UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________.to _______________.
Commission file number 1-11388
VIVEVE MEDICAL, INC.
(Exact name of Registrant as specified in its charter)
Yukon Territory
(State or other jurisdiction of incorporation or
organization)
04-3153858
(I.R.S. Employer Identification No.)
150 Commercial Street
Sunnyvale, California 94086
(Address of principal executive offices - Zip Code)
Registrant's telephone number, including area code: (408) 530-1900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value
Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting
company)
Smaller reporting company ☒
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently
completed second fiscal quarter.
As of June 30, 2015, the aggregate market value of the common stock held by non-affiliates of the Registrant, computed by reference to the
price at which the Registrant’s common equity was last sold, was approximately $21,592,523.
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
As of March 15, 2016 there were 59,929,535 shares of the Registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
VIVEVE MEDICAL, INC.
Table of Contents
Part I
Part II
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Part III
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15
Exhibits, Financial Statement Schedules
Signatures
Part IV
i
1
21
40
40
40
40
41
42
42
53
53
53
53
54
55
59
62
65
67
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71
PART I
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You
can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements
by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,”
“should,” “could,” “may” or other similar expressions in this report. In particular, forward-looking statements include statements relating to future
actions, prospective products, applications, customers and technologies, and future performance or future financial results. These forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present
expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not
limited to:
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our limited cash and our history of losses;
our ability to achieve profitability;
our limited operating history;
emerging competition and rapidly advancing technology;
whether we are successful in having our medical device approved for sale by the U.S. Food and Drug Administration (“FDA”);
whether demand develops for our medical device;
the impact of competitive or alternative products, technologies and pricing;
the adequacy of protection afforded to us by the patents that we own and the cost to us of maintaining, enforcing and defending those
patents;
our ability to obtain, expand and maintain protection in the future, and to protect our non-patented intellectual property;
our exposure to and ability to defend third-party claims and challenges to our patents and other intellectual property rights;
our ability to obtain adequate financing in the future, as and when we need it;
our ability to continue as a going concern;
our success at managing the risks involved in the foregoing items; and
●
●
●
●
●
● other factors discussed in this report
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the
date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report to conform such
statements to actual results or changes in our expectations. You should not place undue reliance on these forward-looking statements.
Item 1. Business
On September 23, 2014, Viveve® Medical, Inc. (formerly PLC Systems, Inc.), a Yukon Territory corporation (“Viveve Medical”, “we”, “us” or
“our”) completed a reverse acquisition and recapitalization pursuant to the terms and conditions of an Agreement and Plan of Merger (the “Merger
Agreement”) by and among PLC Systems Acquisition Corp., a wholly owned subsidiary of PLC Systems Inc., with and into Viveve, Inc., a Delaware
corporation (the “Merger”). In conjunction with the Merger, we changed our name from PLC Systems Inc. to Viveve Medical, Inc. to better reflect our
new business. Viveve Medical competes in the women’s health industry by marketing the Viveve System™ as a way to improve the overall sexual well-
being and quality of life of women suffering from vaginal laxity. We are located at 150 Commercial Street, Sunnyvale, California and our telephone
number is (408) 530-1900. Our website can be accessed at www.viveve.com. The information contained on or that may be obtained from our website is
not a part of this report. Viveve, Inc. operates as a wholly-owned subsidiary of Viveve Medical.
1
Viveve, Inc., our wholly-owned subsidiary, was incorporated in 2005. We design, develop, manufacture and market medical devices for the non-
invasive treatment of vaginal laxity. Vaginal laxity occurs in many women as a result of natural childbirth, during which the vaginal opening, or introitus,
is over-stretched and fails to return to its pre-childbirth state. Vaginal laxity can often cause decreased sexual function and satisfaction in women. The
Viveve Treatment is a non-invasive solution for vaginal laxity that is performed in less than 30 minutes, in a physician’s office, and does not require the
use of anesthesia. The Viveve System uses patented monopolar radiofrequency, or RF, energy to generate low temperature heat. The vaginal mucosa is
simultaneously cooled while this non-ablative heat is delivered into the submucosal layer. The RF energy stimulates the formation of collagen and
causes the collagen fibers to remodel thereby tightening the submucosal tissue of the vaginal introitus. The RF stimulation causes subtle alterations in the
collagen that can renew the tissue and further tighten the vaginal tissue over the next one to three months following treatment (the “Viveve Treatment”)
and lead to increased sexual function as shown by the results of our clinical trials described in this report. (See discussion under the heading “Clinical
Studies”.) The Viveve Treatment provides patients suffering from vaginal laxity and decreased sexual function a non-invasive alternative to surgical
procedures, which in contrast, can cost up to tens of thousands of dollars and involve weeks of recovery. The tissue tightening effect caused from the
application of RF energy has been demonstrated by our own pre-clinical and clinical studies, as more fully described in the discussion under the heading
Clinical Studies. The technology underlying the Viveve System is identical to the technology underlying the Thermage System, except for certain system
modifications required for use in a different indication than that used by the Thermage System. (See discussion under the heading “Patents and
Proprietary Technology”.)
We received regulatory approval to market the Viveve System in Europe through a CE Mark issued on December 7, 2010. An amendment to the
CE Mark was approved and it will remain active through September 18, 2020. On April 26, 2012, we received Canada Health Medical Device License
approval from the Canadian Medical Devices Bureau, subject to annual renewal. In Hong Kong, a Certification of Type Acceptance was issued on June
28, 2012. We currently import into Japan via Japan’s physician import license pathway. We currently market and sell the Viveve System, including the
single-use treatment tips, through trained sales employees, consultants and distributors. Experienced OB/GYN physicians who currently use the Viveve
System provide initial training for new physicians on its proper use, and our sales employees and consultants and distributors maintain frequent
interactions with customers to promote repeat sales of our single-use treatment tips.
We currently have 17 exclusive relationships covering distribution of the Viveve System in 51 countries around the world, and we have
regulatory clearance to market and sell our product in 22 of those countries:
GEOGRAPHIC
REGION
North America
Latin America
Europe
Asia Pacific
Middle East
TOTAL
DISTRIBUTION
COVERAGE
1
1
28
11
10
51
REGULATORY
CLEARANCE
1
-
18
3
-
22
As of the date of this report, we have sold 57 Viveve Systems and approximately 1,500 single-use treatment tips in countries outside of the U.S.
2
Market Overview
Overview of Vaginal Laxity
Vaginal laxity and tissue architecture have often been overlooked as contributing etiological factors to female sexual dysfunction. Vaginal laxity
can lead to diminished physical sensation during intercourse. This reduction in sensation is often coupled with a reduction in sexual satisfaction, all of
which can also impact a woman’s sense of sexual self-esteem and her relationship with her sexual partner.
Vaginal laxity is rarely discussed in the clinical situation, yet most surveyed OB/GYNs and urogynecologists recognize that it is an
underreported, yet bothersome, medical condition that impacts relationship happiness and sexual function. Another survey of OB/GYNs, found that
vaginal laxity is the most frequent physical change seen or discussed post-vaginal delivery . Additionally, in a survey of women ranging from 25-45 years
of age, who had experienced at least one vaginal delivery, approximately half expressed some degree of concern over “looseness” of the vaginal
introitus.
3
1
2
Women can develop vaginal laxity for a number of reasons, including aging, genetic predisposition, lifestyle, and/or trauma. As women age,
slower cellular renewal coupled with reduced vascular and glandular networks contributes to loss of underlying supportive fibrous tissue. Some women
may have underlying pathophysiological issues with collagen formation, remodeling and repair; and their lifestyle choices (e.g., alcohol consumption,
tobacco use, and excessive food consumption) also play a role in the integrity of vaginal tissue. Vaginal trauma (e.g., childbirth, surgery, self-stimulation,
or coitus) can also contribute to vaginal laxity.
All women who have given birth vaginally undergo stretching of the tissues of the vaginal opening to accommodate the fetal head. Often the
effects are permanent and many women have long-term physical and psychological consequences including sexual dissatisfaction. One significant issue
is the loosening of the introitus ─ the vaginal opening. This happens with the first vaginal delivery and usually is made worse with subsequent vaginal
deliveries. Vaginal laxity can result in decreased sexual pleasure for both women and their partners during intercourse. We believe that this condition is
not frequently discussed because women are embarrassed, fear that their concerns will be dismissed or fear that their physicians will not understand.
Physicians hesitate to discuss the situation with their patients because historically there has been no safe and effective treatment. Physicians frequently
recommend Kegel exercises. However, these exercises only strengthen the pelvic floor muscles and do not address the underlying cause of vaginal laxity
– loss of tissue elasticity. While surgery can be performed to tighten the vaginal canal, the formation of scar tissue from the surgery may lead to painful
intercourse and permanent side effects.
As a consequence of the physical tissue damage that can result from childbirth, a significant decrease in sexual satisfaction has been reported in
women who underwent vaginal delivery, when assessed two years after delivery, in comparison with those who underwent elective caesarian section. In
the past several years there has been a marked increase in the number of women requesting delivery by caesarian section with the intention of preventing
damage to the pelvic floor and introitus. Caesarian sections are not without risk to both the baby and mother. Whether or not to agree to a woman’s
request for an elective caesarian section has generated considerable controversy among obstetricians. If a procedure were available to address the
concerns of women about vaginal laxity, we believe the perceived need to have a caesarian section to prevent vaginal tissue damage may decrease
significantly.
1
Pauls RN, Fellner AN, Davila GW. Vaginal laxity: a poorly understood quality of life problem; a survey of physician members of the International
Urogynecological Association (IUGA). Int Urogynecol J. 2012 Oct;23(10):1435-48.
Lukes A, Kigsberg S. OB/GYNs Attitudes and Perceptions Regarding Sexual Health of Patients After Delivery. Poster at ISSWSH Annual Meeting.
2
2010.
Millheiser L, Kingsberg S, Pauls R. A cross-sectional survey to assess the prevalence and symptoms associated with laxity of the vaginal introitus. ICS
3
Annual Meeting 2010. Abstract #206
3
Market for a Proven Solution to Vaginal Laxity
In 2009, we sponsored several on-line marketing surveys in the U.S. with both OB/GYNs and women, ages 25-55, to assess attitudes of
physicians and women about vaginal laxity and towards a safe, non-invasive solution to treat this condition.
● Physician Survey: An OB/GYN marketing survey was conducted by OB/GYN Alliance with nearly 525 practicing OB/GYNs from
across the U.S. The objectives of the study were to: obtain insights from physicians on physical changes resulting from childbirth and
the corresponding sexual health implications for patients; understand the perceptions and opinions of OB/GYN physicians on a
procedure that could be offered to address vaginal laxity following childbirth; and gain an understanding of whom the early adopters
may be of the Viveve Treatment.
● Consumer Survey: In a consumer marketing survey conducted by Q&A Research, 421 women were screened for vaginal delivery, age
(25-55), Herfindahl-Hirschman Index (“HHI”) ($50K+) and education. The objectives of the survey were to assess the need for the
Viveve Treatment and better understand the complexity of emotions and the psychological profile of women who experience, but do
not discuss, vaginal changes post childbirth.
Results from these surveys suggested that vaginal laxity is a significant unmet medical need, and that patients and physicians would benefit
significantly from a safe and effective non-invasive treatment that would also increase physical sensation and sexual satisfaction following vaginal
childbirth. Of the 421 patient respondents, up to 48% felt that vaginal laxity was a concern post-childbirth. Furthermore, it is evident that patients and
their OB/GYNs are not discussing vaginal laxity on a regular basis; in fact, we believe such conversations occur quite infrequently due to many factors,
including patient embarrassment and fear of being ridiculed, lack of time and lack of solutions for physicians. Of the 525 OB/GYNs surveyed, 84%
indicated that vaginal laxity is the number one post-delivery physical change for women, being more prevalent than weight gain, urinary incontinence
and stretch marks, and believe that it is under-reported by their patients. Additionally, in a separate international survey of urogynecologists, 83% of the
563 respondents described vaginal laxity as underreported by their patients and the majority considered it a bothersome condition that impacts sexual
function and relationships. Despite the lack of communication regarding this issue, we believe there is a strong interest among patients and doctors for a
treatment that is clinically proven and safe.
Applying U.S. census data, CDC Vital Statistics data and our projections as a result of these studies, we estimate there are approximately 6
million post-partum women who are potential candidates for this procedure in the U.S. alone, approximately 3 million of whom could be early adopters
for the Viveve Treatment.
In 2012, we conducted a similar consumer study in Japan and Canada in order to understand cultural differences that may exist towards vaginal
laxity and the Viveve Treatment. The results corroborated our U.S. survey conclusions. Applying World Health Organization census data as well as data
from individual countries, we estimate there are 25-30 million women outside the U.S. that could be early adopters of the Viveve Treatment.
Current Treatments and Their Limitations
Currently, few medical treatments are available to effectively treat vaginal laxity. The most widely prescribed treatments include Kegel exercises
and invasive surgical procedures, known as laser vaginal rejuvenation (“LVR”) or vaginoplasty.
● Kegel Exercises: Kegels are an exercise that was developed by Dr. Arnold Kegel designed to strengthen the muscles of the pelvic
floor - the pubococcygeal (“PC”) muscles - to increase vaginal muscle tone, improve sexual response, and limit involuntary urine
release due to stress urinary incontinence. These exercises are often prescribed following childbirth or during and after menopause.
However, we are not aware of any validated evidence indicating that Kegels improve vaginal laxity or sexual function due to laxity.
4
● Surgical Procedures: Of the various alternatives for treating vaginal laxity, invasive surgical procedures, such as LVR, are the only
modalities with any proven efficacy outcomes. Typically, they are performed by plastic surgeons with patients under general
anesthesia. According to The International Society of Aesthetic Plastic Surgeons (“ISAPS”), approximately 114,135 LVR surgeries
were performed world-wide in 2013. However, these invasive surgical procedures are expensive, costing thousands of dollars, and
can involve weeks of post-surgical recovery time for the patient. They also carry the risk of scarring, which can lead to
uncomfortable or painful intercourse, long-term or permanent loss of sensation, serious infection, tissue necrosis, hematomas (fluid
collection under the tissue that may require removal), and adverse reactions to anesthesia.
The Viveve Solution
We believe that the Viveve System provides a compelling, safe, non-invasive treatment for vaginal laxity and improvement of sexual function.
The Viveve System consists of an RF generator with cooling capability that protects the mucosa from over-heating and a handpiece that, in conjunction
with a single-use treatment tip, regulates the application of RF energy and monitors treatment data. The Viveve Treatment is typically performed in a
medical office setting by, or under the supervision of, trained and qualified physicians, that may include obstetricians and gynecologists, plastic surgeons,
dermatologists, general surgeons, urologists, urogynecologists or family practitioners.
Benefits of the Viveve Solution
Our solution provides a number of benefits for physicians and patients:
● Non-Invasive, Non-Ablative Alternative to Surgery with No Identified Safety Issues. The Viveve Treatment has been used to treat
over 200 clinical patients and physician users have reported use of the Viveve Treatment on approximately 1,500 additional
patients as of the date of this report. The procedure is non-invasive and offers an alternative to surgery at a much lower price with
little or no downtime from the patient’s normal routine. It is also not a surgical procedure and does not damage either the mucosal
or sub-mucosal tissue or require any form of anesthesia.
● Single Treatment. The Viveve Treatment is normally performed in a medical office setting as a single treatment that takes less than
30 minutes to complete. Our studies have shown that the clinical effect from our procedure occurs within one to three months and
patients continue to report improvements over a period of six months following treatment. In addition, our studies have shown that
the Viveve Treatment maintains its effect for at least 12 months, based upon currently available data from our clinical studies.
● Compelling Physician Economics. We believe that in an era of declining government and insurance reimbursement, many
physicians are seeking to add effective and safe, self-pay procedures to their practices. The Viveve System can be easily adapted
into many physician practices and offers compelling per-procedure economics for the physician, despite requiring a small capital
equipment purchase.
● Ease of Use. The Viveve System offers an easy-to-use, straightforward user interface that allows a trained physician to perform the
treatment in less than 30 minutes. The Viveve System provides real-time feedback and can be monitored during the treatment. The
handpiece and single-use treatment tip are designed with a small profile for accurate placement during treatment, comfort and ease
of use.
5
Our Technology
The Viveve System uses a patented method of delivering monopolar RF energy for heating collagen.
● Monopolar Radiofrequency Energy. Monopolar RF delivery uses two electrodes, with one active electrode being held in the device
handpiece by the physician and the second, a passive return electrode, typically attached to the patient’s upper leg. Monopolar
delivery allows for precise administration of energy because the electrical current is concentrated where the active electrode touches
the body and disperses quickly as it travels towards the return electrode. The monopolar RF process is distinct from bipolar RF-based
technology, which is superficial, relying on current passing through tissue located between two probes placed close together on the
surface of the skin. We believe that our monopolar technology delivers energy more effectively and to a greater tissue depth than
bipolar technology.
● The Capacitive Coupling Mechanism of Action for Collagen Heating. Our single-use Viveve treatment tip contains patented
technology that uses monopolar RF energy as a controlled tissue heating source through the use of a non-conducting material, known
as a dielectric. Capacitive coupling is the use of the dielectric to create an electric field in the area where the treatment tip touches the
body. The electric field induces a current within the surrounding tissue, resulting in volumetric heating of the tissue due to the tissue’s
natural resistance to electrical current flow. Collagen is an efficient conductor of electricity and therefore acts as a pathway for the
electric current. This process results in heating of the fibrous septae, the strands of collagen fibers that permeate tissues and connect
the outer mucosal layer to the underlying muscle. Delivery of heat to the fibrous septae located in deeper layers of the tissue shrinks
and shortens them, resulting in tightening of the mucosal tissue. Over time, new collagen strands may grow as part of the body’s
natural response to the activation of fibroblasts that results from the application of low-energy hyperthermic RF energy. These new
strands may add strength and produce additional tissue tightening over the next one to three months. This tightening of the tissue has
the potential to reduce vaginal laxity and increase sexual function.
