Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Summary of Stock Options

v3.8.0.1
Note 9 - Summary of Stock Options
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
9
.        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”).
 
There
are currently
no
outstanding stock option awards issued from the
2005
Plan and
no
shares are available for future awards.
 
  
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
5.13
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.
On
August 15, 2017,
the Company’s stockholders approved an amendment to the
2013
Plan increasing the number of shares of common stock authorized for awards under the
2013
Plan from 
2,523,209
 shares to a total of
4,000,000
shares.
 
As of
September 30, 2017,
there are outstanding stock option awards issued from the
2013
Plan covering a total of
2,451,601
shares of the Company’s common stock and there remain reserved for future awards
1,408,655
shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is
$5.80
per share, and the remaining contractual term is
8.76
years.
 
  
Activity under the
2005
Plan, the
2006
Plan and the
2013
Plan is as follows:
 
   
Nine Months Ended September 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
   
739,985
    $
5.86
     
 
     
 
 
Options exercised
   
(7,730
)   $
4.02
     
 
     
 
 
Options cancelled
   
(152,040
)   $
9.82
     
 
     
 
 
Options outstanding, end of period
   
2,489,979
    $
5.88
     
8.70
    $
387,178
 
                                 
Vested and exercisable and expected to vest, end of period
   
2,337,350
    $
5.88
     
8.67
    $
369,478
 
                                 
Vested and exercisable, end of period
   
734,721
    $
5.90
     
7.81
    $
162,632
 
 
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
September 30, 2017.
 
The options outstanding and exercisable as of
September 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
 
September 30, 2017
   
Price
   
Term (Years)
   
September 30, 2017
   
Price
 
                                             
 
$2.64
 
   
12,500
    $
2.64
     
7.62
     
7,553
    $
2.64
 
$3.68
-
$3.76
   
66,876
    $
3.76
     
7.35
     
43,191
    $
3.76
 
$4.46
-
$4.92
   
400,329
    $
4.63
     
8.25
     
161,941
    $
4.77
 
 
$5.22
 
   
567,679
    $
5.22
     
9.20
     
108,555
    $
5.22
 
$5.58
-
$5.67
   
254,000
    $
5.62
     
9.93
     
-
    $
-
 
 
$6.00
 
   
557,753
    $
6.00
     
8.22
     
244,023
    $
6.00
 
$6.24
-
$6.61
   
150,639
    $
6.44
     
8.21
     
45,574
    $
6.34
 
$7.00
-
$7.92
   
441,825
    $
7.65
     
9.10
     
85,506
    $
7.72
 
 
$9.92
 
   
38,135
    $
9.92
     
5.14
     
38,135
    $
9.92
 
$56.00
-
$296.00
   
243
    $
100.46
     
3.21
     
243
    $
100.46
 
 
 
 
   
2,489,979
    $
5.88
     
8.70
     
734,721
    $
5.90
 
           
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
September 30, 2017,
25,000
shares were vested and 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.
 
In
September 2017,
the Company granted RSAs for
6,947
shares of common stock under the
2013
Plan to board members as director compensation with a weighted average grant date fair value of
$5.58
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
6,947
shares of common stock were issued.
 
The
re were
zero
shares of common stock underlying RSAs as of 
September 30, 2017.
 
2017
Employee Stock Purchase Plan
 
In
August 2017,
the stockholders approved the Company
’s
2017
Employee Stock Purchase Plan (the
“2017
ESPP”). The Company reserved a total of
400,000
shares of common stock for issuance under the
2017
ESPP. Eligible employees
may
purchase shares of common stock through periodic payroll deductions, with a maximum purchase of
2,000
shares of common stock in any offering period. The price of common stock purchased under the
2017
ESPP is equal to
85%
of the lesser of the fair market value of common stock on the
first
or last day of the offering period. Each offering period is for a period of
three
months. The
first
offering period under the
2017
ESPP began on
October 1, 2017
and will end on
December 31, 2017.
 
Stock-Based Compensation
 
During the
three
months ended
September 30, 2017
and
2016,
the Company granted stock options to employees to purchase
305,000
and
220,915
shares of common stock with a weighted average grant date fair value of
$3.19
and
$3.58
per share, respectively. During the
nine
months ended
September 30, 2017
and
2016,
the Company granted stock options to employees to purchase
720,110
and
378,932
shares of common stock with a weighted average grant date fair value of
$2.83
and
$3.54
per share, respectively. A total of
7,730
and
3,020
shares pursuant to stock options issued to employees were exercised in the
nine
months ended
September 30, 2017
and
2016,
respectively. The aggregate intrinsic value of options exercised during the
nine
months ended
September 30, 2017
and
2016
was
$31,000
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
   
Nine Months Ended
     
September 30,
   
September 30,
     
2017
   
2016
   
2017
   
2016
                                 
Expected term (in years)
   
5
     
5
     
5
     
5
 
Average volatility
   
64
%    
46
%    
55
%    
54
%
Risk-free interest rate
   
1.73
%    
1.14
%    
1.83
%    
1.31
%
Dividend yield
   
0
%    
0
%    
0
%    
0
%
   
During the
three
and
nine
months ended
September 30, 2017,
the Company granted stock options to nonemployees to purchase
14,000
and
19,875
shares of common stock with a weighted average grant date fair value of
$3.66
and
$4.09,
respectively. During the
three
and
nine
months ended
September 30, 2016,
the Company granted stock options to nonemployees to purchase
50,000
shares of common stock with a with weighted average grant date fair value of
$4.81
.
There were
no
stock options exercised by nonemployees during the
nine
months ended
September 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
nine
months ended
September 30, 2017
and
2016
(in thousands):
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2017
   
2016
   
2017
   
2016
 
                                 
Cost of revenue   $
5
    $
-
    $
12
    $
-
 
Research and development
   
62
     
31
     
170
     
80
 
Selling, general and administrative
   
420
     
241
     
1,132
     
582
 
Total
  $
487
    $
272
    $
1,314
    $
662
 
   
As of
September 30, 2017,
the total unrecognized compensation cost in connection with unvested stock options was approximately
$4,400,000.
These costs are expected to be recognized over a period of approximately
2.86
years.