Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Summary of Stock Options

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Note 12 - Summary of Stock Options
9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]

12.

Summary of Stock Options

 

Stock Option Plans

 

The Company has issued equity awards in the form of stock options (both incentive stock options and non-qualified stock options) and deferred restricted stock awards or units, from two employee benefit plans. The plans include 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”).

 

As of September 30, 2021, there were outstanding stock option awards issued from the 2006 Plan covering a total of 12 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 $9,920.00 per share and the weighted average remaining contractual term is 1.3 years.

 

In January 2021, the total common stock reserved for issuance under the 2013 Plan was increased by 307,705 shares from 1,451,246 shares to a total of 1,758,951 shares under the evergreen provision of the 2013 Plan.

 

In June 2021, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of common stock reserved for issuance thereunder from 1,758,951 to a total of 3,940,136 shares.

 

As of September 30, 2021, there were outstanding stock option awards issued from the 2013 Plan covering a total of 3,195,730 shares of the Company’s common stock and there remain reserved for future awards 66,753 shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is $7.48 per share and the remaining contractual term is 9.3 years. 

 

Activity under the 2006 Plan and the 2013 Plan is as follows: 

 

   

Number

   

Average

   

Remaining

   

Aggregate

 
   

of

   

Exercise

   

Contractual

   

Intrinsic

 
   

Shares

   

Price

   

Term (years)

   

Value

 

Options outstanding, beginning of period

    986,399     $ 19.10       -     $ -  

Options granted

    2,251,000     $ 2.73                  

Options exercised

    -                        

Options canceled

    (41,657 )   $ 23.35                  

Options outstanding, end of period

    3,195,742     $ 7.52       9.3     $ -  
                                 

Vested and exercisable and expected to vest, end of period

    2,932,744     $ 7.88       9.3     $ -  
                                 

Vested and exercisable, end of period

    581,757     $ 23.17       8.5     $ -  

 

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, 2021.  

 

The options outstanding and exercisable as of September 30, 2021 were as follows:

 

                       

Weighted

                 
       

Number

   

Weighted

   

Average

   

Number

   

Weighted

 
       

Outstanding

   

Average

   

Remaining

   

Exercisable

   

Average

 

Range of

 

as of

   

Exercise

   

Contractual

   

as of

   

Exercise

 

Exercise Prices

 

September 30, 2021

   

Price

   

Term (Years)

   

September 30, 2021

   

Price

 
                                             

$2.28

- $2.96     2,224,354     $ 2.73       9.7       130,533     $ 2.73  

$3.06

- $3.40     10,000     $ 3.20       9.5       -     $ -  

$4.45

- $4.80     11,900     $ 4.72       9.2       1,219     $ 4.80  

$5.10

- $5.40     88,000     $ 5.28       9.0       50,875     $ 5.40  

$6.90

- $6.90     5,400     $ 6.90       8.5       2,026     $ 6.90  

$8.60

- $8.91     837,150     $ 8.69       8.1       384,272     $ 8.69  

$10.90

- $13.60     15,500     $ 12.64       8.4       9,678     $ 12.99  

$380.00

- $9,920.00     3,438     $ 2,876.47       6.5       3,154     $ 2,968.91  

Total:

        3,195,742     $ 7.52       9.3       581,757     $ 23.17  

 

Deferred Restricted Stock Units

 

As of September 30, 2021, there are 679,000 shares of unvested restricted stock outstanding that have been granted by the Company pursuant to deferred restricted stock units (“RSUs”) under the 2013 Plan.

 

In January 2021, the Company granted annual equity awards to employees and board members for 690,000 shares of common stock issuable upon vesting of RSUs under the 2013 Plan. The RSUs vest in full on the second anniversary of the grant date.

 

During the three and nine months ended September 30, 2021, RSUs for 5,000 and 11,000 shares of common stock were cancelled, respectively.

 

There were no RSUs for shares of common stock granted by the Company during the nine months ended September 30, 2021.

 

Deferred Restricted Stock Awards

 

As of September 30, 2021, there are 228 shares of unvested restricted stock outstanding that have been granted by the Company pursuant to deferred restricted stock awards (“RSAs”) under the 2013 Plan.

 

During the three and nine months ended September 30, 2021 and 2020, no RSAs for shares of common stock were granted by the Company.