The Viveve System
The Viveve System includes three major components: an RF generator housed in a table-top console, a reusable handpiece and a single-use
treatment tip, as well as several other consumable accessories. Physicians attach the single-use treatment tip to the handpiece, which is connected to the
console. The generator authenticates the treatment tip and programs the system for the desired treatment without further physician intervention.
● Radiofrequency Generator. The generator produces a six-megahertz signal and is simple and efficient to operate. Controls are within easy
reach, and important user information is clearly displayed on the console’s built-in display, including energy delivered, tissue impedance,
duration and feedback on procedure technique. Cooling is achieved, in conjunction with the generator, though the delivery of a coolant
that helps to cool and protect the mucosa during a procedure.
● Handpiece. The reusable handpiece holds the treatment tip in place and processes information about temperature, contact, cooling system
function and other important data. A precision control valve within the handpiece meters the delivery of coolant, which protects the
mucosal surface.
6
● Treatment Tip. The single-use treatment tip is available in one size and comes pre-sterilized. Each treatment tip contains a proprietary
internal EPROM, or programmable memory chip, which stores treatment parameters and safety limits in order to optimize performance
and safety. To enhance procedural safety, we have programmed the EPROM for single-use treatments. Using the same treatment tip to
perform multiple procedures could result in injury, therefore, the EPROM disables the treatment tip after a pre-programmed number of
pulses to ensure that the treatment tip is not reused.
The Viveve System also includes other consumable components. The console houses a canister of coolant that can be used for approximately
four to five procedures. Each procedure requires a new return pad, which is typically adhered to the patient’s upper leg to allow a path of travel for the
RF current through the body and back to the generator. We also sell proprietary single-use bottles of coupling fluid, a viscous liquid that helps ensure
electrical and thermal contact with the treatment tip.
The Viveve Treatment
The Viveve Treatment is conducted on an outpatient basis in a physician’s office. The procedure typically takes less than 30 minutes and does
not require any form of anesthesia. To perform the procedure, a physician attaches the single-use treatment tip to the handpiece. The return pad is then
adhered to the patient’s upper leg to allow a path of travel for the RF current back to the generator. Prior to treatment, the treatment area is bathed in
coupling fluid, which is used for conduction and lubrication. The area from the 1:00 o’clock position to the 11:00 o’clock position just inside the hymenal
ring is treated using the Viveve treatment tip by delivering a three-phased pulse: Phase 1 – cooling, Phase 2 – 90 Joules/cm2 of RF energy, and Phase 3 –
cooling. Each pulse lasts approximately eight seconds. The Viveve treatment tip is then repositioned in an overlapping fashion clockwise and the three-
phased treatment pulse is repeated. The entire circumferential treatment area from the 1:00 o’clock position to the 11:00 o’clock position is treated five
times with overlapping pulses. Treatment of the urethral area is avoided. During the treatment procedure patients are expected to feel a sensation of
warmth when the RF phase is delivered and a cooling sensation when the cooling phases are delivered. Based on our current clinical results, the Viveve
Treatment is only required once, with efficacy lasting for at least 12 months.
Our Customers
To date, we have focused our initial commercial efforts in markets where we have received regulatory clearances for the Viveve System, or in
the case of Japan, where we use a physician import license pathway to sell our product. Within each market, we target thought leaders in the OB/GYN
specialty in order to increase awareness of vaginal laxity and accelerate patient acceptance of the Viveve Treatment. As our markets mature, we intend to
target a broader number of physician specialties, including plastic surgeons, dermatologists, general surgeons, urologists, urogynecologists and family
practitioners.
Through our sales employees, consultants and distributors, we currently target physicians who have a demonstrated commitment to building a
high-volume, non-invasive, treatment business within their practice. If distribution of our product expands globally, we intend to utilize sales consultants
and distribution partners in all countries except the U.S. where we intend to hire a direct sales force. To date, we are heavily reliant on our relationships
with distribution partners and sales employees and consultants for the sale of our products outside the U.S.
Business Strategy
Our goal is to become the leading provider of non-invasive solutions to treat vaginal laxity by:
Increasing the Installed Base of Viveve Systems. In our existing markets, we plan to expand the number of Viveve Systems from our initial base of
early adopters by leveraging our current and future clinical study results and through innovative marketing programs directed at both physicians
and patients. As a condition that has historically had no viable, non-invasive solutions, we intend to focus much of our marketing effort on
physician and patient education. Further, we intend to expand the number of regulatory approvals both internationally and in the U.S., to further
increase the areas in which we can market the Viveve System.
7
Driving Increased Treatment Tip Usage. Unlike the capital equipment model of other businesses, we maintain an active, continuous relationship
with our physician customer base because of the single-use, disposable nature of the treatment tips. We work collaboratively with our physician
customer base to increase treatment tip usage by enhancing customer awareness and facilitating the marketing efforts of our physician customers
to their patients. We believe that our customers’ interests are closely aligned with our interests, and we plan to monitor the market to foster
continued procedure growth for our customers and treatment tip sales for us. We intend to launch innovative marketing programs with physician
customers to develop a profitable Viveve Treatment practice.
Broadening Our Physician Customer Base. While our initial focus is on marketing our procedure to the OB/GYN specialty, we intend to
selectively expand our sales efforts into other physician specialties, such as plastic surgery, dermatology, urology, urogynecology, general surgery
and family practice. Additionally, we intend to pursue sales from physician-directed medi-spas with track records of safe and successful aesthetic
treatments.
Developing New Treatment Tips and System Enhancements. We intend to continue to expand our line of treatment tips to allow for even shorter
procedure times to benefit both physicians and patients. We also plan to pursue potential system modifications and next generation enhancements
that will further increase the ease-of-use of the Viveve System.
Investing in Intellectual Property and Patent Protection. We will continue to invest in expanding our intellectual property portfolio, and we intend
to file for additional patents to strengthen our intellectual property rights. Areas in which we may pursue additional patent protection include, but
are not limited to, redesign of certain system components, disposable components and software algorithms. We believe that our intellectual
property rights protect our position as the exclusive provider of a vaginal laxity treatment using monopolar RF technology in the U.S. and in many
other countries. (See discussion under the heading “ Patents and Proprietary Technology ”.)
Sales and Marketing
International
We currently market and sell the Viveve System, including the single-use treatment tips, in 22 countries outside the U.S. through trained sales
employees, consultants, and distributors. As of the date of this report, we had four sales directors (Europe and Middle East, Asia Pacific, and Latin
America), one sales consultant (Canada) and 17 sales distributors covering 51 countries throughout the world.
By using a consultative sales process, we form strong relationships with our customers through frequent interactions. Beyond performing initial
system installation and on-site training, which can occur within two weeks of a physician’s purchase decision, our sales consultants provide ongoing
consultation to physicians on how to integrate the Viveve System into their practices and market procedures to their patients.
We also provide comprehensive training and education to each physician upon delivery of the Viveve System. We require this initial training to
assist physicians in safely and effectively performing the Viveve Treatment.
8
Our strategy to grow sales internationally is to:
● increase penetration of the Viveve System by targeting physicians and clinics that perform in-office procedures and by implementing direct-to-
consumer marketing programs to increase patient awareness of the Viveve Treatment;
● expand into new international markets by gaining regulatory approval, and identifying and training qualified distributors; and
● expand the scope of physicians who offer the Viveve Treatment in addition to OB/GYNs, including plastic surgeons, dermatologists, general
surgeons, urologists, urogynecologists and primary care physicians.
Further, we intend to actively engage in promotional opportunities through participation in industry tradeshows, clinical workshops and
company-sponsored conferences with expert panelists, as well as through trade journals, brochures and our website. We intend to actively seek
opportunities to obtain positive media exposure, and plan to engage in direct-to-consumer marketing of the Viveve Treatment, including extensive use of
social media.
United States
In December 2008, Viveve received regulatory clearance from the FDA for a version of the device, no longer manufactured, for use in general
surgical procedures for electrocoagulation and hemostasis. In March 2015, we submitted a Special 510(k) to the FDA for the Viveve System to take into
account the design modifications to the original 510(k) cleared device, which include improved user interface capabilities and enhanced
manufacturability.
We intend to seek regulatory clearance or approval from the FDA to allow us to begin to market the current Viveve System, for the treatment of
vaginal tissue to improve sexual function, to physicians practicing in the U.S. and to build awareness of the Viveve Treatment in patients residing in the
U.S. Because we do not have FDA clearance or approval for this indication, we have not generated any sales in the U.S. In June 2012, we submitted a
pre-investigational device exemption, or IDE application, and requested an in-person meeting with the FDA to solicit feedback in advance of filing an
IDE to conduct a clinical study of the Viveve System to support regulatory submission. In August 2012, we met with the FDA and received feedback on
our pre-clinical data, historical clinical data, and a clinical protocol for a prospective randomized controlled trial. We had a second meeting with FDA on
December 17, 2015 and received additional feedback on our clinical protocol design and indication for use. We plan to submit an IDE application in
2016. If approval is received, we intend to begin our U.S. clinical study.
Clinical Studies
We have completed several pre-clinical studies, as well as two human clinical studies and are currently conducting a third human clinical study
outside of the US. We believe the completed studies have shown that the Viveve System has a very strong safety profile and is highly effective in the
treatment of vaginal laxity and improvement of sexual function.
Pre-clinical Studies
In 2010, in collaboration with West Virginia University, we conducted an animal study in sheep to assess the safety, and further understand the
mechanism of action, of the Viveve Treatment. The vaginal introitus of five parous sheep were treated once with the Viveve System using a variety of
energy levels (75−90 Joules/cm2). Each sheep then underwent serial vaginal biopsies immediately after treatment, at approximately one week, and at one,
three and six months (4-5 samples per occurrence). Control biopsies were also obtained from three untreated parous sheep. We examined the vaginal
mucosa and underlying connective tissue for thermal changes and subsequent tissue responses over a six month period through light microscopic
examination of haematoxylin and eosin (“H&E”) stained slides that were reviewed by blinded pathologists.
The results of the study indicated that the optimal level of RF energy delivered was 90 J/cm2 and the biopsies supported the hypothesis that the
mechanism of action of our technology involves connective tissue remodeling with fibroblast activation and new collagen production. The post-treatment
absence of ulcerations, regional necrosis or diffuse fibrosis, throughout the six month follow-up period, also underscores the strong safety profile of the
Viveve Treatment.
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As part of our clinical studies, we have studied and continue to study, the interaction of RF energy and tissue to further understand the
mechanism of action. We have used transmission electron microscopy on ovine biopsied tissue samples to corroborate that our product induces subtle
collagen modification and the deposition of new collagen that leads to tissue tightening and restoration of tissue elasticity. We have developed histology
techniques to investigate the depth of heat in tissue, fibroblast activation and collagen deposition that we believe is responsible for long-term
improvement and tightening of tissue. We have also created three-dimensional computer models to study tissue heating with our product. Determining
the effectiveness of this type of treatment is inherently a subjective evaluation. When performing our clinical studies, we attempt to utilize the most
compelling measures we can in order to provide convincing evidence of efficacy.
Clinical Studies
To date, we have conducted two human clinical studies using the Viveve System, one in the U.S. and one in Japan. Both studies were designed to
assess the safety and efficacy of the Viveve System for the treatment of vaginal laxity and improvement of sexual function and were submitted to
regulatory authorities in Europe and Canada for the purpose of seeking regulatory approval for the use and distribution of the Viveve System in such
locations. Each study resulted in patients reporting that the Viveve System restored vaginal tightness to pre-childbirth level and improved sexual function.
The results of our clinical trials are based on information reported by clinical patients in various response questionnaires (referred to as patient reported
outcomes), designed to measure vaginal laxity and sexual function, completed by each clinical patient prior to treatment with respect to pre and post
childbirth levels and at various times following treatment. All patient reported scores for each questionnaire and at each time point are compared to those
scores reported by the same patients at baseline (prior to treatment) in order to assess whether patients have experienced a change due to the treatment.
This change in score is then tested for statistical relevance (i.e. whether or not the change measured is due to chance). It is widely accepted by clinical
trial industry standards that if the probability is less than 5% (p< .05) that this change is due to chance, than the results are deemed to be “Statistically
Significant”. In other words, there is a 95% probability that the change in score measured is due to the treatment. Therefore, when we indicate that our
clinical patients experienced a Statistically Significant result, we are referring to the change in responses as reported by such patients on the response
questionnaires from the pre-treatment assessment (baseline) as compared to the post-treatment assessments at the various time points specified.
United States
We conducted our first human study of the Viveve System beginning in November 2008. The study was an open-label study (without a control
group) conducted in 24 female subjects, ages 25-44 years old, each of whom had experienced at least one full-term vaginal delivery. The study was
designed to assess the safety and efficacy of the procedure at three RF dosing levels. Each woman was treated once with the Viveve System, with no
anesthesia – three patients received 60 joules/cm2, three patients received 75 joules/cm2, and 18 patients received 90 joules/cm2. Patient outcomes were
measured at baseline, one month, three months, six months, and 12 months using several validated patient-reported outcome measures, including a
company-designed vaginal laxity/tightness questionnaire, modified Female Sexual Function Index (“mFSFI”), Female Sexual Distress Scale-Revised
(“FSDS-R”) and the Global Response Assessment.
Within one month after the Viveve Treatment, patients reported a Statistically Significant improvement in vaginal laxity scores, sexual function
and sexual satisfaction scores to pre-childbirth levels. These results continued throughout the 12 month follow-up period. Additionally, patients reported
a Statistically Significant decrease at one month, and thereafter, in their personal distress scores from sexual activity.
The Viveve System also demonstrated a strong safety profile throughout the study. The treatment was well tolerated and there were no
procedure-related adverse events or serious adverse events through the 12 month follow-up period.
Japan
Our second human clinical study of the Viveve System began in March 2010. This study was an open-label study conducted in 30 female
subjects, ages 21-55 years old, each of whom had experienced at least one full-term vaginal delivery. The study was designed to assess the safety and
efficacy of the procedure. Each woman was treated once with the Viveve System, with no anesthesia, using 90 joules/cm2 of RF energy as the
therapeutic dose.
10
Like the U.S. study, patient outcomes were measured at baseline, one month, three months, six months, and 12 months using several validated
patient-reported outcome measures, including a company-designed vaginal laxity/tightness questionnaire, mFSFI, FSDS-R and the Global Response
Assessment.
Within one month after the Viveve Treatment, patients reported a Statistically Significant improvement in vaginal laxity scores, sexual function
and sexual satisfaction scores to pre-childbirth levels. These results continued throughout the 12 month follow-up period. Additionally, patients reported
a Statistically Significant decrease at one month, and thereafter, in their personal distress scores from sexual activity.
Similar to the U.S. study, the Viveve Treatment continued to demonstrate a strong safety profile. The treatment was well tolerated and there
were no procedure-related adverse events or serious adverse events through the 12 month follow-up period.
Europe, Japan and Canada
In the fourth quarter of 2014, we began the VIVEVE I clinical study, sometimes referred to in this report as the “OUS Clinical Trial,” a
randomized, blinded and sham-controlled trial designed to further demonstrate the efficacy and safety of the Viveve Treatment versus a sham-control
procedure for the treatment of vaginal laxity. The study is designed to demonstrate that the Viveve Treatment is superior to the sham treatment for the
primary effectiveness and safety endpoints described below. It is currently anticipated that up to ten clinical sites will enroll approximately 113 patients,
which will include pre-menopausal females 18 years of age or older who have experienced at least one full term vaginal delivery at least 12 months prior
to enrollment date, randomized in a 2:1 ratio to either an active treatment group or sham-control group. Patients will be followed for six months post-
treatment to assess the primary effectiveness and safety endpoints of the study with data being collected at one, three and six month intervals. The study
will also include an interim data analysis at the 3 month endpoint of 50% of the patients enrolled. Patients initially randomized to the sham arm will be
offered the opportunity to receive the active Viveve treatment once they have completed the 6-month evaluation following the sham intervention.
The primary endpoint of the study is the proportion of subjects in the active arm as compared to the proportion of the subjects in the sham arm
reporting no vaginal laxity at six months post-intervention. “No vaginal laxity” is operationally defined as a score > 4 on the Viveve System
Questionnaires, patient reported global assessment of vaginal laxity based on a 7 point scale. Additionally, the primary safety endpoint is the proportion
of subjects in the active arm experiencing an adverse event (“AE”) by six months post-treatment as compared to the proportion of the subjects in the
sham arm experiencing an AE by six months post-intervention. Secondary endpoints include the percent change in mean score on the FSFI, FSDS-R and
the Vaginal Laxity Inventory (“VALI”). The VALI was created specifically for the assessment of vaginal laxity by external medical experts. Its use as a
comprehensive patient reported outcome questionnaire is currently being scientifically validated by us to assess women’s vaginal laxity on a 7 point
scale.
We believe that the consistency of results, in both safety and efficacy, across these clinical study populations, is indicative of the cross-culture
similarities in this medical condition and the positive impact that an effective treatment can have on the sexual health of women after vaginal childbirth.
Notwithstanding the safety of the Viveve Treatment, patients may experience undesirable side-effects such as temporary swelling or reddening of the
treated tissue.
Research and Development
We intend to focus on various research and development efforts for the Viveve System, including but not limited to:
● implementing a cost improvement program to further increase gross margins and gross profit opportunity;
11
● developing a new cooling system to maintain compliance with potential changes in environmental regulations;
● designing new treatment tips to further optimize ease-of-use and reduce procedure times for patients and physicians; and
● increasing security to prevent counterfeiting and refurbishment.
We have formed strategic relationships with outside contractors for assistance on annualized projects, and we work closely with experts in the
medical community to supplement our research and development resources. Research and development expenses for the years ended December 31, 2015
and 2014 were $4,988,000 and $1,426,000, respectively. In the future, we expect to pursue further research and development initiatives to improve and
extend our technological capabilities and to foster an environment of innovation and quality.
Manufacturing
Our manufacturing strategy involves the combined utilization of internal manufacturing resources and expertise, as well as approved suppliers
and contract manufacturers. Our internal manufacturing activities include the testing and packaging of Viveve treatment tips and handpieces, as well as
the final integration, system testing and packaging of the Viveve System. We outsource the manufacture of components, subassemblies and certain
finished products that are produced to our specifications and shipped to our Sunnyvale facility for final assembly or inspection, testing and certification.
