UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

	For the quarterly period ended September 30, 2021

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

	For the transition period from _________________ to _______________________

Commission file number: 001-38738

ETON PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

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

21925 W. Field Parkway, Suite 235

Deer Park, Illinois 60010-7278

(Address of principal executive offices) (Zip code)

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

Securities registered pursuant to Section 12(b) of the Act		Trading Symbol		Name of each exchange on which registered
Common stock, $0.001 par value per share		ETON		Nasdaq Global Market

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

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

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

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

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

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

As of November 10, 2021, Eton Pharmaceuticals, Inc. had outstanding 24,606,175 shares of common stock, $0.001 par value.

Eton Pharmaceuticals, Inc.

TABLE OF CONTENTS

Part No	Item No	Description	Page No.

I		FINANCIAL INFORMATION	1

	1	Financial Statements	1

		Condensed Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1

		Unaudited Condensed Statements of Operations for the three and nine months ended September 30, 2021 and 2020	2

		Unaudited Condensed Statements of Stockholders’ Equity for the three months ended September 30, 2021 and 2020	3

		Unaudited Condensed Statements of Stockholders’ Equity for the nine months ended September 30, 2021 and 2020	4

		Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	5

		Notes to Condensed Financial Statements	6

	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	3	Quantitative and Qualitative Disclosures About Market Risk	29

	4	Controls and Procedures	30

II		OTHER INFORMATION	31

	1	Legal Proceedings	31

	1A	Risk Factors	31

	2	Unregistered Sales of Equity Securities and Use of Proceeds	31

	3	Defaults Upon Senior Securities	31

	4	Mine Safety Disclosures	31

	5	Other Information	31

	6	Exhibits	31

		Index to Exhibits	32

		Signatures	33

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eton Pharmaceuticals, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

	September 30, 2021			December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	22,709		$	21,295
Accounts receivable, net		385			48
Inventories		334			1,242
Prepaid expenses and other current assets		2,435			2,116
Total current assets		25,863			24,701

Property and equipment, net		134			811
Intangible assets, net		463			575
Operating lease right-of-use assets, net		123			192
Other long-term assets, net		23			40
Total assets	$	26,606		$	26,319

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,273		$	2,344
Current portion of long-term debt		1,092			—
PPP loan, current portion		—			280
Accrued liabilities		995			1,170
Total current liabilities		5,360			3,794

Long-term debt, net of discount and including accrued fees		5,550			6,532
Long-term portion of PPP and EIDL loans		—			231
Operating lease liabilities, net of current portion		36			99

Total liabilities		10,946			10,656

Commitments and contingencies (Note 12)		-

Stockholders’ equity
Common stock, $0.001 par value; 50,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 24,606,175 and 24,312,808 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		25			24
Additional paid-in capital		110,787			107,797
Accumulated deficit		(95,152	)		(92,158	)
Total stockholders’ equity		15,660			15,663

Total liabilities and stockholders’ equity	$	26,606		$	26,319

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	For the three months ended						For the nine months ended
	September 30,			September 30,			September 30,			September 30,
	2021			2020			2021			2020
Revenues:
Licensing revenue	$	—		$	—		$	14,000		$	—
Product sales and royalties		775			(161	)		1,739			(42	)
Total net revenues		775			(161	)		15,739			(42	)

Cost of sales:
Licensing revenue		—			—			1,500			—
Product sales and royalties		617			(144	)		843			(14	)
Total cost of sales		617			(144	)		2,343			(14	)

Gross profit (loss)		158			(17	)		13,396			(28	)

Operating expenses:
Research and development		2,678			2,826			5,554			10,703
General and administrative		3,327			3,429			10,651			8,960
Total operating expenses		6,005			6,255			16,205			19,663

Loss from operations		(5,847	)		(6,272	)		(2,809	)		(19,691	)

Other (expense) income:
Interest and other (expense) income, net		(247	)		(232	)		(731	)		(592	)
Gain on PPP loan forgiven		—			—			365			—
Gain on equipment sale		—			—			181			—

Loss before income tax expense		(6,094	)		(6,504	)		(2,994	)		(20,283	)

Income tax expense		—			—			—			—

Net loss	$	(6,094	)	$	(6,504	)	$	(2,994	)	$	(20,283	)
Net loss per share, basic and diluted	$	(0.24	)	$	(0.31	)	$	(0.12	)	$	(1.01	)
Weighted average number of common shares outstanding, basic and diluted		25,276			21,052			25,181			20,070

