Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Summary of Significant Accounting Policies

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Note 2 - Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
2.
        Summary of Significant Accounting Policies
 
Financial Statement Presentation
 
The condensed consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, Viveve, Inc. and Viveve BV. All significant intercompany accounts and transactions have been eliminated in consolidation.
  
Use of Estimates
 
The preparation of condensed consolidated financial statements in conformity with US GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be 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. Actual results
may
differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results.
 
Concentration of Credit Risk and Other Risks and Uncertainties
 
To achieve profitable operations, the Company must successfully develop, manufacture, and market its products. There can be no assurance that any such products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed. These factors could have a material adverse effect upon the Company’s financial results, financial position, and future cash flows.
 
The Company’s products likely require clearance or approval from the U.S. Food and Drug Administration or other international regulatory agencies prior to commencing commercial sales. There can be no assurance that the Company’s products will receive any of these required clearances or approvals or for the indications requested. If the Company was denied such clearances or approvals or if such clearances or approvals were delayed, it would have a material adverse effect on the Company’s financial results, financial position and future cash flows.
 
The Company is subject to risks common to companies in the medical device industry including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional financing. The Company’s ultimate success is dependent upon its ability to raise additional capital and to successfully develop and market its products.
 
The Company designs, develops, manufactures and markets a medical device for the non-invasive treatment of vaginal introital laxity, for improved sexual function, and for vaginal rejuvenation, depending on the relevant country-specific clearance or approval that it refers to as Geneveve™. Geneveve includes
three
major components: the Viveve System™ (an RF, or radio frequency, generator housed in a table-top console), a reusable handpiece, single-use treatment tips and other ancillary consumables. The Company outsources the manufacture and repair of the Viveve System to a single contract manufacturer. Also, certain other components and materials that comprise the Geneveve device are currently manufactured by a single supplier or a limited number of suppliers. A significant supply interruption or disruption in the operations of the contract manufacturer or these
third
-party suppliers would adversely impact the production of our products for a substantial period of time, which could have a material adverse effect on our business, financial condition, operating results and cash flows.
 
In the U.S., the Company sells its products primarily through a direct sales force to health care practitioners. Outside the U.S., the Company sells through an extensive network of distribution partners. During the
three
months ended
March
31,
2017,
two
distributors accounted for
33%
of the Company’s revenue. During the
three
months ended
March
31,
2016,
three
distributors accounted for
86%
of the Company’s revenue. There were no direct sales customers that accounted for more than
10%
of the Company’s revenue during the
three
months ended
March
31,
2017
and
2016.
 
 
Revenue Recognition
 
The Company recognizes revenue from the sale of its products, the Viveve System, single-use treatment tips and ancillary consumables. Revenue is recognized upon shipment, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable and collection of the resulting receivable is reasonably assured. Sales of our products are subject to regulatory requirements that vary from country to country. The Company has regulatory clearance, or can sell its products without a clearance, in many countries throughout the world, including countries within the following regions: North America, Latin America, Europe, the Middle East and Asia Pacific.
 
The Company does not provide its customers with a right of return.
 
Customer Advance Payments
 
From time to time, customers will pay for a portion of the products ordered in advance.  Upon receipt of such payments, the Company records the customer advance payment as a component of accrued liabilities.  The Company will remove the customer advance payment from accrued liabilities when revenue is recognized upon shipment of the products.
 
Product Warranty
 
The Company’s products are generally subject to a
one
-year warranty, which provides for the repair, rework or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company has assessed the historical claims and, to date, product warranty claims have not been significant. The Company will continue to assess the need to record a warranty accrual at the time of sale going forward.
 
Comprehensive Loss
 
Comprehensive loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive loss
may
include certain changes in equity that are excluded from net loss. For the
three
months ended
March
31,
2017
and
2016,
the Company’s comprehensive loss is the same as its net loss. 
 
Net Loss per Share
 
The Company’s basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents outstanding during the period. For purposes of this calculation, stock options and warrants to purchase common stock and restricted common stock awards are considered common stock equivalents. For periods in which the Company has reported net losses, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
 
The following securities were excluded from the calculation of net loss per share because the inclusion would be anti-dilutive. 
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2017
 
 
2016
 
                 
Stock options to purchase common stock
   
2,134,214
     
1,131,768
 
Warrants to purchase common stock
   
425,274
     
401,446
 
Restricted common stock awards
   
12,500
     
-
 
 
 
Recently Issued and Adopted Accounting Standards
 
In
May
2014,
as part of its ongoing efforts to assist in the convergence of US GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 
2014
-
09,
“Revenue from Contracts with Customers (Topic
606).”
The new guidance sets forth a new
five
-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in US GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The ASU provides alternative methods of initial adoption and is effective for annual and interim periods beginning after
December
15,
2017.
The FASB has issued several updates to the standard which i) defer the original effective date from
January
1,
2017
to
January
1,
2018,
while allowing for early adoption as of
January
1,
2017
(ASU
2015
-
14);
ii) clarify the application of the principal versus agent guidance (ASU
2016
-
08);
iii) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU
2016
-
10);
and clarify the guidance on certain sections of the guidance providing technical corrections and improvements (ASU
2016
-
10).
In
May
2016,
the FASB issued ASU
2016
-
12,
 “Revenue from Contracts with Customers (Topic
606)
Narrow-Scope Improvements and Practical Expedients”, to address certain narrow aspects of the guidance including collectability criterion, collection of sales taxes from customers, noncash consideration, contract modifications and completed contracts. This issuance does not change the core principle of the guidance in the initial topic issued in
May
2014.
We are currently evaluating the impact that this standard will have on our condensed consolidated financial statements. 
 
In
July
2015,
the FASB issued ASU
2015
-
11,
“Simplifying the Measurement of Inventory” (“ASU
2015
-
11”).
ASU
2015
-
11
requires that an entity should measure inventory within the scope of this pronouncement at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The pronouncement does not apply to inventory that is being measured using the last-in,
first
-out (“LIFO”) method or the retail inventory method. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU
2015
-
11
will be effective for the Company’s fiscal year beginning
January
1,
2017
and subsequent interim periods, with earlier adoption permitted. We adopted this standard on
January
1,
2017,
and the adoption did not have a significant impact on the condensed consolidated financial statements.  
 
In
February
2016,
the FASB issued ASU
2016
-
02,
 “Leases (Topic
842)”.
Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after 
December
15,
2018,
including interim periods within the reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the effect of the adoption of this guidance on our condensed consolidated financial statements. 
 
In
March
2016,
the FASB issued ASU
2016
-
09,
“Compensation – Stock Compensation (Topic
718):
Improvements to Employee Share-Based Payment Accounting”. This guidance identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective for annual reporting periods beginning after 
December
15,
2016,
including interim periods within the reporting period, with early adoption permitted. We adopted this standard on
January
1,
2017
and have elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The adoption did not have a significant impact on the condensed consolidated financial statements. 
 
In
August
2016,
the FASB issued ASU No.
2016
-
15,
“Statement of Cash Flows, Classification of Certain Cash Receipts and Cash Payments (Topic
230)”.
 This guidance addresses specific cash flow issues with the objective of reducing the diversity in practice for the treatment of these issues.  The areas identified include: debt prepayment or debt extinguishment costs; settlement of
zero
-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and application of the predominance principle with respect to separately identifiable cash flows.  This guidance is effective for annual reporting periods beginning after 
December
15,
2017,
including interim periods within that reporting period, with early adoption permitted. We are currently evaluating the effect of the adoption of this guidance on our condensed consolidated financial statements.
 
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.