Our finished products are stored at and distributed from our Sunnyvale facility. Quality control, risk management, efficiency and the ability to respond
quickly to changing requirements are the primary goals of our manufacturing operations.
We have arrangements with our suppliers that allow us to adjust the delivery quantities of components, subassemblies and finished products, as
well as delivery schedules, to match our changing requirements. The forecasts we use are based on historical trends, current utilization patterns and sales
forecasts of future demand. Lead times for components, subassemblies and finished products may vary significantly depending on the size of the order,
specific supplier requirements and current market demand for the components and subassemblies. Most of our suppliers have no contractual obligations
to supply us with, and we are not contractually obligated to purchase from them, the components used in our devices.
We obtain programmable memory chips for our treatment tips and the coolant valve for the handpiece from single suppliers, for which we
attempt to mitigate risks through inventory management and utilization of 12- to 18-month purchase orders, and sterilization services from a single
vendor, for which we attempt to mitigate risks by using two sterilization chambers at each of two locations. Other products and components come from
single suppliers, but alternate suppliers have been qualified or, we believe, can be readily identified and qualified. In addition, the availability of cryogen
for our cooling module, which we can source from multiple suppliers, may fluctuate due to changes in the global supply of this material. To date,
shipments of finished products to our customers have not been delayed due to material delays in obtaining any of our components, subassemblies or
finished products.
We are required to manufacture our product in compliance with Title 21 of the Code of Federal Regulations Part 820 (“21 CFR 820”) enacted by
the FDA. 21 CFR 820 regulates the methods and documentation relating to the design, testing, control, manufacturing, labeling, quality assurance,
packaging, storage and shipping of our product. We maintain quality assurance and quality management certifications to enable us to market our product
in the member states of the European Union, the European Free Trade Association and countries which have entered into Mutual Recognition
Agreements with the European Union. These certifications include EN ISO 9001:2000 and CAN/CSA ISO 13485:2003. We are also required to maintain
our product registration in a number of other foreign markets such as Canada.
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We use small quantities of common cleaning products in our manufacturing operations, which are lawfully disposed of through a routine waste
management program. Except for costs that may be incurred in the future in connection with environmental regulations requiring the phase out of R134a,
a hydrofluorocarbon, or HFC, upon which our cooling module relies, we do not anticipate any material costs due to compliance with environmental laws
or regulations. In 2007, the European Union enacted directives aimed at the automotive industry for the removal of HFC's from air conditioning. As a
result of these directives, we anticipate that similar directives may be imposed on the medical device industry over the next decade. While we do not
anticipate that we will have to incur costs in the near future to develop an alternative cooling module for our device which is not dependent on HFCs, if
and when we are required to do so, and if we do not do so in a timely or cost-effective manner, the Viveve System may not be in compliance with
environmental regulations, which could result in fines, civil penalties and the inability to sell our products in certain major international markets.
Given our limited commercial history, we only offer a one year warranty providing for the repair, rework or replacement (at the Company’s
option) of products that fail to perform within stated specifications. To the extent that any of our components have performance related or technical
issues in the field, we typically replace those components as necessary.
Patents and Proprietary Technology
We rely on patent, copyright, trade secret and trademark laws and confidentiality agreements to protect our technology and the Viveve System.
We have an exclusive license to or own 10 issued U.S. patents primarily covering the Viveve System and methods of use, 2 of which have expired. The
remaining 8 will expire between 2016 and 2029. Additionally, we have 4 pending U.S. patent applications, 16 issued foreign patents, and 20 pending
foreign patent applications, some of which foreign applications preserve an opportunity to pursue patent rights in multiple countries.
Issued
10
US Patents
Pending
4
Expired
2
Issued
16
Foreign Patents
Pending
20
Expired
0
All of our employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting
relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or
consulting relationship. We cannot provide any assurance that our employees and consultants will abide by the confidentiality or invention assignment
terms of their agreements. Despite measures taken to protect our intellectual property, unauthorized parties may copy aspects of our product or obtain
and use information that we regard as proprietary.
“Viveve,” is a registered trademark in the U.S. and several foreign countries. As of the date of this report, we have one registered trademark in
the U.S., as well as various foreign registrations protecting the mark in 18 countries outside of the U.S. We may file for additional trademarks to
strengthen our trademark rights, but we cannot be certain that our trademark applications will issue or that our trademarks will be enforceable.
Edward Knowlton Licensed Patents
On February 10, 2006, Viveve, Inc. entered into an Intellectual Property Assignment and License Agreement with Edward W. Knowlton
(“Knowlton”), as amended on May 22, 2006 and July 20, 2007 (collectively, the “Knowlton IP Agreement”), pursuant to which Knowlton granted to
Viveve, Inc. an exclusive, royalty-free and perpetual worldwide sublicense to certain intellectual property and technology licensed to Knowlton from a
third party, including rights to several patents and patent applications owned by Thermage, Inc. outside the field of contraction, remodeling and ablation
of the skin through and including (but not beyond) the subcutaneous fat layer below the skin (collectively, the “Knowlton Licensed IP”). The sublicense
under the Knowlton Licensed IP is fully-paid, transferable, sublicensable and permits us to make, have made, use, sell, offer for sale and import any
product or technology solely for use in the field of transmucosal treatment of the vagina or vulva (the “Field”) and to practice any process, method, or
procedure solely in the Field. The Knowlton IP Agreement also assigns to us all technology and related intellectual property rights owned by Knowlton
for the development and commercialization of devices, including any improvements, in the Field (the “Knowlton Assigned IP”). We are obligated to file
and reasonably prosecute any patent applications that include a description of the Knowlton Assigned IP as prior art and maintain all patents included in
the Knowlton Assigned IP, at our expense. In consideration of the sale, assignment, transfer, release and conveyance and other obligations of Knowlton
under the Knowlton IP Agreement, Viveve, Inc. issued 1,600,000 shares of our common stock to Knowlton and agreed to engage the consulting services
of Knowlton.
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On February 10, 2006, Viveve, Inc. entered into a Consulting Agreement with Knowlton (“Knowlton `Consulting Agreement”), pursuant to
which Knowlton assigned all rights to any inventions and intellectual property developed during the course of providing consulting services in the Field
during the term of the agreement. Unless earlier terminated pursuant to the provisions described therein, the term of the Knowlton Consulting Agreement
continued until the earlier to occur of (i) the date that is six months after the closing of an initial public offering of Viveve, Inc.’s stock; or (ii) the
acquisition by a third party of all or substantially all of the business or assets of Viveve, Inc., whether by asset or stock acquisition, merger, consolidation
or otherwise. The agreement could be renewed only upon the mutual written agreement of the parties prior to its expiration. The Knowlton Consulting
Agreement expired by its terms on September 23, 2014, the effective date of the Merger. The assignment of the intellectual property developed during
the term of the Knowlton Consulting Agreement survives termination. Under the Knowlton Consulting Agreement, Viveve, Inc. paid Knowlton $75,150
for consulting services during the year ended December 31, 2014.
Agreement with Solta Medical
Effective April 30, 2010, Viveve, Inc. entered into a Supply Agreement (the “Supply Agreement”) with Solta Medical, Inc. (“Solta”), pursuant to
which Solta agreed to sell to Viveve, Inc. the cryogen cooling method and coupling fluid that Solta uses with its ThermaCool® System (“TC3 System”)
for use with our compatible radio frequency medical device for the purpose of conducting our initial clinical trials. The applicable term of the Supply
Agreement is the later of the period through completion of our initial clinical trials or six months following the effective date. On October 14, 2010, the
parties amended the term of the Supply Agreement to remain in effect for so long as Solta supports its TC3 System. In the event that Solta discontinues
support of its TC3 System and terminates the Supply Agreement, Solta agrees to (i) provide us with information for Solta’s cryogen supplier, (ii) permit
us to make any arrangement with such supplier for a continued supply of cryogen and (iii) grant us a royalty free, non-exclusive perpetual license under
any Solta intellectual property directed to the design of the cryogen container in the field of treating vaginal tissue.
The portion of the Supply Agreement relating to coupling fluid was subsequently superseded by the parties’ Coupling Fluid License and Product
Supply Agreement on September 30, 2010, pursuant to which Solta agreed to (i) grant to Viveve, Inc. a license for the coupling fluid and (ii) supply the
coupling fluid at preferred pricing for two years and at non-preferred pricing after two years. The agreement grants to us a royalty-free, fully paid-up,
worldwide, perpetual, exclusive license in the field of treating vaginal tissue, with a right to grant sublicenses in such field, to make, have made, use and
sell coupling fluid for an aggregate license fee of $125,000. The agreement was for an initial term of three years, after which it continues to remain in
effect unless and until terminated in accordance with the terms therein. In addition, while the terms of the original agreement permit the use of the
cryogen cooling method for initial clinical trials, Viveve also purchases the cryogen cooling method and coupling fluid from Solta for commercial
purposes. We currently do not have an alternative source of cryogen and if Solta refuses to sell to us for commercial reasons, or otherwise, our business
could be materially adversely affected.
Agreement with Stellartech Research Corporation
On June 12, 2006, Viveve, Inc. entered into the Stellartech Agreement, as amended and restated on October 4, 2007, with Stellartech for an
initial term of three years in connection with the performance of development and manufacturing services by Stellartech and the license of certain
technology and intellectual property rights to each party. Under the Stellartech Agreement, we agreed to purchase 300 units of generators manufactured
by Stellartech. In conjunction with the Agreement, Stellartech purchased 300,000 shares of Viveve, Inc.’s common stock at par value. Under the
Stellartech Agreement, we paid Stellartech $3,446,000 and $484,000 for goods and services during the years ended December 31, 2015 and 2014,
respectively. In addition, Stellartech granted to us a non-exclusive, nontransferable, worldwide, royalty-free license in the Field (defined above in the
discussions titled “Edward Knowlton Licensed Patents”) to use Stellartech’s technology incorporated into deliverables or products developed,
manufactured or sold by Stellartech to us pursuant to the Stellartech Agreement (the “Stellartech Products”) to use, sell, offer for sale, import and
distribute the Stellartech Products within the Field, including the use of software object code incorporated into the Stellartech Products. The Stellartech
technology consists of know-how applicable to the manufacturing and repair of the Viveve System, including any other intellectual property which
Stellartech developed or acquired separate and apart from the Stellartech Agreement and all related derivative works. In addition, once we purchase a
minimum commitment of 300 units of the RF generator component (the “Minimum Commitment”) and the Stellartech Agreement expires, Stellartech is
to grant us a nonexclusive, nontransferable, worldwide, royalty-free, fully-paid license to use the Stellartech technology incorporated into the Stellartech
Products to make and have made Stellartech Products in the Field.
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Stellartech also granted (i) an exclusive (even as to Stellartech), nontransferable, worldwide, royalty-free license within the Field under those
certain intellectual property rights licensed to Stellartech pursuant to a development and supply agreement between Stellartech and Thermage, dated
October 1, 1997 (the “Thermage Technology”), to use any elements of the Thermage Technology incorporated into the Stellartech Products, solely for
the use, sale, offer for sale, importation and distribution within the Field; (ii) upon our satisfaction of the Minimum Commitment and the expiration of
the Stellartech Agreement, an exclusive, nontransferable, worldwide, royalty-free, fully-paid license within the Field under Stellartech’s license rights in
the Thermage Technology to use any elements of the Thermage Technology which are incorporated into the Stellartech Products to make and have made
Stellartech Products in the Field; and (iii) the exclusive right within the Field to prosecute infringers of the portion of Stellartech’s Thermage Technology
rights exclusively licensed to us. Our license rights in Thermage Technology also include the use of software object code for Thermage Technology used
in the Stellartech Products. As of the date of this report, the Stellartech Agreement has expired by its terms, however, the parties still continue to operate
under the terms of the agreement. In addition, we have not yet met the Minimum Commitment requirement, and therefore we are not permitted to use the
Stellartech technology with any other manufacturer. If Stellartech refuses or is unable to meet our delivery requirements for the Viveve System, our
business could be materially adversely affected.
In March 2012, Viveve, Inc. entered into a Quality and Regulatory Agreement with Stellartech, pursuant to which the parties clarified their
respective quality and regulatory responsibilities under the Stellartech Agreement. The Quality and Regulatory Agreement provides that we will serve as
the legal manufacturer for all Stellartech Products developed and sold to us thereunder and that we are obligated to maintain all relevant quality assurance
and regulatory processes and requirements required by any regulatory authority and to comply with the processes and requirements set forth in the
schedule of responsibilities provided in the agreement.
Government Regulation
The Viveve System is a medical device subject to extensive and rigorous regulation by international regulatory bodies as well as the FDA. These
regulations govern the following activities that we perform, or that are performed on our behalf, to ensure that medical products exported internationally
or distributed domestically are safe and effective for their intended uses:
● product design, development and manufacture;
● product safety, testing, labeling and storage;
● record keeping procedures;
● product marketing, sales and distribution; and
● post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device
malfunctions and repair or recall of products.
In addition to the regulatory approvals already received in connection with the sale of the Viveve System in the foreign jurisdictions described
below and the approvals being sought in the U.S., we are currently seeking regulatory approval for the sale of our product in many other countries around
the world.
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International
Sales of our product outside the U.S. are subject to foreign regulatory requirements that vary widely from country to country. In addition,
exports of medical devices from the U.S. are regulated by the FDA. Complying with international regulatory requirements can be an expensive and time-
consuming process and approval is not certain. The time required to obtain registrations or approvals, as required by other countries, may be longer than
that required for FDA clearance, and requirements for such registrations or approvals may significantly differ from FDA requirements. We may be
unable to obtain or maintain registrations or approvals in other countries. We may also incur significant costs in attempting to obtain and in maintaining
foreign regulatory approvals. If we experience delays in receiving necessary registrations or approvals to market our product outside the U.S., or if we
fail to receive those registrations or approvals, we may be unable to market our product or enhancements in international markets effectively, or at all,
which could have a material adverse effect on our business and growth strategy.
An entity that seeks to export an unapproved Class III medical device to a “non-Tier I” country is required to obtain export approval from the
FDA. The Tier I countries are largely defined as industrialized countries with established regulatory infrastructure, such as, among others, Canada and the
European Union. In January of 2011, we sought to obtain FDA approval to export the Viveve System to Mexico, Brazil and Korea (all non-Tier I
countries). An export approval was obtained on March 7, 2011. Exportation of an unapproved Class III medical device to a Tier I country is permitted
without FDA approval provided that certain conditions are met. Accordingly, we have exported the Viveve System to Canada and the European Union
without FDA approval in accordance with Section 802 of the FDC Act.
Once an entity has obtained a marketing authorization for the product in a Tier I country (e.g., a CE mark, etc.), the device can then be shipped
from the U.S. to any country in the world without FDA approval. On December 7, 2010, we obtained a CE Mark for the Viveve System. As a result, we
may now legally export the Viveve System to non-Tier I countries, such as China and Hong Kong without FDA approval.
Entities legally exporting products from the U.S. are often asked by foreign customers or foreign governments to supply a certificate for
products regulated by the FDA. To satisfy this request, an exporter may request that the FDA issue them an export certificate to accompany a device. An
export certificate is a document prepared by the FDA containing information about a product’s regulatory or marketing status in the U.S. Although we
have requested the issuance of export certificates to allow exports into many countries around the world, the FDA has not yet issued export certificates to
us.
Canada
We are subject to the requirements of Health Canada and the regulations that govern medical devices in Canada. In Canada, certain devices must
have a “medical device license” before they can be sold. Prior to selling a device in Canada, manufacturers of Class II, III and IV devices must submit a
Medical Device Application which is reviewed by the Therapeutic Products Directorate (“TPD”), the Canadian authority that monitors and evaluates the
safety, effectiveness and quality of diagnostic and therapeutic medical devices in Canada. All medical devices sold in Canada are categorized by the TPD
into four different classes with Class I devices presenting the lowest potential risk (e.g. a thermometer) and Class IV devices presenting the greatest
potential risk (e.g. pacemaker). Manufacturers of Class I devices do not need a medical device license to sell their product in Canada, but manufacturers
of Class II, III and IV devices must receive a license. Once a medical device license has been granted, the TPD will continue to monitor medical devices
to ensure they continue to be safe and effective. Medical device licenses granted by the TPD do not expire; however, the manufacturer is required to
annually confirm that the information maintained by Health Canada with respect to the medical device is correct and accurate. The failure to do so may
result in the cancellation of the license.
Viveve, Inc. currently holds a medical device license in Canada for the Viveve System which has been categorized as a Class III device.
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European Union (EU)
We are subject to the requirements of the Medical Device Directive (“MDD”), Council Directive 93/42/EEC of 14 June 14, 1993 which were
made mandatory on March 21, 2010. The MDD harmonizes the laws relating to medical devices laws within the European Union. In order for a
manufacturer to legally place a medical device on the European market the requirements of the MDD have to be met. Manufacturers’ products meeting
harmonized standards have a presumption of conformity to the MDD. Products conforming to the MDD must have a CE Mark applied.
Medical devices are classified by the MDD into four categories as Class I, Class IIa, Class IIb, and III. Class I devices present the lowest
potential risk (e.g. a thermometer) and Class III devices present the greatest potential risk (e.g. implant, pacemaker). The MDD stipulates that an
authorized third party or notified body must be involved in the review and conformity of the product in order to gain CE Mark. Viveve, Inc. has a notified
body that reviews the Viveve System for conformity on an annual basis.
Viveve, Inc. currently holds a CE Mark in the European Union for the Viveve System which has been categorized as a Class IIb device.
Turkey
In January 2016, Viveve was notified that the Viveve System was registered in Turkey with the Turkish National Information Database for
Medicines and Medical Devices. The effective date of the registration was December 24, 2015. The Viveve System is registered as a Class IIb device in
Turkey which follows the classification for the EU countries.