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders’ Equity

For the three months ended September 30, 2021 and 2020

(in thousands, except share amounts)

(Unaudited)


	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at June 30, 2021		24,600,175	$	25	$	109,769	$	(89,058	)	$	20,736

Stock-based compensation		—		—		1,009		—			1,009

Stock option exercises		6,000		—		9		—			9
Relative fair value of warrants to purchase common stock issued in connection with debt
Employee stock purchase plan
Employee stock purchase plan,shares
Common stock issued related to restricted stock units
Common stock issued related to restricted stock units,shares
Warrant exercises
Warrant exercises,shares
Proceeds from sales of common stock, net of offering costs
Proceeds from sales of common stock, net of offering costs,shares
issuance of common stock for product candidate licensing rights
issuance of common stock for product candidate licensing rights,shares
Net loss		—		—		—		(6,094	)		(6,094	)

Balances at September 30, 2021		24,606,175	$	25	$	110,787	$	(95,152	)	$	15,660

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at June 30, 2020		20,956,033	$	21	$	84,977	$	(77,967	)	$	7,031

Stock-based compensation		—		—		724		—			724

Stock option exercises		32,500		—		43		—			43

Relative fair value of warrants to purchase common stock issued in connection with debt		—		—		94		—			94

Net loss		—		—		—		(6,504	)		(6,504	)

Balances at September 30, 2020		20,988,533	$	21	$	85,838	$	(84,471	)	$	1,388

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Stockholders’ Equity

For the nine months ended September 30, 2021 and 2020

(in thousands, except share amounts)

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at December 31, 2020		24,312,808	$	24	$	107,797	$	(92,158	)	$	15,663

Stock-based compensation		—		—		2,518		—			2,518

Stock option exercises		144,233		1		338		—			339

Employee stock purchase plan		29,326		—		134		—			134

Common stock issued related to restricted stock units		25,000		—		—		—			—

Warrant exercises		94,808		—		—		—			—

Net loss		—		—		—		(2,994	)		(2,994	)

Balances at September 30, 2021		24,606,175	$	25	$	110,787	$	(95,152	)	$	15,660

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at December 31, 2019		17,877,486	$	18	$	74,720	$	(64,188	)	$	10,550
Balances		17,877,486	$	18	$	74,720	$	(64,188	)	$	10,550

Stock-based compensation		15,190		—		1,803		—			1,803

Stock option exercises		102,378				140		—			140

Employee stock purchase plan		14,005		—		64		—			64

Relative fair value of warrants to purchase common stock issued in connection with debt		—		—		94		—			94

Proceeds from sales of common stock, net of offering costs		2,600,000		3		7,753		—			7,756

Issuance of common stock for product candidate licensing rights		379,474		—		1,264		—			1,264

Net loss		—		—		—		(20,283	)		(20,283	)

Balances at September 30, 2020		20,988,533	$	21	$	85,838	$	(84,471	)	$	1,388
Balances		20,988,533	$	21	$	85,838	$	(84,471	)	$	1,388

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

Eton Pharmaceuticals, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine months ended September 30, 2021			Nine months ended September 30, 2020
Cash flows from operating activities
Net loss	$	(2,994	)	$	(20,283	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation		2,518			1,803
Common stock issued for product candidate licensing rights		—			1,264
Depreciation and amortization		325			490
Debt discount amortization		110			85
Gain on forgiveness of debt		(365	)		—
Gain on sale of equipment		(181	)		—
Changes in operating assets and liabilities:
Accounts receivable		(337	)		473
Inventories		908			(1,319	)
Prepaid expenses and other assets		(283	)		1,305
Accounts payable		929			1,633
Accrued liabilities		(234	)		(615	)
Net cash provided by (used in) operating activities		396			(15,164	)

Cash provided by (used in) investing activities
Proceeds from sale of equipment		700			—
Purchases of property and equipment		(5	)		(6	)
Net cash provided by (used in) financing activities		695			(6	)

Cash flows from financing activities
Proceeds from sales of common stock, net of offering costs		—			7,756
Proceeds from issuance of long-term debt, net of issuance costs		—			1,965
EIDL loan payoff		(150	)		—
Proceeds from PPP and EIDL loans		—			511
Proceeds from employee stock purchase plan and stock option exercises		473			204
Net cash provided by financing activities		323			10,436

