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Share-Based Payment Awards | 12 Months Ended
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Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Share-Based Payment Awards | Note 9 — 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 (the “2018 Plan”) which succeeded the 2017 Plan. The Company has granted RSAs, stock options and restricted stock units (“RSUs”) for its common stock under the 2017 Plan and 2018 Plan as detailed in the tables below. There were 886,020 shares available for future issuance under the 2018 Plan as of December 31, 2018. Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards under the 2018 Plan. In addition, the 2018 Plan provides that commencing January 1, 2019 and through January 1, 2028, the share reserve will be increased by 4% of the total number of shares outstanding as of the preceding December 31, subject to a reduction at the discretion of the Company’s board of directors. The exercise price for stock options granted is not less than the fair value of common shares as determined by the board of directors as of the date of grant. Prior to the IPO, the Company’s board of directors valued the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which might have changed since the date of the most recent contemporaneous valuation through the date of grant. Following the IPO, the Company uses the closing stock price on the date of grant as the exercise price. On January 1, 2018, the Company issued 54,745 restricted shares of its common stock to each of its four outside directors (218,980 total shares). The restricted shares issued to the outside directors vested 25% at each quarter-end in 2018 and became fully vested at December 31, 2018. 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 generally have a ten-year life, except for options to purchase 50,000 shares of the Company’s common stock granted to product consultants that expire within five years if the Company is not able to successfully 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 periods ended December 31, 2018 and 2017, the Company’s total stock-based compensation expense was $1,850 and $1,761, respectively. Of these amounts, $1,770 and $1,735 was recorded in general and administrative expenses, respectively, and $80 and $26 was recorded in R&D expenses, respectively. A summary of stock option activity is as follows:
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value |
Options outstanding as of December 31, 2017 |  |  | 1,090,000 |  |  | $ | 1.24 |  |  |  | 9.7 |  |  | $ | 151 |
Issued |  |  | 225,000 |  |  |  | 4.26 |  |  |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited/Cancelled |  |  | (20,000 | ) |  |  | 0.21 |  |  |  |  |  |  |  |  |
Options outstanding as of December 31, 2018 |  |  | 1,295,000 |  |  | $ | 1.78 |  |  |  | 8.3 |  |  | $ | 5,627 |
Options exercisable at December 31, 2018 |  |  | 404,167 |  |  | $ | 1.06 |  |  |  | 6.9 |  |  | $ | 2,046 |
Options vested and expected to vest at December 31, 2018 |  |  | 1,245,000 |  |  | $ | 1.79 |  |  |  | 8.3 |  |  | $ | 5,390 |
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had strike prices lower than the fair value of the Company’s common stock at December 31. The assumptions used to calculate the fair value of options granted during the periods ended December 31, 2018 and 2017 under the BSM were as follows:
|  | December 31, 2018 |  |  | December 31, 2017 |
Expected dividends |  |  | — | % |  |  | — | %
Expected volatility |  |  | 85 | % |  |  | 85 | %
Risk-free interest rate |  |  | 2.8-2.9 | % |  |  | 1.7-2.3 | %
Expected term |  |  | 6.3 years |  |  |  | 5.8-10 years |
Weighted average fair value |  | $ | 3.39 |  |  | $ | 0.91 |
Expected Term — The Company has opted to use the “simplified method” for estimating the expected term of options granted to employees and directors, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). The expected term of options granted to non-employees equals the contractual life of the options. Expected Volatility — 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 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 — Prior to the Company’s IPO in November 2018, the fair value of the shares of common stock underlying the stock-based awards was determined by the board of directors, with input from management. Because there was no public market for the Company’s common stock, the board of directors determined the fair value of the common stock on the grant-date of the stock-based award by considering a number of objective and subjective factors, including enterprise valuations of the Company’s common stock performed by an unrelated third-party specialist, valuations of comparable companies, sales of the Company’s convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of the Company’s capital stock, and general and industry-specific economic outlook. The board of directors intended all options granted to be exercisable at a price per share not less than the estimated per share fair value of common stock underlying those options on the date of grant. Following the IPO, the Company uses the closing stock price on the date of grant for the fair value of the common stock. A summary of activity for RSAs and RSUs is as follows:
Restricted Stock Awards |  | Number of shares |
Unvested as of December 31, 2017 |  |  | 2,500,000 |
Issued |  |  | 218,980 |
Vested |  |  | (2,406,480 | )
Forfeited/Cancelled |  |  | — |
Unvested as of December 31, 2018 |  |  | 312,500 |
The weighted average grant date fair value of the RSAs issued was $1.37 and $0.21 during the periods ended December 31, 2018 and 2017, respectively. The fair value of the RSAs vested during the periods ended December 31, 2018 and 2017 was $2,784 and $0, respectively.
Restricted Stock Units |  | Number of shares |
Unvested as of December 31, 2017 |  |  | 50,000 |
Issued |  |  | — |
Vested |  |  | (50,000 | )
Forfeited/Cancelled |  |  | — |
Unvested as of December 31, 2018 |  |  | — |
The grant date fair value of the RSUs issued in 2017 was $1.38 and no RSUs were issued in 2018. The fair value of the RSUs vesting during the periods ended December 31, 2018 and 2017 was $69 and $69, respectively. As of December 31, 2018, there was a total of $1,277, $59 and $0 of unrecognized compensation costs related to non-vested stock option awards, RSAs and RSUs, respectively. There were no exercises of stock options during the year ended December 31, 2018. In December 2018, the Company’s board of directors adopted an initial offering of the Company’s common stock under the Company’s 2018 Employee Stock Purchase Plan (the “ESPP”). The Company’s ESPP provides for an initial reserve of 150,000 shares and this reserve is automatically increased on January 1 of each year by the lesser of 1% of the outstanding common shares at December 31 of the preceding year or 150,000 shares, subject to reduction at the discretion of the Company’s board of directors. The initial offering began on December 17, 2018 and will end on December 10, 2019, unless terminated earlier pursuant to the ESPP. The initial offering will consist of two purchase periods, with the first purchase period ending on June 10, 2019 and the second purchase period ending on December 10, 2019. 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 ends, subsequent twelve-month offering periods will automatically commence over the term of the ESPP on the day that immediately follows the conclusion of the preceding offering, each consisting of two purchase periods approximately six months in duration ending on or around June 10 and December 10 each year. The weighted average grant date fair value of share awards in 2018 was $2.59 per share. Employees contributed $8 during 2018, which is included in accrued liabilities in the accompanying balance sheet, and the Company recorded an expense of $5 in 2018 related to the ESPP offering period that commenced on December 17, 2018.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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