Hong Kong
The Department of Health (“DOH”), is the main health authority in Hong Kong. Under the DOH, the Medical Device Control Office
(“MDCO”), regulates medical devices. Similar to the Canadian classifications system described above, medical devices sold in Hong Kong are classified
as I-IV according to the risk level associated with their intended use. Class I devices are low-risk medical devices, such as bandages and dressings. Class
II devices are medium-low-risk devices, such as suction pumps and gastroscopes. Class III devices are medium-high-risk devices, such as orthopedic
implants and medical lasers. Class IV devices are high-risk devices, such as prosthetic heart valves and implantable cardiac pacemakers. The main
contact point with the MDCO is the Local Representative Person (“LRP”), who must be a locally-registered entity. The LRP must be either the
manufacturer of the device or approved by the manufacturer to perform the duties of the LRP. The LRP submits the application for listing medical
devices and fulfills any requests from the MDCO, such as making documents referenced in the application available for inspection. After the device is
listed, the LRP is responsible for the marketing and post-market procedures, which include keeping distribution records, handling complaints, initiating
product recalls, managing adverse incidents, and reporting changes. The manufacturer must issue an LRP appointment letter and attach it to each product
registration application. Currently, market approval from one of the Global Harmonization Task Force (“GHTF”) founding members (U.S., Canada,
Australia, the European Union, and Japan) is required for medical device registration in Hong Kong.
The Viveve System is currently classified in Hong Kong as a Class II device.
Philippines
The Viveve System is not regulated in the Philippines by the Department of Health. In December 2015, Viveve was notified by the Philippines
Department of Health that the Viveve System was not required to register with the Philippines Department of Health and could be sold freely within the
Philippines.
Japan
We currently import the Viveve System into Japan in accordance with the physician import license pathway which allows a medical device to be
used and sold in Japan. The physician import license pathway permits a device to be sold in Japan provided that such device was specifically requested
from a physician in Japan; however, we are not permitted to market the product directly in the country.
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United States
FDA’s Premarket Clearance and Approval Requirements
Unless an exemption applies, any medical device we wish to commercially distribute in the U.S. will require either prior 510(k) clearance or
premarket approval from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose lower risks are placed in either
Class I or II, which requires the manufacturer to submit to the FDA a premarket notification requesting clearance to commercially distribute the device.
This process is generally known as 510(k) clearance. In certain instances, devices that would otherwise be subject to premarket approval can be brought
to market via de novo reclassification (which is described below). Some low risk devices are exempted from this requirement. Devices deemed by the
FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a
previously cleared 510(k) device, are placed in Class III, requiring premarket approval. Low to moderate risk devices that are dissimilar from existing
Class I or II devices can be brought to market via de novo reclassification.
In December 2008, we received 510(k) clearance on our device. Since then, we have made design modifications to the original 510(k) cleared
device. In March 2015, we submitted a Special 510(k) to the FDA for the Viveve System to take into account the design modifications, which include
improved user interface capabilities and enhanced manufacturability.
510(k) Clearance Pathway
When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is
substantially equivalent to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976
for which the FDA has not yet called for the submission of premarket approval applications (“PMA”). By regulation, the FDA is required to clear or
deny a 510(k) premarket notification within 90 days of submission of the application. As a practical matter, clearance often takes significantly longer.
The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. If the FDA determines that
the device, or its intended use, is not substantially equivalent to a previously cleared device or use, the FDA will issue a not-substantially equivalent letter
and place the device, or the particular use, into Class II.
Any modification to a 510(k)-cleared device that would constitute a major change in its intended use, or any change that could significantly
affect the safety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA, if the change raises
complex or novel scientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the
need for a new 510(k) submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with a
manufacturer’s determination that changes did not require a new 510(k), it could require the manufacturer to cease marketing and distribution and/or
recall the modified device until 510(k) clearance or PMA approval is obtained and the manufacturer could be subject to significant regulatory fines or
penalties.
De Novo Process
If there is no known predicate for a device (i.e., a legally marketed Class I or II device with comparable indications for use and technological
characteristics), a company can request a de novo classification of the product. De novo generally applies where there is no predicate device and the FDA
believes the device is sufficiently safe so that no PMA should be required. The FDA’s de novo process has been streamlined to allow a company to
request that a new product classification be established based on information provided by the requesting company. This process, known as the direct de
novo process, must be discussed and agreed upon by the FDA prior to submission. The direct de novo process allows a company to submit a
reclassification petition which includes information that would be included in a 510(k) notice for the subject device in addition to providing the FDA with
a risk-benefit analysis demonstrating that the device presents a moderate risk thereby not requiring a PMA. The submitter also must provide a draft
Annual Control document for the product. The Annual Control document specifies the scope of the device type and the recommendations for submission
of subsequent devices for the same intended use. If a product is classified as Class II through the direct de novo review process, then that device may
serve as a predicate device for subsequent 510(k) pre-market notifications. We intend to market the Viveve System by utilizing the direct de novo
process. However, we cannot predict when or if approval of such a petition will be obtained, or whether the FDA will create a new product code. In
addition, failure to approve a de novo petition, or establishment of a new product code, could require us to seek a PMA for the Viveve System. Delays in
receipt or failure to receive clearances or approvals could reduce our sales, profitability and future growth prospects.
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Premarket Approval (“PMA”) Pathway
A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process. A PMA must be supported by extensive data,
including but not limited to, technical, pre-clinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and
effectiveness of the device for its intended use. The Viveve System, including the radiofrequency generator, reusable handpiece and single-use treatment
tip have not required premarket approval. During the review period, the FDA will typically request additional information or clarification of the
information already provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and
provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition,
the FDA will generally conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the FDA’s quality system
regulations (“QSRs”).
New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example,
certain types of modifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission
of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered
by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. There is no guarantee that the FDA will grant
PMA approval of our future products, if one is required, and failure to obtain necessary approvals for our future products would adversely affect our
ability to grow our business. Delays in receipt or failure to receive approvals could reduce our sales, profitability and future growth prospects.
Clinical Trials
Clinical trials are almost always required to support an FDA premarket application or de novo reclassification, and are sometimes required for
510(k) clearance. With respect to the Viveve System, the FDA has asked us to conduct a clinical study under an Investigational Device Exemption
(“IDE”), to support a future product submission. In the U.S., these clinical trials generally require submission of an application for an IDE to the FDA.
The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in
humans and that the testing protocol is scientifically sound. The IDE must be approved in advance by the FDA for a specific number of patients unless
the product is deemed a non-significant risk device eligible for more abbreviated IDE requirements. Clinical trials for significant risk devices may not
begin until the IDE application is approved by the FDA and the appropriate institutional review boards (“IRBs”), at the clinical trial sites. Our clinical
trials must be conducted under the oversight of an IRB at the relevant clinical trial sites and in accordance with FDA regulations, including but not limited
to those relating to good clinical practices. We are also required to obtain the patients’ informed consent that complies with both FDA requirements and
state and federal privacy regulations. We, the FDA or the IRB at each site at which a clinical trial is being performed may suspend a clinical trial at any
time for various reasons, including a belief that the risks to study subjects outweigh the benefits. Even if a trial is completed, the results of clinical testing
may not demonstrate the safety and efficacy of the device, may be equivocal or may otherwise not be sufficient to obtain clearance or approval of the
product. Similarly, in Europe and other regions, clinical study protocols must be approved by the local ethics committee and in some cases, including
studies with high-risk devices, by the Ministry of Health in the applicable country.
In June 2012, we submitted a pre-IDE application and requested an in-person meeting with the FDA to solicit feedback in advance of filing an
IDE to conduct a clinical study of the Viveve System to support regulatory submission. In August 2012, we met with the FDA and received feedback on
our pre-clinical data, historical clinical data, and a clinical protocol for a prospective randomized controlled trial. We had a second meeting with the FDA
on December 17, 2015 and received additional feedback on our clinical protocol design and indication for use. We plan to re-submit our IDE application
in 2016. If approval of the IDE application is received, we intend to begin our U.S. clinical study.
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Continuing Regulation
After a device is placed on the market, numerous regulatory requirements continue to apply. These include:
● product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
● QSRs, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and
other quality assurance procedures during all aspects of the manufacturing process;
● labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses;
● Medical Device Reporting (“MDR”), regulations, which require that a manufacturer report to the FDA if its device may have caused or
contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the
malfunction were to recur;
● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and
effectiveness data for the device; and
● regulations pertaining to voluntary recalls and notices of corrections or removals.
The FDA has broad post-market and regulatory enforcement powers. We and our third-party manufacturers are subject to announced and
unannounced inspections by the FDA and the Food and Drug Branch of the California Department of Health Services (“CDHS”), to determine
compliance with the QSR and other regulations. In the past, our facility has been inspected, and observations were noted, including an April 2012 CDHS
inspection that cited deficiencies related to signature authority of inspection documentation, incomplete corrective action responses, and labeling
indicating that our product contained no latex without proper objective evidence. The FDA and CDHS have accepted our responses to these
observations, and we believe that we are in substantial compliance with the QSR.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following
actions:
● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;
● repair, replacement, refunds, recall or seizure of our products;
● operating restrictions, partial suspension or total shutdown of production;
● refusing our requests for 510(k) clearance or premarket approval of new products or new intended uses;
● refusing to grant export approval for our product;
● withdrawing 510(k) clearance or premarket approvals that are already granted; and
● criminal prosecution.
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If any of these events were to occur, it could have a material adverse effect on our business.
We are also subject to a wide range of federal, state and local laws and regulations, including those related to the environment, health and safety,
land use and quality assurance. We believe that compliance with these laws and regulations as currently in effect will not have a material adverse effect
on our capital expenditures, earnings and competitive and financial position.
Competition
The medical device industry is characterized by intense competition and rapid innovation. While we believe that our solution to treat vaginal
laxity is unique and offers a more effective solution from that which is on the market currently, the market for the treatment of vaginal laxity and related
decreases in women’s sexual function remains a tremendous, under-developed opportunity. Therefore, competition is expected to increase, particularly as
the market becomes more developed with further solutions. Aside from Kegel exercises and invasive surgical procedures, such as LVR, there are many
companies developing energy-based technologies for vaginal rejuvenation as well as others developing drug therapies and therapeutics for the treatment
of various types of female sexual dysfunction. Further, the overall size and attractiveness of the market may compel larger companies focused in the
OB/GYN, aesthetic or women’s health markets, and with much greater capital and other resources, to pursue development of or acquire technologies that
may address these areas. Potential competitors include, but are not limited to Cynosure, Syneron Medical, Fotona, Thermi Aesthetics (acquired by
Almirall, S.A.), Cutera, Apricus, and others.
Employees
As of March 15, 2016, we had 21 full-time employees and we retain the services of several qualified consultants. We believe that our future
success will depend in part on our continued ability to attract, hire and retain qualified personnel. None of our employees is represented by a labor union,
and we believe that our employee relations are good.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below,
together with all of the other information included or referred to in this Annual Report on Form 10-K, before purchasing shares of our common stock.
There are numerous and varied risks that may prevent us from achieving our goals. If any of these risks actually occurs, our business, financial
condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors
in our common stock could lose all or part of their investment.
Risks Related to Our Business
We are dependent upon the success of the Viveve System, which has a limited commercial history. If the Viveve System fails to gain or loses market
acceptance, our business will suffer.
In 2012, we began marketing the Viveve System in Canada, Hong Kong and Japan, and we expect that sales of the Viveve System, including the
single-use Viveve treatment tips, will account for substantially all of our revenue for the foreseeable future. The Viveve System may not significantly
penetrate current or new markets, including the U.S. and elsewhere. If demand for the Viveve System does not increase as we anticipate, or if demand
declines, our business, financial condition and results of operations will be harmed.
We compete against companies that have more established products, longer operating histories and greater resources, which may prevent us from
achieving significant market penetration or increased operating results.
The medical device and aesthetics markets are highly competitive and dynamic, and are marked by rapid and substantial technological
development and product innovations. Demand for the Viveve System could be diminished by equivalent or superior products and technologies
developed by competitors. Specifically, the Viveve System competes against other offerings in these markets, including laser and other light-based
medical devices, pharmaceutical and consumer products, surgical procedures and exercise therapies.
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Competing in these markets could result in price-cutting, reduced profit margins and loss of market share, any of which would harm our
business, financial condition and results of operations. Our ability to compete effectively depends upon our ability to distinguish our company and the
Viveve System from our competitors and their products, on such factors as:
● safety and effectiveness;
● product pricing;
● success of our marketing initiatives;
● compelling clinical data;
● intellectual property protection;
● quality of customer support; and
● development of successful distribution channels, both domestically and internationally
Some of our competitors have more established products and customer relationships than we have, which could inhibit our market penetration
efforts. For example, we may encounter situations where, due to pre-existing relationships, potential customers decide to purchase additional products
from our competitors. Potential customers may need to recoup the cost of expensive products that they have already purchased to perform LVR surgery
and thus may decide not to purchase, or to delay the purchase of, the Viveve System. If we are unable to achieve continued market penetration, we will
be unable to compete effectively and our business will be harmed.
In addition, potential competitors could have significantly greater financial, research and development, manufacturing, and sales and marketing
resources than we have and could utilize their greater resources to acquire or develop new technologies or products that could effectively compete with
our existing product. Given the relatively few competitors currently in the market, any such action could exacerbate existing competitive pressures, which
could harm our business.
Performing clinical studies on, and collecting data from, the Viveve Treatment is inherently subjective, and we have limited data regarding the
efficacy of the Viveve System. If future data is not positive or consistent with our prior experience, rates of physician adoption will likely be harmed.
We believe that in order to significantly grow our business, we will need to conduct future clinical studies of the effectiveness of the Viveve
System. Clinical studies of vaginal laxity and sexual function are subject to a number of limitations. First, these studies do not involve objective standards
for measuring the effectiveness of treatment. Subjective, patient reported outcomes are the most common method of evaluating effectiveness. As a result,
clinical studies may conclude that a treatment is effective even in the absence of objective measures. Second, as with other non-invasive, energy-based
devices, the effect of the Viveve Treatment varies from patient to patient and can be influenced by a number of factors, including the age, ethnicity and
level of vaginal laxity and sexual function of the patient, among other things.
Current published studies of the Viveve System conducted in the U.S. and Japan have investigated the tissue-tightening effect of Viveve’s
monopolar RF technology using single-arm studies where all patients enrolled in the trial received the same treatment without comparison to randomized,
blinded or controlled trials. Clinical studies designed in a randomized, blinded and controlled fashion represent the gold-standard in clinical trial design,
which most effectively assess the efficacy of a product or therapy versus a placebo group. Future clinical studies, which may be required to drive
physician adoption or support regulatory clearance or approval, may require randomized, blinded and controlled trial designs. In the fourth quarter of
2014, we initiated a new randomized, blinded and sham-controlled clinical trial in Europe and Canada designed to demonstrate the efficacy of the Viveve
Treatment versus a sham-controlled procedure for the treatment of vaginal laxity (the “OUS Clinical Trials”). (See discussion under the heading
“Clinical Studies”.) A sham-controlled treatment or procedure refers to a procedure performed as a control and that is similar to the treatment or
procedure under investigation without the key therapeutic element being investigated.
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Since we have not yet received the results of the Viveve Treatment under these trial design conditions, we cannot be certain that the outcomes
will be positive. Negative outcomes would have a material, adverse impact on our business. For example, on September 30, 2014, we entered into a Loan
and Security Agreement, as amended on February 19, 2015, May 14, 2015 and November 30, 2015, with Pacific Western Bank (as successor in interest
by merger to Square 1 Bank) (the “Lender”) pursuant to which we received a term loan in the amount of $5 million, which was funded in multiple
tranches. The first tranche of $2.5 million was provided to us on October 1, 2014. The second tranche of the term loan is equal to $1.5 million, of which
$500,000 was provided to us on February 19, 2015 and $1 million was subject to (i) evidence acceptable to the Lender of at least 50% enrollment in the
OUS Clinical Trial, and (ii) documentation or other evidence acceptable to the Lender of a prospective equity financing. On each of March 16, 2015 and
April 6, 2015, we received an additional $500,000 in connection with a drawdown of funds from the second tranche, for a total of $1,500,000 received
under the second tranche. The terms of the loan also require that the Company meet certain financial covenants and milestones in connection with the
OUS Clinical Trial, including, but not limited to, (a) full enrollment as of March 31, 2015, (b) positive 3-month interim data as of July 10, 2015, as
amended, (c) positive results from the trial as of January 31, 2016, as amended, and (d) unrestricted cash and cash equivalents at an affiliate of the Lender
in an account of at least the amount of all cash advances or any other extension of credit by the Lender under the Loan Agreement then outstanding. The
Company provided evidence to the Lender of positive three month interim results with respect to the OUS Clinical Trial, and on July 15, 2015 we
received the final $1,000,000 drawdown of funds from the third tranche. The proceeds from the second and third tranches will be used for general
working capital purposes and capital expenditures. While we were able to provide evidence of positive 3-month interim data as of July 10, 2015, due to
over-enrollment of the OUS Clinical Trial we were unable to provide positive results as of January 31, 2016 and we were not in compliance, as of
February 18, 2016, of a covenant requiring us to keep a minimum cash balance at the Lender’s institution (the “Covenant Failures”). On March 18, 2016,
we entered into the Fourth Amendment to the Loan and Security Agreement pursuant to which the Lender waived the Covenant Failures. The Fourth
Amendment also extended the date, to April 30, 2016, of the requirement that we provide evidence of positive results from the OUS Clinical Trial and
revised the minimum cash balance requirement. Following execution of the Fourth Amendment, we must maintain a balance of cash of at least
$3,000,000 at the Lender’s institution. As of December 31, 2015 and the date of this filing, the outstanding term loan principal balance was $4.8 million
and $4.5 million, respectively.
Additionally, we have not conducted any head-to-head clinical studies that compare results from treatment with the Viveve System to surgery or
treatment with other therapies. Without head-to-head studies against competing alternative treatments, which we have no current plans to conduct,
potential customers may not find clinical studies of our technology sufficiently compelling to purchase the Viveve System. If we decide to pursue
additional studies in the future, such studies could be expensive and time consuming, and the data collected may not produce favorable or compelling
results. If the results of such studies do not meet physicians’ expectations, the Viveve System may not become widely adopted, physicians may
recommend alternative treatments for their patients, and our business may be harmed.
We currently do not have the ability to market the Viveve System in the U.S. If we want to sell the Viveve System and single-use treatment tips in the
U.S., we will need to obtain FDA clearance or approval, which may not be granted.