Change in cash and cash equivalents		1,414			(4,734	)
Cash and cash equivalents at beginning of period		21,295			12,066
Cash and cash equivalents at end of period	$	22,709		$	7,332

Supplemental disclosures of cash flow information
Cash paid for interest	$	603		$	545
Cash paid for income taxes	$	—		$	—

Supplemental disclosure of non-cash financing activity
Relative fair value of warrants to purchase common stock issued in connection with debt	$	—		$	94

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

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 1 — Company Overview

Eton Pharmaceuticals, Inc. (“Eton” or the “Company”) was incorporated as a Delaware “C” corporation on April 27, 2017 and was initially set up as a wholly-owned subsidiary of Harrow Health, Inc. (“Harrow”, fka Imprimis Pharmaceuticals, Inc.). In June 2017, the Company raised $20,055 in start-up capital through a private sale of preferred stock and a separate management team was then established for Eton with its corporate offices located in Deer Park, Illinois. In November 2018, the Company completed its initial public offering (the “IPO”) and received net proceeds of $21,960, after deducting underwriting discounts and commissions and offering-related expenses. In November 2019, the Company entered into a credit agreement and received net proceeds of $4,750 and in August 2020 the Company received net proceeds of $1,965 under the credit agreement (see Note 5). In March and April 2020, Eton received net proceeds of $7,756 from the sale of shares of its common stock in a private placement and in October 2020, the Company received net proceeds of $21,026 from a public offering for its common stock at an offering price of $7.00 per share.

Eton is an innovative specialty pharmaceutical company focused on developing, acquiring, and commercializing treatments for rare diseases. The Company seeks to improve the formula, delivery system, or safety of existing molecules in order to address unmet patient needs. Eton pursues what it perceives to be low-risk product candidates where existing published literature, historical clinical trials, or physician usage has established safety and/or efficacy of the molecule, thereby reducing the incremental clinical burden required for the Company to bring the product to patients.

The Company’s Biorphen® product was approved by the FDA in October 2019 and sales commenced for this product at the end of 2019. Eton’s EM-100 product was sold to Bausch Health and the product was approved by the FDA in September 2020. Bausch Health launched this product under the name of Alaway® Preservative Free in January 2021 and Eton receives royalties from the sale of the product. In addition, the Company acquired the licensing rights to Alkindi Sprinkle and this product was approved by the FDA in October 2020 and launched in December 2020. In February 2021, the Company sold three pediatric neurology products it had under development to Azurity Pharmaceuticals (“Azurity”) and anticipates additional revenues from Azurity based on various product-related milestones including the commercial launch for these products. One of the three products was approved by the FDA in November 2021 and two are currently under review with the FDA. In June 2021, the Company’s Rezipres product was approved by the FDA and is expected to launch in the coming months. In October 2021, the Company acquired the rights to an FDA-approved generic carglumic acid product indicated for the treatment of hyperammonemia due to N-acetylglutamate Synthase (NAGS) deficiency and it expects to launch this product late in 2021. The Company has three additional product candidates under development, two of which have been submitted to the FDA.

Note 2 — Liquidity Considerations

During the first nine months of 2021, the Company generated net cash provided by operating activities of $396 primarily from the sale of three neurology products. The Company expects further growth in 2021 and beyond in accordance with additional market penetration from its approved products plus additional revenues from licensing and additional products where it anticipates FDA approval. Prior to 2021, the Company had generated limited revenues and had incurred negative cash flows from operating activities since its inception in 2017.

The Company currently believes its existing cash and cash equivalents of $22,709 as of September 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of filing of this quarterly report. This estimate is based on the Company’s current assumptions, including assumptions relating to estimated sales and its ability to manage 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 could 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 accounting principles generally accepted in the United States of America (“GAAP”).

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

Unaudited Interim Financial Information

The accompanying interim condensed financial statements are unaudited and have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2021 and the results of its operations and its cash flows for the periods ended September 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and nine-month periods ended September 30, 2021 and 2020 are also unaudited. The results for the nine-month period ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods or any future year or period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, provisions for uncollectible receivables and sales returns, valuation of inventories, useful lives of assets and the impairment of property and equipment, the accrual of research and development expenses and the valuation of common stock, stock options and warrants. 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.

