Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Summary of Stock Options

v3.7.0.1
Note 8 - Summary of Stock Options
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
8
.        Summary of Stock Options
 
Stock Option Plans
 
The Company has issued equity awards in the form of stock options and restricted stock awards from
three
employee benefit plans. The plans include the Company’s 
2005
Stock Incentive Plan (the
“2005
Plan”), the Viveve Amended and Restated
2006
Stock Plan (the
“2006
Plan”) and the Company’s Amended and Restated
2013
Stock Option and Incentive Plan (the
“2013
Plan”).
 
The
2005
Plan was adopted by the Company’s board of directors and approved by its stockholders. As of
June 30, 2017,
1,892
shares of common stock remain reserved for issuance under the
2005
Plan. The Company does
not
intend to grant further awards from the
2005
Plan, however, it will continue to administer the
2005
Plan until all outstanding awards are exercised, expire, terminate or are forfeited. There are currently outstanding stock option awards issued from the
2005
Plan covering a total of
1,892
shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is
$116.29
per share and the weighted average remaining contractual term is
0.23
years.
   
The
2006
Plan was adopted by the board of directors of Viveve, Inc. and was terminated in conjunction with the merger that took place on
September 23, 2014
between PLC Systems Inc., Viveve, Inc. and PLC Systems Acquisition Corp. (the “Merger”). Prior to the Merger, the board of directors voted to accelerate the vesting of all unvested options that were outstanding as of the date of the Merger such that all options would be immediately vested and exercisable by the holders. In conjunction with the Merger, the Company agreed to assume and administer the
2006
Plan and all outstanding options to purchase shares of Viveve, Inc. common stock issued from the
2006
Plan were converted into options to purchase shares of the Company’s common stock (rounded down to the nearest whole share). There are currently outstanding stock option awards issued from the
2006
Plan covering a total of
38,378
shares of the Company’s common stock and
no
shares are available for future awards. The weighted average exercise price of the outstanding stock options is
$10.49
per share and the weighted average remaining contractual term is
5.38
years.
 
The
2013
Plan was also adopted by the Company’s board of directors and approved by its stockholders. The
2013
Plan is administered by the Compensation Committee of the Company’s board of directors (the “Administrator”). Under the
2013
Plan, the Company
may
grant equity awards to eligible participants which
may
take the form of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted, deferred or unrestricted stock awards, performance based awards or dividend equivalent rights. Awards
may
be granted to officers, employees, nonemployee directors (as defined in the
2013
Plan) and other key persons (including consultants and prospective employees). The term of any stock option award
may
not
exceed
10
years and
may
be subject to vesting conditions, as determined by the Administrator. Options granted generally vest over
four
years. Incentive stock options
may
be granted only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section
424
(f) of the Internal Revenue Code. The exercise price of any stock option award cannot be less than the fair market value of the Company’s common stock, provided, however, that an incentive stock option granted to an employee who owns more than
10%
of the Company’s outstanding voting power must have an exercise price of
no
less than
110%
of the fair market value of the Company’s common stock and a term that does
not
exceed
five
years.
 
On
August 22, 2016,
the Company’s stockholders approved an amendment to the
2013
Plan to add an “evergreen” provision to the
2013
Plan which will automatically increase annually, on the
first
day of each
January,
the maximum number of shares of common stock reserved and available for awards under the
2013
Plan (the “Stock Issuable”) by an amount equal to the lesser of (i) the number of shares that will increase the Stock Issuable by
4%
of the total number of shares of common stock outstanding (on a fully diluted basis) or (ii) an amount determined by the board of directors. On
December 23, 2016,
the board of directors approved the
2017
evergreen increasing the total stock reserved for issuance under the
2013
Plan by
523,209
shares from 
2,000,000
shares to a total of
2,523,209
shares, which was effective
January 1, 2017.
As of
June 30, 2017,
there are outstanding stock option awards issued from the
2013
Plan covering a total of
2,247,302
shares of the Company’s common stock and there remain reserved for future awards
143,110
shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is
$5.98
per share, and the remaining contractual term is
8.89
years.
 
Activity under the
2005
Plan, the
2006
Plan and the
2013
Plan is as follows:
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
Weighted
 
 
Average
 
 
Aggregate
 
 
 
Number
 
 
Average
 
 
Remaining
 
 
Intrinsic
 
 
 
of
 
 
Exercise
 
 
Contractual
 
 
Value
 
 
 
Shares
 
 
Price
 
 
Term (years)
 
 
(in thousands)
 
                                 
Options outstanding, beginning of period
   
1,909,764
    $
6.19
     
9.12
    $
211,396
 
Options granted
   
420,985
    $
5.88
     
 
     
 
 
Options exercised
   
(7,730
)   $
4.02
     
 
     
 
 
Options cancelled
   
(35,447
)   $
5.64
     
 
     
 
 
Options outstanding, end of period
   
2,287,572
    $
6.15
     
8.82
    $
3,290,039
 
                                 
Vested and exercisable and expected to vest, end of period
   
2,135,320
    $
6.17
     
8.79
    $
3,076,175
 
                                 
Vested and exercisable, end of period
   
603,985
    $
6.83
     
7.94
    $
935,383
 
 
The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price as of
June 30, 2017.
 