Developing and promoting the Viveve System in additional areas, including the U.S., is a key element of our future growth strategy. We
currently do not have FDA clearance or approval in the U.S. to market the Viveve System in its current configuration. We are in the process of seeking
clearance or approval from the FDA to expand our marketing efforts. We cannot predict whether we will receive such clearances or approvals. The FDA
will require us to conduct clinical trials to support regulatory clearance or approval, which trials may be time-consuming and expensive, and may produce
results that do not result in clearance or approval of our FDA application. In the event that we do not obtain FDA clearance or approval, we will be unable
to promote the Viveve System in the U.S. and the ability to grow our revenues may be adversely affected.
Our business is not currently profitable, and we may not be able to achieve profitability even if we are able to generate significant revenue.
As of December 31, 2015, we have incurred losses since inception of approximately $48.5 million. In 2015, we incurred a loss of $12.4 million
and in 2014 a loss of $6.2 million. Even though our revenue may increase, we expect to incur significant additional losses while we grow and expand our
business. We cannot predict if and when we will achieve profitability. Our failure to achieve and sustain profitability could negatively impact the market
price of our common stock and may require us to seek additional financing for our business. There are no assurances that we will be able to obtain any
additional financing or that any such financing will be on terms that are favorable to us.
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It is difficult to forecast future performance, which may cause our financial results to fluctuate unpredictably.
Our limited operating history makes it difficult to predict future performance. Additionally, the demand for the Viveve System may vary from
quarter to quarter. A number of factors, over which we have limited or no control, may contribute to fluctuations in our financial results, such as:
● delays in receipt of anticipated purchase orders;
● performance of our independent distributors;
● positive or negative media coverage of the Viveve System, the Viveve Treatment or products of our competitors;
● our ability to obtain further regulatory clearances or approvals;
● delays in, or failure of, product and component deliveries by our subcontractors and suppliers;
● customer response to the introduction of new product offerings; and
● fluctuations in foreign currency.
Our limited operating history has limited our ability to determine an appropriate sales price for our products.
Our historical operating performance has limited our ability to determine the proper sales prices for the Viveve System and the single-use
treatment tips. Establishing appropriate pricing for our capital equipment and components has been challenging because there have not existed directly
comparable competitive products. We may experience similar pricing challenges in the future as we enter new markets or introduce new products, which
could have an unanticipated negative impact on our financial performance.
If there is not sufficient patient demand for our treatments, practitioner demand for the Viveve System could drop, resulting in unfavorable operating
results.
Most procedures performed using the Viveve System are elective procedures, the cost of which must be borne by the patient, and are not
reimbursable through government or private health insurance. The decision to undergo the Viveve Treatment is thus driven by consumer demand, which
may be influenced by a number of factors, such as:
● whether our marketing efforts directed toward increasing consumer awareness of the Viveve Treatment, for which we have limited
experience and resources, are successful;
● the extent to which physicians recommend the Viveve Treatment to their patients;
● the cost, safety and effectiveness of a Viveve Treatment versus alternative treatments;
● general consumer sentiment about the benefits and risks of such procedures; and
● consumer confidence, which may be impacted by economic and political conditions.
Our financial performance could be materially harmed in the event that any of the above factors discourage patients from seeking the Viveve
Treatment.
The failure of the Viveve System to meet patient expectations or the occurrence of unpleasant side effects from the Viveve Treatment could impair our
financial performance.
Our future success depends upon patients having a positive experience with the Viveve Treatment in order to increase physician demand for our
products, as a result of positive feedback and word-of-mouth referrals. Patients may be dissatisfied if their expectations of the procedure, side effects and
results, among other things, are not met. Despite the safety of the Viveve Treatment, patients may experience undesirable side-effects such as temporary
swelling or reddening of the treated tissue. Experiencing any of these side effects could discourage a patient from completing a Viveve Treatment or
discourage a patient from having future procedures or referring Viveve Treatments to others. In order to generate referral business, we believe that
patients must be satisfied with the effectiveness of the Viveve Treatment. Results obtained from a Viveve Treatment are subjective and may be subtle.
The Viveve Treatment may produce results that may not meet patients’ expectations. If patients are not satisfied with the procedure or feel that it is too
expensive for the results obtained, our reputation and future sales will suffer.
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Our success depends on growing physician adoption of the Viveve System and continued use of treatment tips.
Some of our target physician customers already own self-pay device products. Our ability to grow our business and convince physicians to
purchase the Viveve System depends on the success of our sales and marketing efforts. Our business model involves both a capital equipment purchase
of the Viveve System and continued purchases by our customers of single-use treatment tips and ancillary consumables. This may be a novel business
model for many potential customers who may be used to competing products that are exclusively capital equipment, such as many laser-based systems.
We must be able to demonstrate that the cost of the Viveve System and the revenue that the physician can derive from performing procedures using it are
compelling when compared to the cost and revenue associated with alternative products or therapies. When marketing to plastic surgeons, we must also,
in some cases, overcome a bias against non-invasive procedures. If we are unable to increase physician adoption of the Viveve System and use of the
treatment tips, our financial performance will be adversely affected.
To successfully market and sell the Viveve System internationally, we must address many issues with which we have limited experience.
Sales outside the U.S. accounted for 100% of our revenue during the years ended December 31, 2015, 2014 and 2013. We believe that a
significant portion of our business will continue to come from sales outside the U.S. through increased penetration in countries where we currently sell
the Viveve System, combined with expansion into new international markets. However, international sales are subject to a number of risks, including:
● difficulties in staffing and managing international operations;
difficulties in penetrating markets in which our competitors’ products may be more established;
● reduced or no protection for intellectual property rights in some countries;
● export restrictions, trade regulations and foreign tax laws;
● fluctuating foreign currency exchange rates;
● foreign certification and regulatory clearance or approval requirements;
● difficulties in developing effective marketing campaigns for unfamiliar, foreign countries;
● customs clearance and shipping delays;
● political and economic instability; and
● preference for locally produced products.
If one or more of these risks were realized, it could require us to dedicate significant resources to remedy the situation, and even if we are able to
find a solution, our revenues may still decline.
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To market and sell the Viveve System internationally we depend on distributors and they may not be successful.
We currently depend exclusively on third-party distributors to sell and service the Viveve System internationally and to train our international
customers, and if these distributors terminate their relationships with us or under-perform, we may be unable to maintain or increase our level of
international revenue. We will also need to engage additional international distributors to grow our business and expand the territories in which we sell
the Viveve System. Distributors may not commit the necessary resources to market, sell and service the Viveve System to the level of our expectations. If
current or future distributors do not perform adequately, or if we are unable to engage distributors in particular geographic areas, our revenue from
international operations will be adversely affected.
We currently have limited sales and marketing resources or experience and failure to build and manage a sales force or to market and distribute the
Viveve System effectively could have a material adverse effect on our business.
We expect to rely on a direct sales force to sell the Viveve System in the U.S. In order to meet our future anticipated sales objectives, we expect
to grow our domestic sales organization significantly over the next several years. There are significant risks involved in building and managing our sales
organization, including risks related to our ability to:
● hire qualified individuals as needed;
● provide adequate training for the effective sale of the Viveve System; and
● retain and motivate sales employees.
It is difficult to predict how well our sales force will perform. Our failure to adequately address these risks could have a material adverse effect
on our ability to sell the Viveve System, causing our revenue to be lower than expected and harming our results of operations.
Competition among providers of devices for the medical device and aesthetics markets is characterized by rapid innovation, and we must
continuously innovate the Viveve System and develop new products or our revenue may decline.
While we attempt to protect the Viveve System through patents and other intellectual property rights, there are few barriers to entry that would
prevent new entrants or existing competitors from developing products that compete directly with our products. For example, while we believe our
monopolar RF technology maintains a strong intellectual property position, there may be other companies employing competing technologies which
claim to have a similar clinical effect to our technology. Additionally, there are others who may market monopolar RF technology for competing
purposes in a direct challenge to our intellectual property position. As we continue to create market demand for a non-surgical, non-invasive way to treat
vaginal laxity and sexual dysfunction, competitors may enter the market with other products making similar or superior claims. We expect that any
competitive advantage we may enjoy from our current and future innovations may diminish over time, as companies successfully respond to our
innovations, or create their own. Consequently, we believe that we will have to continuously innovate and improve the Viveve System and technology or
develop new products to compete successfully. If we are unable to develop new products or innovate successfully, the Viveve System could become
obsolete and our revenue will decline as our customers purchase competing products.
We outsource the manufacturing and repair of key elements of the Viveve System to a single manufacturing partner.
We outsource the manufacture and repair of the Viveve System to a single contract manufacturer, Stellartech. If Stellartech’s operations are
interrupted or if Stellartech is unable to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to
fulfill new customer orders or to repair equipment at current customer sites. Stellartech has limited manufacturing capacity, is itself dependent upon third-
party suppliers and is dependent on trained technical labor to effectively repair components making up the Viveve System. In addition, Stellartech is a
medical device manufacturer and is required to demonstrate and maintain compliance with the FDA’s Quality System Regulation, or QSR. If Stellartech
fails to comply with the FDA’s QSR, its manufacturing and repair operations could be halted. In addition, both the availability of our product to support
the fulfillment of new customer orders as well as our ability to repair those products installed at current customer sites would be impaired. In addition, as
of the date of this report, the development and manufacturing agreement under which Viveve and Stellartech operate has expired without any subsequent
extension or renewal by the parties and the minimum conditions to the licenses granted therein have not been satisfied by us. Although the parties
continue to operate under the terms of this agreement, our manufacturing operations could be adversely impacted if we are unable to enforce Stellartech’s
performance under this agreement, or enter into a new agreement with Stellartech upon favorable terms.
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Our manufacturing operations and those of our key manufacturing subcontractors are dependent upon third-party suppliers, making us vulnerable
to supply shortages and price fluctuations, which could harm our business.
The single source supply of the Viveve System from Stellartech could not be replaced without significant effort and delay in production. Also,
several other components and materials that comprise the Viveve System are currently manufactured by a single supplier or a limited number of
suppliers. In many of these cases, we have not yet qualified alternate suppliers and we rely upon purchase orders, rather than long-term supply
agreements. A supply interruption or an increase in demand beyond our current suppliers’ capabilities could harm our ability to manufacture the Viveve
System until new sources of supply are identified and qualified. Our reliance on these suppliers subjects us to a number of risks that could harm our
business, including:
● interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;
● delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s variation in a component;
● a lack of long-term supply arrangements for key components with our suppliers;
● inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
● difficulty locating and qualifying alternative suppliers for our components in a timely manner;
● production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory
qualifications;
● delay in delivery due to suppliers prioritizing other customer orders over our orders;
● damage to our brand reputation caused by defective components produced by our suppliers;
● increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our
suppliers; and
● fluctuation in delivery by our suppliers due to changes in demand from us or from their other customers.
Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at
acceptable prices in a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business.
If, in the future, we decide to perform additional manufacturing functions internally that we currently outsource, our business could be harmed by
our limited manufacturing experience and related capabilities.
In the future, for financial or operational purposes, we may elect to perform component or system manufacturing functions internally. Our
limited experience with manufacturing processes could lead to difficulties in producing sufficient quantities of manufactured items that meet our quality
standards and that comply with applicable regulatory requirements in a timely and cost-effective manner. In addition, if we experience these types of
manufacturing difficulties, it may be expensive and time consuming to engage a new or previous subcontractor or supplier to fulfill our replacement
manufacturing needs. The occurrence of any of these events could harm our business.
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If the Viveve System malfunctions or if we discover a manufacturing defect that could lead to a malfunction, we may have to initiate a product recall
or replace components, which could adversely impact our business.
Problems in our manufacturing processes, or those of our manufacturers or subcontractors, which lead to an actual or possible malfunction in any
of the components of the Viveve System, may require us to recall product from customers or replace components and could disrupt our operations. For
example, in December 2012, we began replacing handpiece assemblies that were causing system malfunctions due to fiber optic damage that occurred
during the manufacturing process. We subsequently worked with our manufacturer to redesign and test the reliability of the newly designed handpiece.
The problem was resolved within several weeks and did not have a significant impact on our ability to supply products to our customers or, more
generally, on our results of operations. However, our results of operations, reputation and market acceptance of our products could be harmed if we
encounter difficulties in manufacturing that result in a more significant issue or significant patient injury, and delays our ability to fill customer orders.
We may not be able to develop an alternative cooling module that will be in compliance with changing environmental regulations in a timely or cost-
effective manner.
Our cooling module relies upon a hydrofluorocarbon, or HFC, called R134a, to protect the outer layer of the tissue from over-heating while the
device delivers RF energy to the submucosal tissue. New environmental regulations phasing out HFCs over the next decade have been adopted or are
under consideration in a number of countries. Since 2007, European Union directives aimed at the automotive industry require the phase-out of HFCs and
prohibit the introduction of new products incorporating HFCs and it is currently anticipated that such directives may impact the medical device industry.
As a result, if we are unable to develop an alternative cooling module for our device which is not dependent on HFCs in a timely or cost-effective manner,
the Viveve System may not be in compliance with environmental regulations, which could result in fines, civil penalties and the inability to sell our
products in certain major international markets.
In addition, the impending restrictions on HFCs have reduced their current availability, as suppliers have less of an incentive to expand
production capacity or maintain existing capacity. This change in supply could expose us to supply shortages or increased prices for R134a, which could
impair our ability to manufacture the Viveve System and adversely affect our results or operations. HFCs may also be classified by some countries as a
hazardous substance and, therefore, subject to significant shipping surcharges that may negatively impact profit margins.
If Solta Medical refuses to sell to us the cryogen cooling method and coupling fluid for commercial reasons, or otherwise, our business could be
materially adversely affected.
We entered into a Coupling Fluid License and Product Supply Agreement with Solta Medical (“Solta”) pursuant to which Solta agreed to grant
to us a license for the coupling fluid and supply the coupling fluid at preferred pricing for two years and at non-preferred pricing after two years. The
agreement was for an initial term of three years, after which it continues to remain in effect unless and until terminated in accordance with the terms
therein. We use the cryogen cooling method and coupling fluid with our compatible radio frequency medical device for the purpose of conducting our
clinical trials as well as for commercial purposes. Since we currently do not have any alternative sources of cryogen, if Solta refuses to sell to us for
commercial reasons, or otherwise, our business could be materially adversely affected.
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We forecast sales to determine requirements for components and materials used in the Viveve System, and if our forecasts are incorrect, we may
experience delays in shipments or increased inventory costs.
We keep limited materials, components and finished product on hand. To manage our manufacturing operations with our suppliers, we forecast
anticipated product orders and material requirements to predict our inventory needs up to six months in advance and enter into purchase orders on the
basis of these requirements. Our limited historical experience may not provide us with enough data to accurately predict future demand. If our business
expands, our demand for components and materials would increase and our suppliers may be unable to meet our demand. If we overestimate our
component and material requirements, we will have excess inventory, which would increase our expenses. If we underestimate our component and
material requirements, we may have inadequate inventory, which could interrupt, delay or prevent delivery of the Viveve System to our customers. Any
of these occurrences would negatively affect our financial performance and the level of satisfaction that our customers have with our business.
Even though we require training for users of the Viveve System and we do not sell the Viveve System to non-physicians, there exists a potential for
misuse, which could harm our reputation and our business.
Outside of the U.S., our independent distributors sell in many jurisdictions that do not require specific qualifications or training for purchasers or
operators of the Viveve System. We do not supervise the procedures performed with the Viveve System, nor can we be assured that direct physician
supervision of our equipment occurs according to our recommendations. We and our distributors require purchasers of the Viveve System to undergo an
initial training session as a condition of purchase, but do not require ongoing training. In addition, we prohibit the sale of the Viveve System to companies
that rent the Viveve System to third parties, but we cannot prevent an otherwise qualified physician from contracting with a rental company in violation
of his or her purchase agreement with us.
In the U.S., we intend to only sell the Viveve System to licensed physicians who have met certain training requirements. However, current
federal regulations will allow us to sell the Viveve System to “licensed practitioners,” if we receive FDA approval. The definition of “licensed
practitioners” varies from state to state. As a result, the Viveve System may be operated by licensed practitioners with varying levels of training, and in
many states by non-physicians, including physician assistants, registered nurses and nurse practitioners. Thus, in some states, the definition of “licensed
practitioner” may result in the legal use of the Viveve System by non-physicians.
The use of the Viveve System by non-physicians, as well as noncompliance with the operating guidelines set forth in our training programs, may
result in product misuse and adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.
Product liability suits could be brought against us due to defective design, labeling, material or workmanship, or misuse of the Viveve System, and
could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates.
If the Viveve System is defectively designed, manufactured or labeled, contains defective components or is misused, we may become subject to
substantial and costly litigation by our customers or their patients. Misusing the Viveve System or failing to adhere to operating guidelines could cause
serious adverse events. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. We may, in the future, be
involved in litigation related to the use of the Viveve System. Product liability claims could divert management’s attention from our business, be
expensive to defend and result in sizable damage awards against us. We may not have sufficient insurance coverage for all future claims. We may not be
able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. Any product liability claims
brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could
harm our reputation in the industry and reduce product sales. Product liability claims in excess of our insurance coverage would be paid out of cash
reserves, harming our financial condition and adversely affecting our operating results.
After-market modifications to treatment tips by third parties and the development of counterfeit products could reduce our sales, expose us to product
liability litigation and dilute our brand quality.
Third parties may introduce adulterated after-market modifications to our treatment tips, which enable re-use of treatment tips in multiple
procedures. Because the treatment tips are designed to withstand a finite number of pulses, modifications intended to increase the number of pulses could
result in patient injuries caused by the use of worn-out or damaged treatment tips. In addition, third parties may seek to develop counterfeit products that
are compatible with the Viveve System and available to practitioners at lower prices. If security features incorporated into the design of the Viveve
System are unable to prevent after-market modifications to the treatment tips or the introduction of counterfeit products, we could be subject to reduced
sales, product liability lawsuits resulting from the use of damaged or defective goods and damage to our reputation.
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We depend on skilled and experienced personnel to operate our business effectively. If we are unable to recruit, hire and retain these employees, our
ability to manage and expand our business will be harmed, which would impair our future revenue and profitability.