Segment Information

The Company operates the business on the basis of a single reportable segment, which is the business of developing and commercializing prescription drug products. The Company’s chief operating decision-maker is the Chief Executive Officer (“CEO”), who evaluates the Company as a single operating segment.

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 short-term money market accounts. From time to time, amounts deposited with its bank exceed federally insured limits and 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 doubtful accounts, cash discounts for prompt payment, distribution fees, chargebacks and returns and allowances. The total for these reserves amounted to $91 and $71 as of September 30, 2021 and December 31, 2020, 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 will record a write-down if an impairment is identified. During the three-month period ended September 30, 2021, the Company recorded a provision of $432 for excess quantities of its Biorphen product that are approaching expiration. Inventories at September 30, 2021 and December 31, 2020 consist solely of purchased finished goods. At September 30, 2021 and December 31, 2020, inventories are shown net of a slow-moving reserve for its Biorphen product of $1,414 and $623, respectively, due to the risk of expiry before this entire stock of inventories is sold.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at cost. 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.

In March 2021, the Company completed an evaluation of its expected needs for product development and testing activities and determined that it would discontinue its laboratory operation in Lake Zurich, Illinois. The Company completed a sale of the lab equipment in May 2021 at a price of $700 which was $181 in excess of the book value for these assets. Accordingly, the $519 net book value of these assets was removed from the property and equipment accounts and the $181 gain is reflected in the Company’s statements of operations for the nine-month period ended September 30, 2021. In conjunction with the closing of its laboratory operation, the Company scrapped various furniture and equipment which had a net book value of $31 which has been included in research and development expense in the statements of operations.

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 in accordance with Accounting Standards Codification (“ASC”) 350 — Intangibles - Goodwill and Other. A $750 payment related to the approval of the Company’s Biorphen product in 2019 has been capitalized and that cost is being amortized over five years. The intangible assets, net on the Company’s balance sheet reflected $287 of accumulated amortization as of September 30, 2021. The Company recorded $37 and $112 of amortization expense for the three and nine months ended September 30, 2021, respectively. The Company will record amortization expense of $150 per year for this intangible asset for 2021 through 2023 and then $125 in 2024 when it will be fully amortized.

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 has been recognized since the Company’s inception in 2017.

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.

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.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. 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.

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 or over time, and if over time this is based on the use of an output or input method. Any amounts received prior to revenue recognition will be recorded as deferred revenue. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date will be classified as current portion of deferred revenue in the Company’s balance sheets. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as long-term deferred revenue, net of current portion.

Milestone Payments – If a commercial contract arrangement includes development and regulatory milestone payments, the Company will evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue. 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. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

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

The Company sells Biorphen in the U.S. to wholesale pharmaceutical distributors, who then sell the product to hospitals and other end-user customers. Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments of Biorphen represent performance obligations under each purchase order. 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. The Company has no significant obligations to wholesalers to generate pull-through sales. In addition, the Company sells its Alkindi Sprinkle product to one pharmacy distributor customer which provides order fulfilment and inventory storage/distribution services.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sell Biorphen at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs. In addition, the Company pays fees to wholesalers for their distribution services, inventory reporting and chargeback processing. The Company pays GPOs fees for administrative services and for access to GPO members and concluded the benefits received in exchange for these fees are not distinct from its sales of Biorphen, and accordingly it applies these amounts to reduce revenues. Wholesalers also have rights to return unsold product nearing or past the expiration date. Because of the shelf life of Biorphen and the Company’s lengthy return period, there may be a significant period of time between when the product is shipped and when it issues credits on returned product. For its Alkindi Sprinkle product, 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.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

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 of Biorphen and the impact of the other discounts and fees it pays while Alkindi Sprinkle sales to its distributor are not subject to returns. When estimating these adjustments to the transaction price, the Company reduces it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known.

The Company recognizes revenue from Biorphen product sales and related cost of sales upon product 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. The Company stores its Alkindi Sprinkle inventory at its pharmacy distributor customer location and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

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 of 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.

In addition, the Company receives revenues from product licensing agreements where it has contracted for milestone payments and royalties from products it has developed or for which it has acquired the rights to a product developed by a third party.

Revenues for the three months ended September 30, 2021 reflected $734 in product sales and $41 in royalty revenue. Revenues for the nine months ended September 30, 2021 reflected $14,000 of licensing milestone fees, $1,481 in product sales and $258 in royalty revenue. Revenues for the three and nine months ended September 30, 2020 consisted solely of product sales.

