ended June 30, 2025 that generated a gross profit of $21,785 for the period. The increase in product sales, net was primarily the result of increased sales of INCRELEX®, GALZIN®, ALKINDI SPRINKLE®, Carglumic Acid and the addition of HEMANGEOL® product sales in the current period. Licensing revenue during the six months ended June 30, 2026 was $0 compared to $3,286 in licensing revenue during the six months ended June 30, 2025. Licensing revenue during the six months ended June 30, 2025 was due to $1,786 from our out-licensing of INCRELEX® rights outside of the U.S. and $1,500 from the recognition of a development milestone event associated with our divestiture of DS-200. Research and Development Expenses During the three months ended June 30, 2026, we incurred $993 of research and development (“R&D”) expenses as compared to $3,712 for the same period in 2025. During the six months ended June 30, 2026, we incurred $2,868 of research and development (“R&D”) expenses as compared to $4,873 for the same period in 2025. In 2025, the Company paid a $2,155 NDA filing fee for DESMODA™, which was approved by the FDA in February of 2026. 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 June 30, 2026 and 2025, we incurred $11,626 and $9,687, respectively, of G&A expenses. During the six-month periods ended June 30, 2026 and 2025, we incurred $22,072 and $18,857, respectively, of G&A expenses. The increase in G&A expenses during the six months ended June 30, 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. Liquidity and Capital Resources As of June 30, 2026, we had total assets of $115.8 million, cash and cash equivalents of $26.8 million and working capital of $23.5 million. Cash Flows The following table sets forth a summary of our cash flows for the six-month periods ended June 30, 2026 and 2025 (dollars in thousands): Six months ended Six months ended June 30, 2026 June 30, 2025 Net cash from operating activities $ 14,660 $ 10,049 Cash used in investing activities (15,070 ) — Cash from financing activities 1,313 394 Change in cash and cash equivalents $ 903 $ 10,443 19 Table of Contents During the six months ended June 30, 2026, net cash from operating activities was $14,660 compared to $10,049 during the six months ended June 30, 2025. The increase in cash from operating activities during the six months ended June 30, 2026 was primarily due to higher cash collections from product sales and lower cash outlay for inventory purchases. During the six months ended June 30, 2026, net cash used in investing activities was $15,070 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, which also occurred in February 2026. During the six months ended June 30, 2026, net cash from financing activities was $1,313 compared to $394 during the six months ended June 30, 2025. The increase in net cash from financing activities related to increased proceeds of $3,649 from stock option exercises, proceeds of $270 from the employee stock purchase program, partially offset by a $3,000 principal debt payment. 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. 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 For the six months ended June 30, June 30, June 30, June 30, 2026 2025 2026 2025 GAAP Net income (loss) $ 11,578 $ (2,585 ) $ 13,132 $ (4,157 ) Depreciation (1) 22 4 44 16 Intangible amortization expense (2) 1,364 1,001 2,473 2,002 Interest expense (including debt discount amortization and non-cash interest expenses) 1,013 1,198 2,149 2,361 Income tax expense 140 66 160 140 EBITDA $ 14,117 $ (316 ) $ 17,958 $ 362 Other non-GAAP adjustments: Inventory step-up expense (3) 650 1,207 1,000 2,349 Stock-based compensation (4) 1,468 2,096 2,986 3,296 Severance expense (5) — — — 335 Acquisition/divestiture-related costs (6) — 64 — 384 Total of Other non-GAAP adjustments 2,118 3,367 3,986 6,364 Adjusted EBITDA $ 16,235 $ 3,051 $ 21,944 $ 6,726 GAAP Net income (loss) $ 11,578 $ (2,585 ) $ 13,132 $ (4,157 ) Non-GAAP adjustments: Depreciation (1) 22 4 44 16 Intangible amortization expense (2) 1,364 1,001 2,473 2,002 Inventory step-up expense (3) 650 1,207 1,000 2,349 Stock-based compensation (4) 1,468 2,096 2,986 3,296 Severance expense (5) — — — 335 Acquisition/divestiture-related costs (6) — 64 — 384 Total pre-tax non-GAAP adjustments 3,504 4,372 6,503 8,382 Income tax effect of pre-tax non-GAAP adjustments (7) 735 247 806 290 Total non-GAAP adjustments 2,769 4,125 5,697 8,092 Non-GAAP Net income $ 14,347 $ 1,540 $ 18,829 $ 3,935 Weighted average number of common shares outstanding, basic 27,642 26,893 27,444 26,889 Weighted average number of common shares outstanding, diluted 32,787 31,141 32,298 31,066 GAAP income (loss) per share - Basic $ 0.42 $ (0.10 ) $ 0.48 $ (0.15 ) Non-GAAP adjustments 0.10 0.15 0.21 0.30 Non-GAAP income per share - Basic $ 0.52 $ 0.05 $ 0.69 $ 0.15 GAAP income (loss) per share - Diluted $ 0.35 (0.10 ) $ 0.41 $ (0.15 ) Non-GAAP adjustments 0.08 0.13 0.18 0.26 Non-GAAP income per share - Diluted $ 0.43 $ 0.03 $ 0.59 $ 0.11 (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®, IMPAVIDO®, Carglumic Acid, Betaine Anhydrous and Nitisinone. 20 Table of Contents (3) During the three and six months ended June 30, 2026, we recognized in cost of sales $650 and $1,000, respectively, compared to $1,207 and $2,349 during the three and six months ended June 30, 2025, respectively, for inventory step-up expense primarily attributable to the HEMANGEOL® inventory revalued in connection with the product acquisition in 2026 period, and the INCRELEX® inventory revalued in connection with this product acquisition in the 2025 periods. (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 9, we are in a full income tax valuation allowance position and the income tax effect on pre-tax non-GAAP adjustments is commensurate with the performance measure. 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 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 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 we determine the contract falls within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. 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 or services 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. Renewal options that provide a material right are treated as a separate performance obligation, allocated a portion of the transaction price, and related revenue is deferred until the option is exercised or the option expires unused. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time. For the three and six months ended June 30, 2026 and 2025, all revenues recognized in the Condensed Statements of Operations were point in time sales to our customers. Milestone Payments – If a commercial contract arrangement includes development milestone payments, we will evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. Licensing Revenues – We recognize revenues from licensing arrangements primarily associated with product license agreements that could contain development activity milestones and agreements to divest the licensing rights to products or product candidates. At the inception of each licensing agreement, we assess the goods or services promised within the contract to identify performance obligations. If a license to our product rights is determined to be distinct from other promised goods or services, it is accounted for as a separate performance obligation. If a license grants the customer a right to use our product license, revenue is recognized at the point in time when the license is transferred to the customer and the customer has the ability to use and benefit from the product license. Additionally, revenue is recognized from product license agreements with development activity milestones when these development activities occur per the contractual terms of the agreement. 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. Principal Versus Agent – Under the terms of the transitional services agreement (“TSA”) between us and Ipsen S.A, we evaluated whether our performance obligation is a promise to transfer product to a customer as the principal, or to arrange for product to be provided by another party using a control model as the agent. This evaluation determined that we are not in control of establishing the transaction price, managing all aspects of the shipment process and taking the risk of loss for delivery, collection and returns. Based on our evaluation of the control model, we determined that our responsibilities under the TSA was as an agent and not the principal, and correspondingly, such revenue related to products sold by Ipsen S.A are reported on a net versus a gross basis. 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. We bill for our products at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements and other government programs which are recorded as a reduction of net revenues at the date of sale/shipment. Our product sales are not subject to returns. Upon recognition of revenue from product sales, the estimated amounts of chargebacks, prompt pay discounts and state Medicaid and other government program rebates are in sales reserves, accrued liabilities and net accounts receivable. We store our products inventory at our specialty pharmacy distributor locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders. 21 Table of Contents The state Medicaid and other government program rebates and related liabilities 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. Acquisitions We account for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Our estimates of fair value are based upon assumptions believed to be reasonable but that are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. We account for acquisitions that do not meet the definition of a business as an asset acquisition. The determination of whether a transaction represents a business combination or an asset acquisition requires significant judgment, including an evaluation of whether the acquired set includes a substantive process and whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. For transactions accounted for as an asset acquisition, we allocate the purchase price, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. This allocation requires management to make significant estimates and assumptions, including the selection of valuation methodologies, discount rates, projected cash flows, and useful lives of acquired assets. Changes in these assumptions could result in materially different allocations of the purchase price, which may impact future depreciation and amortization expense. In addition, because goodwill is not recognized in asset acquisitions, the assignment of value to identifiable intangible assets may be greater than in a business combination. We amortize finite-lived intangible assets over their estimated useful lives and evaluates indefinite-lived assets for impairment. The determination of useful lives and the timing of impairment assessments require significant judgment and may materially affect our results of operations. Critical estimates in valuing certain of the intangible assets acquired include: ● 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 We account for stock-based compensation under the provisions of ASC 718 Compensation – Stock Compensation. The guidance under ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant and record expense over the related service periods, which are generally the vesting period of the equity awards. Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed. The fair value of these awards and assumption inputs are measured using the Black-Scholes option-pricing model (“BSM”). We estimate the fair value of stock-based option awards using the BSM. The BSM requires the input of subjective assumptions, including the expected stock price volatility, the calculation of expected term, forfeitures and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was determined from the implied yields for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options. Dividends on common stock are assumed to be zero for the BSM valuation of the stock options. The expected term of stock options granted is based on vesting periods and the contractual life of the options. Expected volatilities are based on our historical volatility subsequent to our IPO, which we believe represents the most accurate basis for estimating expected future volatility. We account for forfeitures as they occur. Off Balance Sheet Transactions We do not have any off-balance sheet transactions.