Our success largely depends on the skills, experience and efforts of our officers and other key employees. While we have employment contracts
with our Chief Executive Officer and our Chief Financial Officer, these officers and other key employees may terminate their employment at any time.
The loss of any senior management team members could weaken our management expertise and harm our business.
Our ability to retain our skilled labor force and our success in attracting and hiring new skilled employees will be a critical factor in determining
whether we will be successful in the future. We may not be able to meet our future hiring needs or retain existing personnel. We will face particularly
significant challenges and risks in hiring, training, managing and retaining engineering and sales and marketing employees, as well as independent
distributors, most of whom are geographically dispersed and must be trained in the use and benefits of the Viveve System. Failure to attract and retain
personnel, particularly technical and sales and marketing personnel, would materially harm our ability to compete effectively and grow our business.
Any acquisitions that we make could disrupt our business and harm our financial condition.
We expect to evaluate potential strategic acquisitions of complementary businesses, products or technologies. We may also consider joint
ventures and other collaborative projects. We may not be able to identify appropriate acquisition candidates or strategic partners, or successfully
negotiate, finance or integrate acquisitions of any businesses, products or technologies. Furthermore, the integration of any acquisition and management
of any collaborative project may divert management’s time and resources from our business and disrupt our operations. We do not have any experience
with acquiring companies or products. If we decide to expand our product offerings, we may spend time and money on projects that do not increase our
revenues.
Risks Related to Regulatory Matters
We may be unable to obtain or maintain international regulatory qualifications or approvals for our current or future products, which could harm
our business.
Sales of the Viveve System internationally are subject to foreign regulatory requirements that vary widely from country to country. In addition,
the FDA regulates exports of medical devices from the U.S. Complying with international regulatory requirements can be an expensive and time-
consuming process, and approval is not certain. The time required to obtain clearances or approvals, if required by other countries, may be longer than
that required for FDA clearance or approvals, and requirements for such clearances or approvals may significantly differ from FDA requirements. We
may rely on third-party distributors to obtain all regulatory clearances and approvals required in other countries, and these distributors may be unable to
obtain or maintain such clearances or approvals. Our distributors may also incur significant costs in attempting to obtain and in maintaining foreign
regulatory approvals or qualifications, which could increase the difficulty of attracting and retaining qualified distributors. If our distributors experience
delays in receiving necessary qualifications, clearances or approvals to market our products outside the U.S., or if they fail to receive those qualifications,
clearances or approvals, we may be unable to market our products or enhancements in international markets effectively, or at all.
Foreign governmental authorities that regulate the manufacture and sale of medical devices have become increasingly stringent and, to the
extent we market and sell our products outside of the U.S., we may be subject to rigorous international regulation in the future. In these circumstances,
we would be required to rely on our foreign independent distributors to comply with the varying regulations, and any failures on their part could result in
restrictions on the sale of our product in foreign countries.
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If we fail to maintain regulatory approvals and clearances, or if we are unable to obtain, or experience significant delays in obtaining, FDA
clearances or approvals for the Viveve System or any future products we may develop or acquire, including product enhancements, our business and
results of operations could be adversely affected.
The Viveve System is, and any future products we may acquire or develop will be, subject to rigorous regulation by the FDA and numerous
other federal, state and foreign governmental authorities. The process of obtaining regulatory clearances or approvals to market a medical device can be
costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits
commercial distribution of a new medical device only after the device has received clearance under Section 510(k) of the Federal Food, Drug and
Cosmetic Act, approval of a de novo reclassification petition, or is the subject of an approved premarket approval application, or PMA, unless the device
is specifically exempt from those requirements. The FDA will clear marketing of a lower risk medical device through the 510(k) process if the
manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products. High risk devices deemed to pose the
greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared
device, require the approval of a PMA. The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. A PMA application
must be supported by extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data, to demonstrate to
the FDA’s satisfaction the safety and efficacy of the device for its intended use.
If there is no known predicate for a device, a company can request a de novo reclassification of the product. De novo generally applies where
there is no predicate device and the FDA believes the device is sufficiently safe so that no PMA should be required. FDA’s de novo process has just been
streamlined to allow a company to request that a new product classification be developed based on information provided by the requesting company. Our
plan is to utilize the direct de novo process for the Viveve System. However, we cannot predict when or if such approval will be obtained, or whether
FDA will create a new product code. Failure to approve the de novo petition or establishment of a new product code could require us to seek a PMA for
the Viveve System. Delays in receipt or failure to receive clearances or approvals could adversely affect our business, results of operations and future
growth prospects.
If we modify an FDA-cleared device, we may need to seek and obtain new clearances, which, if not granted, would prevent the sale of our modified
product or require us to redesign the product.
Any modifications to an FDA-cleared device that could significantly affect its safety or effectiveness or that would constitute a major change in
its intended use would require a new 510(k) clearance or possibly a premarket approval. Viveve may not be able to obtain additional 510(k) clearances or
premarket approvals for new products or for modifications to, or additional indications for, our existing product in a timely fashion, or at all. Delays in
obtaining future clearances would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn could harm our
revenue and potential future profitability. We have made modifications to our device in the past and may make additional modifications in the future that
we believe do not or will not require additional clearances or approvals. If the FDA disagrees, and requires new clearances or approvals for the
modifications, we may be required to recall and to stop marketing the modified device, which could harm our operating results and require us to redesign
the product.
Clinical trials necessary to support a 510(k) or a PMA application will be expensive and will require the enrollment of large numbers of patients.
Suitable patients may be difficult to identify and recruit. Delays or failures in our clinical trials may prevent us from commercializing our current
product or any modified or new products and will adversely affect our business, operating results and prospects.
The FDA has asked us to conduct an investigational device exemption, or IDE, study to support a future product submission for the Viveve
System. Initiating and completing clinical trials necessary to support a 510(k) or a PMA application for the Viveve System, as well as other possible
future product candidates, will be time consuming and expensive and the outcome is uncertain. Moreover, the results of early clinical trials are not
necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials.
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Conducting successful clinical studies will require the enrollment of patients, and suitable patients may be difficult to identify and recruit. Patient
enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population,
the nature of the trial protocol, the desirability of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the
availability of appropriate clinical trial investigators and support staff, the proximity of patients to clinical sites, the ability of patients to comply with the
eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in
our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of
our product or if they determine that the treatments received under the trial protocols are not desirable or involve unacceptable risk or discomfort.
Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop
such protocols to support clearance and approval. Further, the FDA may require us to submit data on a greater number of patients than we originally
anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in
patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted
commercialization of our product or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in clinical trials,
the FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our
business, operating results and prospects.
If the third parties on which we rely to conduct our clinical trials and to assist us with pre-clinical development do not perform as contractually
required or expected, we may not be able to obtain the regulatory clearance or approval which would permit us to commercialize our products.
We do not have the ability to independently conduct the pre-clinical and clinical trials for our product, therefore we must rely on third parties,
such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct the trials. If these third parties do
not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the
quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other
reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain
regulatory approval for, or be able to successfully commercialize, our product on a timely basis, if at all. In that event, our business, operating results and
prospects may be adversely affected.
The results of our clinical trials may not support our proposed product claims or may result in the discovery of adverse side effects. Furthermore, if
the results of our OUS Clinical Trials are not positive, we may not receive further funding from our lender. Any of these events could have a material
adverse impact on our business.
Even if our clinical trials are completed as planned, it cannot be certain that the results of the clinical trials will support our proposed claims for
the Viveve System, that the FDA or foreign authorities will agree with our conclusions regarding them or that even if our product receives regulatory
approval or clearance, that it will not later result in adverse side effects that limit or prevent its use. Success in pre-clinical studies and early clinical trials
does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical
studies. The clinical trial process may fail to demonstrate that our product is safe and effective for the proposed indicated uses. Any delay of our clinical
trials or failure by the FDA or other foreign authorities to accept our product claims will delay, or even prevent, our ability to commercialize our product
and generate revenues.
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Even if our product is approved by regulatory authorities, if we or our suppliers fail to comply with ongoing FDA or other foreign regulatory
authority requirements, or if we experience unanticipated problems with our product, the product could be subject to restrictions or withdrawal from
the market.
Any product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical data
and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspections by the FDA and other
domestic and foreign regulatory bodies, such as the Food and Drug Branch of the California Department of Health Services, or CDHS. In particular, we
and our suppliers are required to comply with the FDA’s QSR, and International Standards Organization, or ISO, regulations for the manufacture of our
product and other regulations which cover the methods and documentation of the design, testing, production, control, quality assurance, labeling,
packaging, storage and shipping of any product for which we obtain clearance or approval. Regulatory bodies, such as the FDA, enforce the QSR and
other regulations through periodic inspections. In the past, our facility has been inspected by the FDA and CDHS, and observations were noted. The FDA
and CDHS have accepted our responses to these observations, and we believe that we are in substantial compliance with the QSR. Any future failure by
us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely
and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following
enforcement actions:
● untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
● unanticipated expenditures to address or defend such actions
● customer notifications for repair, replacement or refunds;
● recall, detention or seizure of our products;
● operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
● operating restrictions;
● withdrawing 510(k) clearances on PMA approvals that have already been granted;
● refusal to grant export approval for our product; or
● criminal prosecution.
If any of these actions were to occur it would harm our reputation and cause our product sales to suffer and may prevent us from generating
revenue. Furthermore, our third party manufacturers may not currently be, or may not continue to be, in compliance with all applicable regulatory
requirements which could result in a failure to produce our product on a timely basis and in the required quantities, if at all.
Even if regulatory clearance or approval of a product is granted for the Viveve System or future products, such clearance or approval may be
subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and
generate revenue from the product. If the FDA determines that our promotional materials, labeling, training or other marketing or educational activities
constitute promotion of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory
enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other
promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities,
such as laws prohibiting false claims for reimbursement.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and
we must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later
discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or
frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on
such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or
refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the
imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.
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The Viveve System may also be subject to state regulations which are, in many instances, in flux. Changes in state regulations may impede sales.
For example, federal regulations may allow the Viveve System to be sold to, or on the order of, “licensed practitioners,” as determined on a state-by-state
basis. As a result, in some states, non-physicians may legally purchase and operate the Viveve System. However, a state could change its regulations at
any time, disallowing sales to particular types of end users. We cannot predict the impact or effect of future legislation or regulations at the federal or
state levels.
If we or our third-party manufacturers fail to comply with the FDA’s QSR, our business would suffer.
We and our third-party manufacturers are required to demonstrate and maintain compliance with the FDA’s QSR. The QSR is a complex
regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging,
storage and shipping of our product. The FDA enforces the QSR through periodic unannounced inspections. We anticipate that in the future we will be
subject to such inspections. Our failure, or the failure of our third-party manufacturers, to take satisfactory corrective action in response to an adverse
QSR inspection could result in enforcement actions, including a public warning letter, a shutdown of our manufacturing operations, a recall of our
product, civil or criminal penalties or other sanctions, which would cause our reputation, sales and business to suffer.
If our product causes or contributes to a death or a serious injury, or malfunctions in certain ways, we will be subject to medical device reporting
regulations, which can result in voluntary corrective actions or agency enforcement actions.
Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device
has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious
injury if the malfunction of the device were to recur. If we fail to report these events to the FDA within the required timeframes, or at all, the FDA could
take enforcement action against us. Any such adverse event involving the Viveve System or future products could result in future voluntary corrective
actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or
involuntary, as well as mounting a defense to a legal action, if one were to be brought, would require the dedication of our time and capital, distract
management from operating our business, and may harm our reputation and financial results.
The Viveve System may, in the future, be subject to product recalls that could harm our reputation, business and financial results.
The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of
material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that
there is a reasonable probability that the device would cause serious injury or death. In addition, foreign governmental bodies have the authority to
require the recall of our product in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative,
recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as
a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. A recall of our product would divert
managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain
classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of
recalls, even if they are not reportable to the FDA. In the future, we may initiate one or more voluntary recalls involving our product that we determine
do not require notification to the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future
recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for
failing to report the recalls when they were conducted.
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Federal and state regulatory reforms may adversely affect our ability to sell our product profitably.
From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the
clearance or approval, manufacture and marketing of a medical device. In addition, FDA regulations and guidance are often revised or reinterpreted by
the agency in ways that may significantly affect our business and our product. It is impossible to predict whether legislative changes will be enacted or
FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.
For example, in August 2010, the FDA issued its preliminary recommendations on reform of the 510(k) premarket notification process for
medical devices. On January 19, 2011, the FDA announced its “Plan of Action” for implementing these recommendations. The Plan of Action included
25 action items, including revising existing guidance or developing guidance to clarify various aspects of the 510(k) process and to streamline the review
process for innovative, lower risk products (the “de novo” process); improving training for the Center for Devices and Radiological Health staff;
increasing reliance on external experts; and addressing and improving internal processes. The FDA may implement other reforms in the future. Future
reforms could have the effect of making it more difficult and expensive for us to obtain 510(k) clearance.
In addition, a state could change its regulations at any time, disallowing sales to particular types of end users. We cannot predict the impact or
effect of future legislation or regulations at the federal or state levels.
Failure to comply with the U.S. Foreign Corrupt Practices Act and similar laws associated with our activities outside the U.S. could subject us to
penalties and other adverse consequences.
A significant portion of our revenues is and will be from jurisdictions outside of the U.S. We are subject to the U.S. Foreign Corrupt Practices
Act, or the FCPA, which generally prohibits U.S. companies and their intermediaries from making payments to foreign officials for the purpose of
directing, obtaining or keeping business, and requires companies to maintain reasonable books and records and a system of internal accounting controls.
The FCPA applies to companies and individuals alike, including company directors, officers, employees and agents. Under the FCPA, U.S. companies
may be held liable for the corrupt actions taken by employees, strategic or local partners or other representatives. In addition, the government may seek
to rely on a theory of successor liability and hold us responsible for FCPA violations committed by companies or associated with assets which we acquire.
In many foreign countries where we operate, particularly in countries with developing economies, it may be a local custom for businesses to
engage in practices that are prohibited by the FCPA or other similar laws and regulations. In contrast, we have implemented a company policy requiring
our employees and consultants to comply with the FCPA and similar laws. Although we have not conducted formal FCPA compliance training, we are in
the process of devising a training schedule for certain of our employees, agents and partners. Nevertheless, there can be no assurance that our employees,
partners and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of the FCPA
or our policies for which we may be ultimately held responsible. As a result of our anticipated growth, our development of infrastructure designed to
identify FCPA matters and monitor compliance is at an early stage. If we or our intermediaries fail to comply with the requirements of the FCPA or
similar legislation, governmental authorities in the U.S. and elsewhere could seek to impose civil and/or criminal fines and penalties which could have a
material adverse effect on our reputation, business, operating results and financial conditions. We may also face collateral consequences, such as
debarment and the loss of our export privileges.
35
Risks Related to Our Intellectual Property
Intellectual property rights may not provide adequate protection for the Viveve System, which may permit third parties to compete against us more
effectively.
We rely on patent, copyright, trade secret and trademark laws and confidentiality agreements to protect our technology and the Viveve System.
We have an exclusive license to or own 10 issued U.S. patents primarily covering the Viveve System and methods of use, 2 of which have expired. The
remaining 8 will expire between 2016 and 2029. Additionally, we have 4 pending U.S. patent applications; 16 issued foreign patents; and 20 pending
foreign patent applications, some of which foreign applications preserve an opportunity to pursue patent rights in multiple countries. Some of the Viveve
System components are not, and in the future may not be, protected by patents. Additionally, our patent applications may not issue as patents or, if issued,
may not issue in a form that will be advantageous to us. Any patents we obtain may be challenged, invalidated or legally circumvented by third parties.
Consequently, competitors could market products and use manufacturing processes that are substantially similar to, or superior to, ours. We may not be
able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by consultants, vendors, former employees or current
employees, despite the existence generally of confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures
of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective.
Moreover, we do not have patent rights in all foreign countries in which a market may exist, and where we have applied for foreign patent rights, the laws
of many foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S.
In addition, competitors could purchase the Viveve System and attempt to replicate some or all of the competitive advantages we derive from
our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive
technologies that fall outside of our intellectual property rights. If our intellectual property is not adequately protected so as to defend our market against
competitors’ products and methods, our competitive position and business could be adversely affected.
We may be involved in future costly intellectual property litigation, which could impact our future business and financial performance.
Our industry has been characterized by frequent intellectual property litigation. Our competitors or other patent holders may assert that the
Viveve System and the methods we employ are covered by their patents. If the Viveve System or methods are found to infringe, we could be prevented
from marketing the Viveve System. In addition, we do not know whether our competitors or potential competitors have applied for, or will apply for or
obtain, patents that will prevent, limit or interfere with our ability to make, use, sell, import or export the Viveve System. We may also initiate litigation
against third parties to protect our intellectual property that may be expensive, protracted or unsuccessful. In the future there may be companies that
market products for competing purposes in direct challenge to our intellectual property position, and we may be required to initiate litigation in order to
stop them. If we initiate litigation to protect our rights, we run the risk of having our patents invalidated, which would undermine our competitive
position.
Litigation related to infringement and other intellectual property claims, with or without merit, is unpredictable, can be expensive and time-
consuming and could divert management’s attention from our business. If we lose this kind of litigation, a court could require us to pay substantial
damages, and prohibit us from using technologies essential to the Viveve System, any of which would have a material adverse effect on our business,
results of operations and financial condition. In that event, we do not know whether necessary licenses would be available to us on satisfactory terms, or
whether we could redesign the Viveve System or processes to avoid infringement.
Competing products may also appear in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent
lawsuit, we could be prevented from marketing the Viveve System in one or more countries.
In addition, we may hereafter become involved in litigation to protect our trademark rights associated with our name or the names used with the
Viveve System. Names used with the Viveve System and procedures may be claimed to infringe names held by others or to be ineligible for proprietary
protection. If we have to change the name of the company or the Viveve System, we may experience a loss in goodwill associated with our brand name,
customer confusion and a loss of sales.