Cost of Sales

Cost of 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, write-downs for excess/obsolete inventory, 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.

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 relies upon estimates of those costs applicable to the stage of completion of each project. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. 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.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

Income (Loss) Per Share

Basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares, such as unvested restricted stock awards (“RSA”), restricted stock units (“RSU’”), stock options and warrants, outstanding during the period. Common stock equivalents (using the treasury stock method) from stock options, unvested RSAs and RSUs, and warrants at September 30, 2021 and 2020 were 4,279,400 and 3,308,152, 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 are RSUs awarded to directors that have vested, but the issuance and delivery of the common shares are deferred until the director retires from service as a director.

Basic weighted average shares for the three and nine months ended September 30, 2021 include 600,000 vested warrants to purchase common shares. As the shares underlying these warrants can be purchased for little to no consideration ($0.01 per share exercise price), they are included in the computation of basic earnings per share.

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. The Company estimates the fair value of stock-based option awards using the Black-Scholes-Merton 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 comparable companies’ historical volatility along with a limited weighting included for the Company’s own volatility subsequent to its IPO, which management believes represents the most accurate basis for estimating expected future volatility under the current conditions. The Company accounts for forfeitures as they occur.

Fair Value Measurements

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

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

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

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

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

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 3 — Summary of Significant Accounting Policies (continued)

The Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and a long-term debt obligation. Based on borrowing rates currently available to the Company, 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.

Impact of New Accounting Pronouncements

There were no new accounting pronouncements issued by the FASB during the current period that would apply to the Company and have a material impact on its financial position or results of operations.

Note 4 — Property and Equipment

Property and equipment consist of the following:

Schedule of Property and Equipment

	September 30, 2021			December 31, 2020
Computer hardware and software	$	155		$	182
Furniture and fixtures		105			143
Equipment		132			994
Leasehold improvements		71			184
Property and equipment, gross		463			1,503
Less: accumulated depreciation		(329	)		(692	)
Property and equipment, net	$	134		$	811

Depreciation expense for the three-month periods ended September 30, 2021 and 2020 was $24 and $86, respectively. Depreciation expense for the nine-month periods ended September 30, 2021 and 2020 was $132 and $260, respectively. The balances at September 30, 2021 reflect the sale of laboratory equipment in May 2021 which had a net book value of $519.

Note 5 — Long-Term Debt

SWK Loan

On November 13, 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK Holdings Corporation (“SWK”) which provided for up to $10,000 in financing. The Company received proceeds of $5,000 at closing and was able to borrow an additional $5,000 upon the FDA approval of a second product developed by the Company, excluding EM-100. In March 2020, in conjunction with the Company’s Alkindi Sprinkle product licensing agreement (see Note 12) and the Company’s March 2020 sale of additional shares of its common stock, the Company and SWK amended the SWK Credit Agreement. The amendment provided the Company with the option to immediately draw an additional $2,000 and the ability to borrow an additional $3,000 based upon the FDA approval of EM-100 and Alkindi Sprinkle which subsequently occurred in September 2020. Accordingly, the Company borrowed an additional $2,000 on August 11, 2020. The term of the SWK Credit Agreement is for five years and borrowings bear interest at a rate of LIBOR 3-month plus 10.0%, subject to a stated LIBOR floor rate of 2.0%. A 2.0% unused credit limit fee was assessed during the first twelve months after the date of the SWK Credit Agreement and loan fees include a 5.0% exit fee based on the principal amounts drawn which is payable at the end of the term of the SWK Credit Agreement. The Company is required to maintain a minimum cash balance of $3,000, will only pay interest on the debt until February14, 2022 and then will pay 5.5% of the loan principal balance commencing on February 15, 2022 and then every three months thereafter until November 13, 2024 at which time the remaining principal balance is due. Borrowings under the SWK Credit Agreement are secured by the Company’s assets.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 5 — Long Term Debt (continued)

The SWK Credit Agreement contains customary default provisions and covenants which include limits on additional indebtedness. In March 2020, SWK provided a waiver for the Company to obtain loans with the Small Business Association. In February 2021, the Company notified SWK that it will not require additional borrowing capacity under the SWK Credit Agreement and terminated the additional borrowing capacity with SWK.