 

During the three months ended September 30, 2021, 4 RSAs for shares of common stock were cancelled. During the nine months ended September 30, 2021, RSAs for 6 shares of common stock were cancelled.

 

During the three months ended September 30, 2020, 15 RSAs for shares of common stock were cancelled. During the nine months ended September 30, 2020, RSAs for 43 shares of common stock were cancelled.

 

2017 Employee Stock Purchase Plan

 

In September 2020, the board of directors approved the suspension of the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”) following the twelfth offering period and the ESPP purchase on September 30, 2020.

 

The activity of the Company’s 2017 ESPP for the nine months ended September 30, 2020 is described as follows:

 

 

The tenth offering period under the Company’s 2017 ESPP began on January 1, 2020 and ended on March 31, 2020, and 32 shares were issued on March 31, 2020 at a purchase price of $5.86.

 

 

The eleventh offering period under the Company’s 2017 ESPP began on April 1, 2020 and ended on June 30, 2020, and 30 shares were issued on June 30, 2020 at a purchase price of $4.79.

 

 

The twelfth offering period under the Company’s 2017 ESPP began on July 1, 2020, and ended on September 30, 2020, and 22 shares were issued on September 30, 2020 at a purchase price of $4.44.

 

In June 2021, the Company’s stockholders approved an amendment to the 2017 ESPP to increase the number of shares of common stock reserved for issuance thereunder from 400 to 500,378 shares and to increase the number of shares available in an offering period from 2 to 2,000 per participant (subject to adjustment in the event of certain changes to the Company’s capital structure and other similar events).

 

Following the Company’s annual stockholders’ meeting, the board of directors approved to reactivate the ESPP effective with the offering period beginning on July 1, 2021. 

 

The activity of the Company’s 2017 ESPP for the nine months ended September 30, 2021 is described as follows:

 

 

The thirteenth offering period under the Company’s 2017 ESPP began on July 1, 2021, and ended on September 30, 2021, and 10,844 shares were issued on September 30, 2020 at a purchase price of $1.94.

 

The Company estimated the fair value of purchase rights under the ESPP using the Black-Scholes option valuation model and the straight-line attribution approach.

 

As of September 30, 2021, the remaining shares available for issuance under the 2017 ESPP were 489,156 shares.

 

Stock-Based Compensation

 

During the three months ended September 30, 2021, the Company granted stock options to employees and nonemployees to purchase 30,400 shares of common stock with a weighted average grant date fair value of $1.60 per share. During the three months ended September 30, 2020, the Company granted stock options to employees and nonemployees to purchase 55,000 shares of common stock with a weighted average grant date fair value of $3.60 per share. During the nine months ended September 30, 2021, the Company granted stock options to employees and nonemployees to purchase 2,251,000 shares of common stock with a weighted average grant date fair value of $1.75 per share. During the nine months ended September 30, 2020, the Company granted stock options to employees and nonemployees to purchase 101,800 shares of common stock with a weighted average grant date fair value of $53.25 per share.

 

The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of stock options granted was estimated using the following weighted average assumptions: 

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Expected term (in years)

    5       5       6       5  

Average volatility

    84 %     87 %     76 %     81 %

Risk-free interest rate

    0.81 %     0.27 %     0.97 %     0.34 %

Dividend yield

    0 %     0 %     0 %     0 %

 

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 the Company specific events that affected volatility in a prior period. The expected term of 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 for options, RSUs and ESPP shares included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (in thousands):

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Cost of revenue

  $ 76     $ 42     $ 191     $ 163  

Research and development

    131       78       330       250  

Selling, general and administrative

    881       522       2,244       1,596  

Total

  $ 1,088     $ 642     $ 2,765     $ 2,009  

 

As of September 30, 2021, the total unrecognized compensation cost in connection with unvested stock options was approximately $6,618,000. These costs are expected to be recognized over a period of approximately 2.95 years.   

 

The fair value of the RSUs is determined on the grant date based on the fair value of the Company’s common stock. The fair value of the RSUs is recognized as expense ratably over the vesting period of two years. For the three and nine months ended September 30, 2021, the stock-based compensation expense for RSUs was $272,000 and $771,000, respectively.  

 

As of September 30, 2021, the total unrecognized compensation cost in connection with unvested RSUs was approximately $1,436,000. These costs are expected to be recognized over a period of approximately 1.25 years.   

 

For the three and nine months ended September 30, 2021, the stock-based compensation expense for ESPP shares was not significant.