36
Risks Related to our Securities
Public company compliance may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and rules implemented by the Commission have required changes in corporate governance practices of public
companies. As a public company, these rules and regulations increase our compliance costs and make certain activities more time consuming and costly.
These rules and regulations may also make it more difficult and expensive for us to maintain our director and officer liability insurance and we may be
required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be
more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at
reasonable rates, or at all.
Concentration of ownership of our common stock may have the effect of delaying or preventing a change in control.
Our officers, directors and principal stockholders, i.e., stockholders who beneficially own greater than 10% of our outstanding common stock,
collectively beneficially own approximately 66.2% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to
control the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely
affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.
We are a holding company with no business operations of our own and we depend on cash flow from Viveve, Inc. to meet our obligations.
As a result of the Merger, we are a holding company with no business operations of our own or material assets other than the stock we own in
Viveve, Inc. All of our operations are conducted by Viveve, Inc. As a holding company, we will require dividends and other payments from our
subsidiary to meet cash requirements. The terms of any agreements governing indebtedness that we may enter into may restrict our subsidiary from
paying dividends and otherwise transferring cash or other assets to us. If there is an insolvency, liquidation or other reorganization of our subsidiary, our
stockholders likely will have no right to proceed against its assets. Creditors of our subsidiary will be entitled to payment in full from the sale or other
disposal of the assets of our subsidiary before we, as an equity holder, would be entitled to receive any distribution from that sale or disposal. If Viveve,
Inc. is unable to pay dividends or make other payments to us when needed, we will be unable to satisfy our obligations.
Because we are incorporated in Canada, you may not be able to enforce judgments against us and our Canadian directors.
Under Canadian law, you may not be able to enforce a judgment issued by courts in the U.S. against us or our Canadian directors. The status of
the law in Canada is unclear as to whether a U.S. citizen can enforce a judgment from a U.S. court in Canada for violations of U.S. securities laws. A
separate suit may need to be brought directly in Canada.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of
which are beyond our control, including the following:
actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
● changes in the market’s expectations about our operating results;
● success of competitors;
37
● our operating results failing to meet the expectations of securities analysts or investors in a particular period;
● changes in financial estimates and recommendations by securities analysts concerning our business, the market for our products, the
health services industry, or the healthcare and health insurance industries in general;
● operating and stock price performance of other companies that investors deem comparable to us;
● our ability to market new and enhanced products on a timely basis;
● changes in laws and regulations affecting our business;
● commencement of, or involvement in, litigation involving us;
● changes in our capital structure, such as future issuances of securities or the incurrence of debt;
● the volume of shares of our common stock available for public sale;
● any major change in our board of directors or management;
● sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that
such sales could occur; and
● general economic and political conditions such as recessions, fluctuations in interest rates and international currency fluctuations.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common
stock.
Our shares of common stock are thinly traded, the price may not reflect our value, and there can be no assurance that there will be an active market
for our shares of common stock either now or in the future.
Our shares of common stock are thinly traded, our common stock is held by a small number of holders, and the price may not reflect our actual
or perceived value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market
liquidity will be dependent on the perception of our operating business, among other things. We will take certain steps including utilizing investor
awareness campaigns, investor relations firms, press releases, road shows and conferences to increase awareness of our business. Any steps that we might
take to bring us to the awareness of investors may require that we compensate consultants with cash and/or stock. There can be no assurance that there
will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to
liquidate their investment or liquidate it at a price that reflects the value of the business, and trading may be at a depressed price relative to the
performance of the Company due to, among other things, the availability of sellers of our shares. If an active market should develop, the price may be
highly volatile. Because there is currently a relatively low per-share price for our common stock, many brokerage firms or clearing firms are not willing
to effect transactions in the securities or accept our shares for deposit in an account. Many lending institutions will not permit the use of low priced shares
of common stock as collateral for any loans.
38
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period under
Rule 144, or shares issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang”
and, in anticipation of which, the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are
occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a
time and price that we deem reasonable or appropriate.
In general, under Rule 144, a non-affiliated person who has held restricted shares of our common stock for a period of six months may sell into
the market all of their shares, subject to the Company being current in our periodic reports filed with the Commission.
As of March 15, 2016, there were approximately 27,874,786 shares of common stock of the 59,929,535 shares issued and outstanding that could
be sold pursuant to Rule 144, 315,905 shares of restricted stock, 3,066,447 shares subject to outstanding warrants, 8,990,916 shares subject to outstanding
options and an additional 1,120,509 shares reserved for future issuance under our 2013 Employee Stock Option and Incentive Plan, as amended, all of
which will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements or Rule 144 under the Securities
Act.
We do not expect to declare or pay dividends in the foreseeable future.
We have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future. We intend to retain any earnings
to develop, carry on, and expand our business.
Penny stock rules may make buying or selling our common stock difficult, and severely limit its marketability and liquidity.
Because our securities are considered a penny stock, stockholders will be more limited in their ability to sell their shares. The Commission has
adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a
price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities
constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of
shares to sell our securities in any market that might develop for them. As long as the trading price of our common shares is less than $5.00 per share, the
common shares will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared by the Commission that contains a description of the nature and level of risk in the
market for penny stocks in both public offerings and secondary trading; contains a description of the broker’s or dealer’s duties to the customer and of the
rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws; contains a brief, clear,
narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
contains a toll-free telephone number for inquiries on disciplinary actions; defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and contains such other information and is in such form, including language, type, size and format, as the SEC shall require by
rule or regulation.
Prior to effecting any transaction in a penny stock, the broker-dealer also must provide the customer with: (a) bid and offer quotations for the
penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices
apply, or other comparable information relating to the depth and liquidity of the market for such shares; and (d) a monthly account statement showing the
market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our shares.
39
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
We currently lease office and laboratory facilities at 150 and 154 Commercial St., Sunnyvale, California 94086. The space consists of
approximately 7,777 square feet, leased from the Castine Group. The term of the lease agreement, dated January 25, 2012, as amended in January 2015,
commenced in March 2012 and will terminate on March 31, 2017. Rent expense for the year ended December 31, 2015 was $210,000. Future minimum
payments under the lease are approximately as follows:
Year Ending December 31,
2016 – $229,000
2017 – $ 58,000
We believe that these facilities are adequate for our current business operations.
Item 3. Legal Proceedings
On March 11, 2016, the Company filed a demand for Arbitration with the American Arbitration Association ("AAA") against a former
employee asserting common law and statutory negligence claims against the former employee arising from the former employee's negligent performance
of certain work duties. The demand seeks damages for lost profits, along with attorney's fees, interest, and costs. As of today's date, the former employee
has not served any responsive filing to the demand.
Item 4. Mine Safety Disclosures
Not applicable.
40
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
As of March 15, 2016, our common stock is trading on the OTCQB of the OTC Markets Group Inc. under the symbol “VIVMF”. Prior to
October 22, 2014, our common stock traded under the symbol “PLCSF” and “PLCSD”.
The following table sets forth the high and low bid prices for our common stock for the periods indicated as reported by the OTCQB. The bid
quotations reported by the OTCQB reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual
transactions. The bid quotations reflect a one-for-100 reverse stock split we effected on September 23, 2014.
Period
October 1, 2015 through December 31, 2015
July 1, 2015 through September 30, 2015
April 1, 2015 through June 30, 2015
January 1, 2015 through March 31, 2015
October 1, 2014 through December 31, 2014
July 1, 2014 through September 30, 2014
April 1, 2014 through June 30, 2014
January 1, 2014 through March 31, 2014
High
Low
0.97 $
1.05 $
1.15 $
0.65 $
1.40 $
2.70 $
4.00 $
4.90 $
0.67
0.80
0.30
0.32
0.35
0.50
0.60
3.52
$
$
$
$
$
$
$
$
The last reported closing price of our common stock on the OTCQB on March 15, 2016 was $0.80 per share.
Holders
As of March 15, 2016 there were 207 holders of record of our common stock.
Dividends
We have not declared or paid any cash dividends on our common stock, and we currently intend to retain future earnings, if any, to finance the
expansion of our business; we do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on our
common stock will be made by our board of directors, in their discretion, and will depend on our financial condition, results of operations, capital
requirements and other factors that our board of directors considers significant.
Securities Authorized For Issuance Under Equity Compensation Plans
The Company has issued equity awards in the form of stock options from three employee benefit plans. The plans include the PLC 2005 Stock
Incentive Plan (the “2005 Plan”), the Viveve Amended and Restated 2006 Stock Plan (the “2006 Plan”) and the PLC 2013 Stock Option and Incentive
Plan, as amended (the “2013 Plan”).
41
The following table sets forth information about the 2005 Plan, the 2006 Plan and the 2013 Plan as of December 31, 2015:
Plan Category
Equity compensation plans approved by security holders (2005 Plan)
Equity compensation plans approved by security holders (2013 Plan)
Equity compensation plans not approved by security holders (2006 Plan)
Total
Number of
securities
to be issued upon
exercise of
outstanding
options,
warrants and
rights
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
Number of
securities remaining
available for future
issuance under
equity
compensation
plans
22,095 $
7,833,127 $
322,069 $
8,177,291
12.83
1.54
0.74
0
1,944,644
0
1,944,644
The 2006 Plan was adopted by the board of directors of Viveve and was terminated in conjunction with the Merger. Outstanding stock option
awards have been assumed by Viveve Medical and will continue to be administered in accordance with the terms of the 2006 Plan until such awards are
exercised, expire, terminate or are forfeited. There are currently outstanding stock option awards issued from the 2006 Plan covering a total of 322,069
shares of our common stock and no shares available for future awards. The weighted average exercise price of the outstanding stock options is $1.54 per
share and the weighted average remaining contractual term is 6.64 years. Additionally, 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. Furthermore, at the Merger, outstanding options to purchase shares of Viveve, Inc. common stock issued from the 2006 Plan were converted
into options to purchase shares of Viveve Medical common stock (rounded down to the nearest whole share). The number of shares of Viveve Medical
common stock into which the 2006 Plan options were converted was determined by multiplying the number of shares covered by each 2006 Plan option
by the exchange ratio of 0.0080497. The exercise price of each 2006 Plan option was determined by dividing the exercise price of each 2006 Plan option
immediately prior to the Merger by the exchange ratio of 0.0080497 (rounded up to the nearest cent).
Issuances of Unregistered Securities
In December 2015, the Company issued common stock warrants to employees and nonemployee contractors for performance bonuses to purchase
a total of 215,000 shares of common stock at an exercise price of $0.70 per share. The warrants have a contractual life of ten years and are immediately
exercisable. The warrants were issued in reliance on Section 4(a)(2) of the Securities Act of 1933.
Item 6. Selected Financial Data
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this
Item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect",
"plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially.
42
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested in this Annual Report.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere in
this Annual Report. In addition to historical information, the following discussion contains forward looking statements based upon current expectations
that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but
not limited to, risks described in the section entitled “Risk Factors”.
Overview
In the discussion below, when we use the terms “we”, “us” and “our”, we are referring to Viveve Medical, Inc. and its wholly-owned subsidiary,
Viveve, Inc., which was acquired on September 23, 2014.
We design, develop, manufacture and market a medical device for the non-invasive treatment of vaginal laxity that we refer to as the Viveve
Treatment. While our product has not been approved for sale in the U.S., we currently have 17 exclusive partnerships covering distribution of the Viveve
System in 51 countries around the world, and we have regulatory clearance to market and sell our product in 22 of those countries:
GEOGRAPHIC
REGION
North America
Latin America
Europe
Asia Pacific
Middle East
TOTAL
DISTRIBUTION
COVERAGE
1
1
28
11
10
51
REGULATORY
CLEARANCE
1
-
18
3
-
22
Outside the U.S., we market and sell the Viveve System, including the single-use treatment tips, through trained sales employees, consultants,
and distributors. As of the date of this filing, we have sold 57 Viveve Systems and approximately 1,500 single-use treatment tips in countries outside of
the U.S.
Because the revenues we have earned to date have not been sufficient to support our operations, we have relied on sales of our securities, loans
from related parties and a bank term loan, as more fully described below, to fund our operations. We are located in Sunnyvale, California.
Reverse Acquisition and Recent Events
On September 23, 2014, we completed a reverse acquisition and recapitalization pursuant to the terms and conditions of an Agreement and Plan
of Merger (“Merger Agreement”) by and among PLC Systems Acquisition Corp., a wholly owned subsidiary of the Company with and into Viveve, Inc.,
a Delaware corporation (the “Merger”). In connection with the Merger, we changed our name from PLC Systems Inc. to Viveve Medical, Inc. Viveve,
Inc. operates as a wholly-owned subsidiary of Viveve Medical.
Pursuant to the Merger Agreement, all shares of capital stock (including common and preferred stock) of Viveve, Inc. were converted into
3,743,282 shares of Viveve Medical, Inc.’s common stock which represented approximately 62% of the issued and outstanding shares of common stock
of Viveve Medical on a fully diluted basis. In addition, non-accredited investors were entitled to receive, on a pro-rata basis, an aggregate of
approximately $16,000 upon closing.
43
As a condition to and upon the closing of the Merger, an aggregate amount of $4,875,000 and related accrued interest of approximately $522,000
were extinguished pursuant to the terms and conditions of a Convertible Note Termination Agreement, dated May 9, 2014, by and between Viveve, Inc.
and 5AM Co-Investors II, LP, a Convertible Note Termination Agreement, dated May 9, 2014 (collectively, the “5AM Note Termination Agreements”),
by and between Viveve, Inc. and 5AM Ventures II, LP (together with 5AM Co-Investors II, LP, the “5AM Parties”) and a Convertible Note Exchange
Agreement, dated May 9, 2014 (the “GBS Note Exchange Agreement”) by and between Viveve, Inc. and GBS Venture Partners Limited, trustee for GBS
BioVentures III (“GBS”). In accordance with the terms and conditions of the 5AM Note Termination Agreements, the 5AM Parties acknowledged and
agreed that the benefits received from the closing of the Merger, including the portion of the merger consideration issued to the 5AM Parties as
shareholders of Viveve, Inc. in accordance with the terms of the merger agreement, was full and fair consideration to cancel or extinguish all principal
and interest underlying the notes held by such holders. Pursuant to the terms of the Note Exchange Agreement, GBS agreed to cancel and extinguish all
principal and interest underlying the notes held by GBS in exchange for a warrant to acquire such number of shares of common stock of Viveve Medical
equal to 5% of the issued and outstanding common stock of Viveve Medical following the effective date of the Merger (the “GBS Warrant”). Upon the
closing of the Merger, we issued an aggregate of 943,596 shares of common stock to GBS upon the automatic conversion of the warrant.
Upon the closing of the Merger, all rights, title or interest in outstanding warrants to purchase securities of Viveve, Inc. were also terminated,
extinguishing approximately $572,000 in outstanding warrant liabilities, in accordance with the terms and conditions of a Warrant Termination
Agreement, dated May 9, 2014, by and between Viveve, Inc. and each of the 5AM Parties, a Warrant Termination Agreement, dated May 9, 2014, by and
between Viveve, Inc. and GBS, a Warrant Termination Agreement, dated May 9, 2014, by and between Viveve, Inc. and Oxford Finance LLC
(“Oxford”), and a Warrant Termination Agreement, dated May 9, 2014 (collectively, the “Warrant Termination Agreements”), by and between Viveve,
Inc. and SVB Financial Group (“SVB Financial”). The cancellation of the outstanding principal amount and related accrued interest underlying the
convertible bridge notes and the warrant liabilities were accounted for as part of the Merger transaction and no gain was recorded in the statement of
operations.
The acquisition was accounted for as a reverse merger and recapitalization effected by a share exchange. Viveve, Inc. was considered the
acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity were brought forward at their book value and no
goodwill was recognized. Therefore, the historical financial data of Viveve, Inc. is deemed to be our historical financial data.
Concurrent with the consummation of the Merger, we completed a private placement (the “September 2014 Offering”) of 11,406,932 shares of
our common stock (of which 11,305,567 shares of our common stock were issued at the closing as a result of beneficial ownership limitations), together
with five-year warrants for the purchase of up to 940,189 shares of common stock, at an exercise price of $0.53 per share, for gross proceeds of
approximately $6.0 million, which included the conversion of $1.5 million of convertible notes. The price per unit was $0.53 per share.
On September 30, 2014, we entered into a Loan and Security Agreement, as amended on February 19, 2015, May 14, 2015, and November 30,
2015 (collectively the “Loan Agreement”), with Pacific Western Bank (as successor in interest by merger to Square 1 Bank) (the “Lender”) pursuant to
which we received a term loan in the amount of $5.0 million, funded in 3 tranches. The first tranche of $2.5 million was provided to us on October 1,
2014 and proceeds of $500,000 from the second tranche were received on each of February 19, 2015, March 16, 2015 and April 6, 2015 for aggregate
proceeds of $1.5 million. The first tranche borrowing is repayable in interest only payments until November 1, 2015 and then 30 equal installments of
principal and interest at a rate of 5.25% per annum. The second tranche borrowings in February, March and April 2015 are repayable in interest only
payments until March 1, 2016 and then 30 equal installments of principal and interest at a rate of 5.00%, 5.06% and 5.00% per annum, respectively. The
terms of the loan also require that the Company meet certain financial covenants and milestones in connection with the OUS Clinical Trial, including, but
not limited to, (a) full enrollment as of March 31, 2015, (b) positive 3-month interim data as of July 10, 2015, and (c) positive results from the trial as of
January 31, 2016. Full enrollment of the OUS Clinical Trial was achieved prior to March 31, 2015. Additionally, Viveve Medical provided evidence to
the Lender of positive three month interim results with respect to the OUS Clinical Trial, and on July 15, 2015 we received the final $1.0 million of the
term loan with a drawdown of funds from the third tranche. The third tranche borrowing is repayable in interest only payments until August 1, 2016 and
then 30 equal installments of principal and interest at a rate of 6.56% per annum. While we were able to provide evidence of positive 3-month interim
data as of July 10, 2015, due to over-enrollment of the OUS Clinical Trial we were unable to provide positive results as of January 31, 2016 and we were
not in compliance, as of February 18, 2016, of a covenant requiring us to keep a minimum cash balance at the Lender’s institution (the “Covenant
Failures”). On March 18, 2016, we entered into the Fourth Amendment to the Loan and Security Agreement pursuant to which the Lender waived the
Covenant Failures. The Fourth Amendment also extended the date, to April 30, 2016, of the requirement that we provide evidence of positive results
from the OUS Clinical Trial and revised the minimum cash balance requirement. Following execution of the Fourth Amendment, we must maintain a
balance of cash of at least $3,000,000 at the Lender’s institution. As of December 31, 2015 and the date of this filing, the outstanding term loan principal
balance was $4.8 million and $4.5 million, respectively.