In connection with the initial $5,000 borrowed in November 2019, the Company issued warrants to SWK to purchase 51,239 shares of the Company’s common stock with an exercise price of $5.86 per share. The relative fair value of the 51,239 warrants was $226 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions: fair value of the Company’s common stock at issuance of $5.75 per share; seven-year contractual term; 95% volatility; 0% dividend rate; and a risk-free interest rate of 1.8%.

In connection with the additional $2,000 borrowed in August 2020, the Company issued warrants for 18,141 shares of its common stock at an exercise price of $6.62 per share. The relative fair value of the 18,141 warrants was $94 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions: fair value of the Company’s common stock at issuance of $6.85 per share; seven-year contractual term; 95% volatility; 0% dividend rate; and a risk-free interest rate of 0.4%.

These warrants (the “SWK Warrants”) are exercisable immediately and have a term of seven years from the date of issuance. The SWK Warrants contain a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to change in connection with stock splits, dividends, reclassifications and other conditions.

Interest expense of $766 was recorded during the nine months ended September 30, 2021, which included $110 of debt discount amortization. Interest expense of $617 was recorded during the nine months ended September 30, 2020, which included $85 of debt discount amortization. As of September 30, 2021, $107 of accrued interest is included in accrued liabilities.

The table below reflects the future payments for the SWK loan principal and interest as of September 30, 2021.

	Amount
2021	$	212
2022		2,202
2023		1,756
2024		5,300
Total payments		9,470
Less: amount representing interest		(2,470	)
Loan payable, gross		7,000
Less: current portion of long-term debt		(1,092	)
Less: unamortized discount		(358	)
Long-term debt, net of unamortized discount	$	5,550

PPP loan

On May 4, 2020, the Company received $361 in loan proceeds under the Paycheck Protection Program (“PPP”) from the Small Business Administration (“SBA”) through its banking relationship with Bank of America. On May 20, 2021, the Company received notice that the $361 loan principal along with cumulative interest of $4 was forgiven in full as permitted under the applicable SBA guidelines for PPP loans. The $365 gain on debt extinguishment is reflected in non-operating income for the nine-month period ended September 30, 2021.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 5 — Long Term Debt (continued)

EIDL loan

On July 21, 2020, the Company received $150 in loan proceeds under the Economic Injury Disaster Loan program (“EIDL”) from the SBA. The Company paid off the full EIDL loan principal and its cumulative interest of $6 in July 2021.

Note 6 — Common Stock

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

During the nine months ended September 30, 2021, the Company issued 144,233 shares of its common stock resulting from stock option exercises under its 2018 Equity Incentive Plan (see Note 8). In April 2021, the Company issued 25,000 shares of common stock to a member of its board of directors upon his retirement from the board in connection with previously vested restricted stock units (“RSUs”).

During the nine months ended September 30, 2021, a holder of the Company’s common stock warrants exercised 135,650 warrants on a cashless basis and the Company issued 94,808 shares of its common stock in connection with the warrant exercise. The intrinsic value of the warrant exercise was $806.

In June 2021, the Company issued 29,326 shares of its common stock to employees in accordance with its Employee Stock Purchase Plan (“ESPP”).

Note 7 — Common Stock Warrants

The Company’s outstanding warrants to purchase shares of its common stock at September 30, 2021 are summarized in the table below.

Summary of Warrants Outstanding

Description of Warrants	No. of Shares		Exercise Price
Business Advisory Warrants		600,000	$	0.01
Placement Agent Warrants – 2017 Preferred Stock Offering		471,446	$	3.00
Placement Agent Warrants - IPO		414,000	$	7.50
SWK Warrants – Debt – Tranche #1		51,239	$	5.86
SWK Warrants – Debt – Tranche #2		18,141	$	6.62
Total		1,554,826	$	3.18	(Avg)

The holders of these warrants or their permitted transferees, are entitled to rights with respect to the registration under the Securities Act of 1933, as amended (the “Securities Act”) for their shares that are converted to common stock, including demand registration rights and piggyback registration rights. These rights are provided under the terms of a registration rights agreement between the Company and the investors.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 8 — 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 in January 2021, the “2018 plan”) which succeeded the 2017 Plan. The Company has granted restricted stock awards (“RSAs”), stock options and RSUs for its common stock under the 2017 Plan and 2018 Plan as detailed in the tables below. There were 481,160 shares available for future issuance under the 2018 Plan as of September 30, 2021.