The options outstanding and exercisable as of
June 30, 2017
are as follows: 
 
 
 
 
 
 
Options Outstanding
 
 
Options Exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
 
 
Weighted
 
 
Average
 
 
Number
 
 
Weighted
 
 
 
 
 
 
Outstanding
 
 
Average
 
 
Remaining
 
 
Exercisable
 
 
Average
 
Range of
 
 
as of
 
 
Exercise
 
 
Contractual
 
 
as of
 
 
Exercise
 
Exercise Prices
 
 
June 30, 2017
 
 
Price
 
 
Term (Years)
 
 
June 30, 2017
 
 
Price
 
                                               
 
$2.64
 
     
12,500
    $
2.64
     
7.87
     
6,771
    $
2.64
 
$3.68
-
$3.76
     
66,876
    $
3.76
     
7.61
     
39,011
    $
3.76
 
$4.46
-
$4.92
     
427,829
    $
4.62
     
8.58
     
141,577
    $
4.78
 
 
$5.22
 
     
586,409
    $
5.22
     
9.48
     
75,491
    $
5.22
 
 
$6.00
 
     
557,753
    $
6.00
     
8.47
     
209,161
    $
6.00
 
$6.24
-
$6.40
     
117,965
    $
6.35
     
8.34
     
43,466
    $
6.35
 
$7.00
-
$7.92
     
472,325
    $
7.67
     
9.36
     
42,593
    $
7.70
 
 
$9.92
 
     
38,135
    $
9.92
     
5.40
     
38,135
    $
9.92
 
$56.00
-
$296.00
     
7,780
    $
83.66
     
0.33
     
7,780
    $
83.66
 
 
 
 
     
2,287,572
    $
6.15
     
8.82
     
603,985
    $
6.83
 
 
Restricted Stock Awards
 
In
January 2016,
the Company granted restricted stock awards (“RSAs”) for
39,494
shares of common stock under the
2013
Plan to employees for
2015
accrued bonuses with a weighted average grant date fair value of
$6.24
per share, based on the market price of the Company’s common stock on the award date. A total of
89
shares pursuant to an RSA were cancelled in
September 2016.
The remaining RSAs vested on the
one
-year anniversary of the award date in
January 2017
and
39,405
shares of common stock were issued.
  
In
August 2016,
the Company granted RSAs for
5,998
shares of common stock under the
2013
Plan to board members as director compensation with a weighted average grant date fair value of
$7.89
per share, based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of grant and
5,998
shares of common stock were issued.
 
In
September 2016,
the Company granted
25,000
shares to a consultant with a weighted average grant date fair value of
$7.58
per share, based on the market price of the Company’s common stock on the award date. The RSA vests over
one
year at a rate of
1/4
th
per quarter beginning as of the award date. As of
June 30, 2017,
18,750
shares were vested and common stock has been issued.
 
In
November 2016,
the Company granted RSAs for
6,544
shares of common stock under the
2013
Plan to board members as director compensation with a weighted average grant date fair value of
$5.91
per share, based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of grant and
6,544
shares of common stock were issued.
 
In
May 2017,
the Company granted RSAs for
4,797
shares of common stock under the
2013
Plan to board members as director compensation with a weighted average grant date fair value of
$7.07
per share, based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of grant and
4,797
shares of common stock were issued.
 
The total number of shares pursuant to outstanding RSAs as of 
June 30, 2017
were
6,250
shares of common stock.
  
Stock-Based Compensation
 
During the
three
months ended
June 30, 2017
and
2016,
the Company granted stock options to employees to purchase
185,250
and
28,750
shares of common stock with a weighted average grant date fair value of
$3.31
and
$3.17
per share, respectively. During the
six
months ended
June 30, 2017
and
2016,
the Company granted stock options to employees to purchase
415,110
and
158,017
shares of common stock with a weighted average grant date fair value of
$2.56
and
$3.49
per share, respectively. A total of
7,730
and
3,020
shares pursuant to stock options issued to employees were exercised in the
six
months ended
June 30, 2017
and
2016,
respectively. The aggregate intrinsic value of options exercised during the
six
months ended
June 30, 2017
and
2016
was
$30,785
and
$5,000,
respectively.
  
The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options granted was estimated using the following weighted average assumptions: 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
                                 
Expected term (in years)
   
5
     
5
     
5
     
5
 
Average volatility
   
48
%    
47
%    
48
%    
65
%
Risk-free interest rate
   
1.76
%    
1.26
%    
1.90
%    
1.53
%
Dividend yield
   
0
%    
0
%    
0
%    
0
%
 
During the
three
and
six
months ended
June 30, 2017,
the Company granted stock options to nonemployees to purchase
5,875
shares of common stock with a weighted average grant date fair value of
$5.11
.
During the
three
and
six
months ended
June 30, 2016,
there
no
stock options granted to nonemployees. There were
no
stock options exercised by nonemployees during the
six
months ended
June 30, 2017
and
2016.
 
 
Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of comparable companies’ stock, look-back volatilities and Company specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options.
No
dividend yield is included as the Company has
not
issued any dividends and does
not
anticipate issuing any dividends in the future.
 
The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the
three
and
six
months ended
June 30, 2017
and
2016
(in thousands):  
 
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
 
 
 
June 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
                                 
Cost of revenue
  $
4
    $
-
    $
7
    $
-
 
Research and development
   
57
     
28
     
108
     
49
 
Selling, general and administrative
   
394
     
174
     
712
     
341
 
Total
  $
455
    $
202
    $
827
    $
390
 
 
As of
June 30, 2017,
the total unrecognized compensation cost in connection with unvested stock options was approximately
$4,109,000.
These costs are expected to be recognized over a period of approximately
3.04
years.