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

During the third quarter of 2017, the Company issued 25,000 RSU’s to each of its four outside directors (100,000 total share units). The RSU’s issued to the outside directors were 100% vested at June 30, 2018. The associated 100,000 shares of the Company’s common stock are not issued until the individual director retires from service from the Company’s board of directors. In April 2021, 25,000 of these vested RSU shares were issued to a director after his retirement from the Company’s board. The Company has not issued any additional RSU’s.

To date, all stock options issued have been non-qualified stock options, and the exercise prices were set at the fair value for the shares at the dates of grant. Options typically have a ten-year life, except for options to purchase 50,000 shares of the Company’s common stock granted to product consultants in July 2017 that expire within five years if the Company is not able to file certain product submissions to the FDA prior to the five-year expiration date. Furthermore, these option awards to the Company’s product consultants do not vest unless certain product submissions are made to the FDA, and accordingly, the Company has not recorded any expense for these contingently vesting option awards to its product consultants.

For the three months ended September 30, 2021 and 2020, the Company’s total stock-based compensation expense was $1,009 and $724, respectively. Of these amounts, $838 and $647, respectively, was recorded in general and administrative expenses, and $171 and $77, respectively, was recorded in research and development expenses.

For the nine months ended September 30, 2021 and 2020, the Company’s total stock-based compensation expense was $2,518 and $1,803, respectively. Of these amounts, $2,110 and $1,623, respectively, was recorded in general and administrative expenses, and $408 and $180, respectively, was recorded in research and development expenses.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 8 — Share-Based Payment Awards (continued)

A summary of stock option activity is as follows:

Summary of Stock Option Activity

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)		Aggregate Intrinsic Value
Options outstanding as of December 31, 2020		2,824,500		$	4.05		8.3	$	11,525
Issued		902,098		$	8.61
Exercised		(144,233	)	$	2.35
Forfeited/Cancelled		(12,500	)	$	7.31
Options outstanding as of September 30, 2021		3,569,865		$	5.26		8.1	$	4,167
Options exercisable at September 30, 2021		1,734,652		$	4.00		7.4	$	2,961
Options vested and expected to vest at September 30, 2021		3,519,865		$	5.31		8.1	$	3,984

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 period end.

The assumptions used to calculate the fair value of options granted during the nine months ended September 30, 2021 under the BSM were as follows:

Expected dividends	—		%
Expected volatility		80	%
Risk-free interest rate		0.9 - 1.1	%
Expected term		5.3 – 6.3 years
Weighted average fair value	$	5.88

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 ten years). The expected term of options granted to non-employees equals the contractual life of the options.

Expected Volatility — Due to the Company’s limited operating history and a lack of Company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The Company has continued this methodology plus given some limited weighting to its own volatility in the periods subsequent to its November 2018 IPO. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

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.

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.

Eton Pharmaceuticals, Inc.

Notes to Condensed Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

Note 8 — Share-Based Payment Awards (continued)

As of September 30, 2021, there was a total of $7,270 of unrecognized compensation costs related to non-vested stock option and restricted awards. During the nine-month period ended September 30, 2021, there were five stock option exercises which totaled 144,233 shares at an average exercise price of $2.35 per share with an intrinsic value of $682. There were six stock option exercises for 102,378 shares during the nine months ended September 30, 2020 at an average exercise price of $1.37 per share with an intrinsic value of $436.

In December 2018, the Company’s board of directors approved and adopted an initial offering of the Company’s common stock under the Company’s 2018 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. As of September 30, 2021, there were 500,009 shares available for issuance under the ESPP.

The initial offering of the ESPP began on December 17, 2018 and ended on December 10, 2019. The annual offerings consist of two stock purchase periods, with the first purchase period ending in June and the second purchase period ending in December. 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 ended, 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.

For the first nine months of 2021 and 2020 there were 29,326 and 14,005 share issuances under the ESPP. The weighted average grant date fair value of share awards in the first nine months of 2021 and 2020 was $2.83 and $2.43, respectively. Employees contributed $192 and $100 via payroll deductions during the nine months ended September 30, 2021 and 2020, respectively. The Company recorded an expense of $83 and $38 related to the ESPP in the nine-month periods ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and December 31, 2020, the accompanying condensed balance sheets include $77 and $19, respectively, in accrued liabilities for remaining employee ESPP contributions.

Note 9 — Earnings (Loss) Per Share

Basic and diluted net income (loss) per share was calculated as follows:

SEC Form 10-Q filed by Eton Pharmaceuticals, Inc.