44
In connection with the terms of the Loan Agreement, we entered into the Intellectual Property Security Agreement, dated as of September 30,
2014, pursuant to which a first priority security interest was created in all of our intellectual property and we issued a 10-year warrant to the Lender for
the purchase of 471,698 shares of Viveve Medical common stock at an exercise price of $0.53 per share (the “Warrant”), such number of shares to
automatically increase in the event that we fail to meet certain covenants to achieve certain OUS Clinical Trial milestones or capital raising requirements
as set forth in the Loan Agreement, as amended, by a number equal to the quotient derived by dividing (i) 1% of the principal balance outstanding under
the Loan Agreement by (ii) the exercise price $0.53 per share (the “Amended Warrant”). In connection with the second amendment to the Loan
Agreement in May 2015, Viveve Medical issued a second 10-year warrant to the Lender to purchase a total of 25,000 shares of common stock at an
exercise price of $0.37 per share.
On May 14, 2015, we completed a private placement (the “May 2015 Offering”) pursuant to which we sold 32,432,432 shares of common stock
for gross proceeds of approximately $12.0 million, to 20 accredited investors pursuant to the terms of a Securities Purchase Agreement dated as of May
12, 2015. The net proceeds from the May 2015 Offering were approximately $11.0 million.
On November 24, 2015, we completed a private placement (the “November 2015 Offering”) pursuant to which we sold 8,573,385 shares of
common stock for gross proceeds of approximately $6,000,000, to 12 accredited investors pursuant to the terms of a Securities Purchase Agreement dated
as of November 20, 2015. The net proceeds from the November 2015 Offering were approximately $5.4 million.
We are subject to risks, expenses and uncertainties frequently encountered by companies in the medical device industry. These risks include, but
are not limited to, intense competition, whether we can be successful in obtaining FDA approval for the sale of our product and whether there will be a
demand for the Viveve Treatment, given that the cost of the procedure will likely not be reimbursed by the government or private health insurers. In
addition, we will continue to require substantial funds to support our clinical trials and fund our efforts to expand regulatory approval for our products in
locations in which we do not currently have approval to market our product, including the U.S. We cannot be certain that any additional required
financing will be available when needed or on terms which are favorable to us. As noted above, our operations to date have been primarily funded
through sales of our securities, loans from related parties and the bank term loan described above. Various factors, including our limited operating history
with minimal revenues to date and our limited ability to market and sell our product have resulted in limited working capital available to fund our
operations. The recent Merger and concurrent September 2014 Offering was consummated in an effort to raise additional capital and increase public
awareness of Viveve, as well as to create opportunities for access to additional capital by increasing liquidity. While we believe that our recent going
public transaction will be attractive to investors and even though we completed a private offering in May 2015 and November 2015, there are no
assurances that we will be successful in securing additional financing in the future to fund our operations going forward. Failure to generate sufficient
cash flows from operations, raise additional capital or reduce certain discretionary spending could have a material adverse effect on our ability to achieve
our intended business objectives. These factors raise substantial doubt about our ability to continue as a going concern.
Plan of Operation
We intend to increase our sales and exposure both internationally and in the United States market by seeking regulatory approvals for the sale
and distribution of our product, identifying and training qualified distributors and expanding the scope of physicians who offer the Viveve Treatment to
include plastic surgeons, dermatologists, general surgeons, urologists, urogynecologists and primary care physicians. In addition, we intend to use the
strategic relationships that we have developed with outside contractors and medical experts to improve the Viveve System by focusing our research and
development efforts on various areas including, but not limited to:
● designing new treatment tips optimized for both ease-of-use and to reduce procedure times for patients and physicians;
45
● increasing security to prevent the re-use of treatment tips, resulting in improved procedure efficacy and reduced safety concerns; and
● developing a new cooling system that integrates a substitute for hydrofluorocarbon, to maintain compliance with changes in international
environmental regulations.
The net proceeds received from the sales of our securities and the term loan have been used to support commercialization of our product in
existing and new markets, for our research and development efforts and for protection of our intellectual property, as well as for working capital and
other general corporate purposes. We expect that our cash will be sufficient to fund our activities for the next nine months, however, we will continue to
require funds to fully implement our plan of operation. Our operating costs include employee salaries and benefits, compensation paid to consultants,
professional fees and expenses, costs associated with our clinical trials, capital costs for research and other equipment, costs associated with research and
development activities including travel and administration, legal expenses, sales and marketing costs, general and administrative expenses, and other costs
associated with an early stage public company subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). We also expect to incur expenses related to obtaining regulatory approvals in the U.S. and internationally as well as legal and related expenses to
protect our intellectual property. We expect capital expenditures, for the foreseeable future, to be less than $250,000 annually.
We intend to continue to meet our operating cash flow requirements through the sales of our products and by raising additional funds from the
sale of equity or debt securities. If we sell our equity securities, or securities convertible into equity, to raise capital, our current stockholders will likely
be substantially diluted. We may also consider the sale of certain assets, or entering into a transaction, such as a merger, with a business complimentary
to ours, although we do not currently have plans for any such transaction. While we have been successful in raising capital to fund our operations since
inception, other than as discussed in this report, we do not have any committed sources of financing and there are no assurances that we will be able to
secure additional funding. If we cannot obtain financing, then we may be forced to curtail our operations or consider other strategic alternatives.
Results of Operations
Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
Revenue
Year Ended
December 31,
2015
2014
Change
$
%
(in thousands, except percentages)
Revenue
$
1,447 $
90
1,357
1,508%
We recorded revenue of $1,447,000 for the year ended December 31, 2015, compared to revenue of $90,000 for the year ended December 31,
2014, an increase of $1,357,000. The increase in revenue was primarily due to sales of Viveve Systems and disposable treatment tips and other ancillary
consumables to our new distributors. Sales in 2014 were limited primarily because of insufficient commercial inventory available for sale. In 2014,
inventory production was slowed due to funding constraints and the majority of inventory during the second half of 2014 was used to support our OUS
Clinical Trial.
46
Gross Profit
Year Ended
December 31,
2015
2014
Change
$
%
(in thousands, except percentages)
Gross profit
$
462 $
40 $
422
1,055%
Gross profit was $462,000, or 32% of revenue, for the year ended December 31, 2015, compared to gross profit of $40,000, or 44% of revenue,
for the year ended December 31, 2014. The increase in gross profit was primarily due to sales of 34 Viveve Systems to our new distributors in 2015.
Gross margin decreased primarily due to demo pricing offered to certain new distributors and higher manufacturing costs. Sales in 2014 did not include
any Viveve Systems and were limited to smaller quantities of disposable treatment tips and other ancillary consumables primarily because of insufficient
commercial inventory available for sale. In 2014, inventory production was slowed due to funding constraints and the majority of inventory during the
second half of 2014 was used to support our OUS Clinical Trial.
Research and development expenses
Year Ended
December 31,
Change
2015
2014
$
%
(in thousands, except percentages)
Research and development
$
4,988 $
1,426 $
3,562
250%
Research and development expenses totaled $4,988,000 for the year ended December 31, 2015, compared to research and development expenses
of $1,426,000 for year ended December 31, 2014, an increase of $3,562,000, or approximately 250%. Spending on research and development increased
in 2015 primarily due to costs associated with our OUS Clinical Trial. The Viveve OUS Clinical Trial commenced in the fourth quarter of 2014 and is a
post-market study designed to evaluate the safety and effectiveness of the Viveve Treatment. The study duration is approximately 12-15
months. Research and development expenses also included increased engineering and development work with our contract manufacturer related to
product improvement efforts and additional stock-based compensation expense primarily due to stock options granted to new employees and performance
bonuses for employees in 2015.
Selling, general and administrative expenses
Year Ended
December 31,
Change
2015
2014
$
%
(in thousands, except percentages)
Selling, general and administrative
$
7,464 $
4,276 $
3,188
75%
Selling, general and administrative expenses totaled $7,464,000 for the year ended December 31, 2015, compared to $4,276,000 for the year
ended December 31, 2014, an increase of $3,188,000, or approximately 75%. The increase in selling, general and administrative expenses in 2015 was
primarily attributable to increased sales and marketing efforts to build brand and market awareness, expenses associated with being a public company and
financing efforts. Selling, general and administrative expenses during 2015 also included higher personnel costs due to hiring new employees (primarily
in connection with our sales and marketing efforts) and additional stock-based compensation expense primarily due to stock options granted to new
employees and performance bonuses for employees in 2015. In contrast, selling, general and administrative expenses in 2014 were primarily attributable
to professional services-related expenses associated with the Merger transaction that was completed in September 2014 and to a lesser degree greater
spending to build brand and market awareness. Selling, general and administrative expenses in 2014 also included additional stock-based compensation
expense associated with the accelerated vesting of certain stock options in connection with the Merger. Selling, general and administrative expenses in
2014 were impacted by lower spending in the first half of the year as a result of reduced activity due to funding constraints.
47
Interest expense
Year Ended
December 31,
Change
2015
2014
$
%
(in thousands, except percentages)
Interest expense
$
415 $
567 $
(152)
(27)%
During the year ended December 31, 2015, we had interest expense of $415,000, compared to $567,000 for the year ended December 31, 2014.
The decrease of $152,000, or approximately 27%, resulted primarily from the discontinuance of the interest expense on our convertible bridge notes
which were extinguished in connection with the Merger, partially offset by interest expense from the new term loan.
Other income (expense), net
Year Ended
December 31,
2015
2014
Change
$
%
(in thousands, except percentages)
Other income (expense), net
$
(21) $
49 $
(70)
(143)%
During the year ended December 31, 2015 we had other expense, net, of $21,000 as compared to other income, net, of $49,000 for the year ended
December 31, 2014. The decrease of $70,000, or approximately 143%, was primarily attributable to mark-to-market adjustments in 2014 associated with
the change in the fair value of our preferred stock warrants, which were accounted for as liabilities. The warrants were extinguished in connection with
the Merger.
Liquidity and Capital Resources
Year Ended December 31, 2015
Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity
includes the ability to obtain appropriate financing or to raise capital. We have funded our operations since inception through the sale of our securities,
loans from related parties and the bank term loan. To date, we have not generated sufficient cash flows from operating activities to meet our obligations
and commitments, and we anticipate that we will continue to incur losses for the foreseeable future.
Because we have incurred losses and reported negative cash flow from operations since inception, our consolidated financial statements have
been prepared assuming that we will continue as a going concern. These conditions raise substantial doubt about our ability to continue as a going
concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
48
The following table summarizes the primary sources and uses of cash for the periods presented below (in thousands):
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase in cash and cash equivalents
Operating Activities
Year Ended
December 31,
2015
2014
$
$
(12,195) $
(109)
18,769
6,465 $
(5,991)
(117)
6,573
465
We have incurred, and expect to continue to incur, significant expenses in the areas of research and development, regulatory compliance and
clinical study costs associated with the Viveve System.
Operating activities used $12,195,000 for the year ended December 31, 2015 compared to $5,991,000 used for the year ended December 31,
2014. The primary use of our cash was to fund selling, general and administrative expenses and research and development expenses associated with the
Viveve System. Net cash used during the year ended December 31, 2015 consisted of a net loss of $12,426,000 adjusted for non-cash expenses including
depreciation and amortization of $77,000, stock-based compensation of $220,000, fair value of warrants issued to employees for performance bonuses of
$286,000, fair value of warrants issued to service providers of $251,000 (primarily related to nonemployee contractors), non-cash interest expense of
$197,000, and outflows from changes in operating assets and liabilities of $800,000. Net cash used during the year ended December 31 2014 consisted of
a net loss of $6,180,000 adjusted for non-cash expenses including depreciation and amortization of $56,000, stock-based compensation of $184,000, fair
value of warrants issued to service providers of $137,000 (primarily related to nonemployee contractors), gain of $52,000 from the revaluation of the
warrant liability, non-cash interest expense of $418,000, and outflows from changes in operating assets and liabilities of $556,000.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2015 and 2014 was $109,000 and $117,000, respectively, which was
used for the purchase of property and equipment. We expect to continue to purchase property and equipment in the normal course of our business. The
amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors
including, but not limited to, any increase in the number of our employees and any changes to the capital equipment requirements related to our
development programs and clinical trials.
Financing Activities
Net cash provided by financing activities during year ended December 31, 2015 was $18,769,000, which was the result of the net proceeds of
$11,040,000 from our May 2015 Private Offering, the net proceeds of $5,393,000 from our November 2015 Offering, and the proceeds of $2,500,000
from the drawdown of funds from the second and third tranches of the term loan. Cash provided by financing activities during the year ended December
31, 2014 was $6,573,000, which was the result of the net proceeds of $4,204,000 from our September 2014 Offering, the proceeds of $2,500,000 from
the first tranche of the term loan, partially offset by the repayment of the existing term loan of $1,631,000, and the proceeds of $1,500,000 from the
issuance of related party convertible bridge notes which were extinguished in connection with the Merger.
49
Contractual Payment Obligations
We have obligations under a non-cancelable operating lease, a bank term loan and a purchase commitment for inventory. As of December 31,
2015, our contractual obligations are as follows (in thousands):
Contractual Obligations:
Non-cancellable operating lease obligations
Debt obligations (including interest)
Total
Total
Less than
1 Year
1 - 3 Year
3 -5 Years
More than
5 Years
$
$
287 $
5,213
5,500 $
229 $
1,894
2,123 $
58 $
3,319
3,377 $
- $
-
- $
-
-
-
In June 2006, we entered into a Development and Manufacturing Agreement with Stellartech Research Corporation (the "Agreement"). The
Agreement was amended on October 4, 2007. Under the Agreement, we agreed to purchase 300 generators manufactured by Stellartech. As of December
31, 2015 and the date of this filing, we have purchased 112 units and 113 units, respectively. The price per unit is variable and dependent on the volume
and timing of units ordered.
In January 2012, we entered into a lease agreement for office and laboratory facilities. The lease agreement, as amended in January 2015,
commenced in March 2012 and will terminate in March 2017.
.
As described above, on September 30, 2014, we entered into the Loan Agreement with the Lender pursuant to which we received a term loan in
the amount of $5.0 million. As of December 31, 2015 and the date of this filing, the outstanding term loan principal balance was $4.8 million and $4.5
million, respectively.
Critical Accounting Policies and Estimates
The discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have
been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are
particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our
management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result,
they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate
assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and
projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information
available from other outside sources, as appropriate. Please see Note 2 to our consolidated financial statements for a more complete description of our
significant accounting policies.
Inventory
Inventory is stated at the lower of cost or market, cost being determined on an actual cost basis on a first-in, first-out method and market being
determined as the lower of replacement cost or net realizable value. All inventory as of December 31, 2015 and 2014 is finished goods. We regularly
assess the valuation of inventory and write down inventory which is obsolete or in excess of forecasted usage to their estimated realizable value.
Estimates of realizable value are based upon our analysis and assumptions including, but not limited to, forecasted sales by product, expected product life
cycle, product development plans and future demand requirements. If market conditions are less favorable than our forecast or actual demand from
customers is lower than our estimates, we may be required to record additional inventory write-downs. At the point of write down, a new lower-cost
basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly
established cost basis. If there were to be a sudden and significant decrease in demand for our products, or if there were a higher incidence of inventory
obsolescence because of rapidly changing technology and customer requirements, we could be required to increase inventory write-downs, and our gross
margin could be adversely affected. If demand is higher than expected, we may sell inventories that had previously been written down.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset might not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the anticipated
undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is
determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has not identified any such
impairment losses to date.
50
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 delivery, 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 Viveve’s products are subject to regulatory requirements that vary from country to country. The
Company has regulatory clearance outside the U.S. and currently sells the Viveve System in Canada, Hong Kong, Japan, Europe, the Middle East and
Southeast Asia.
The Company does not provide its customers with a contractual right of return.
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 if there should be a warranty accrual going forward.
Research and Development
Research and development costs are charged to operations as incurred. Research and development costs include, but are not limited to, payroll
and personnel expenses, prototype materials, laboratory supplies, consulting costs, and allocated overhead, including rent, equipment depreciation, and
utilities.
Income Taxes
Accounting for income taxes requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary
differences between the book and tax bases of recorded assets and liabilities. The liability method is used in accounting for income taxes. Deferred tax
assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities, and are measured using
the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets may be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We evaluate annually the realizability of our deferred
tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of
realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax
assets. As of December 31, 2015 and 2014, the Company has recorded a full valuation allowance for our deferred tax assets based on our historical loss
and the uncertainty regarding our ability to project future taxable income. In future periods if we are able to generate income, we may reduce or eliminate
the valuation allowance.
Accounting for Uncertainty in Income Taxes
We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which
may not accurately anticipate actual outcomes. The first step is to evaluate the tax position for recognition by determining if the weight of available
evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
Whether the more-likely-than-not recognition threshold is met for a tax position is a matter of judgment based on the individual facts and circumstances
of that position evaluated in light of all available evidence.
51
Accounting for Stock-Based Compensation
Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee’s
service period. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award.
We determined that the Black-Scholes option pricing model is the most appropriate method for determining the estimated fair value for stock
options. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of share-
based awards, including the option’s expected term and the price volatility of the underlying stock.
Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the
underlying equity instruments vest.
Recent Accounting Pronouncements
In May 2014, as part of its ongoing efforts to assist in the convergence of accounting principles generally accepted in the United States of America
(“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. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, “Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could be Achieved After a Requisite Service Period” (“ASU 2014-12”). Companies
commonly issue share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in
the awards. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period should be
treated as a performance condition. The performance target should not be reflected in estimating the grant date fair value of the award. Compensation
cost should be recognized in the period in which it becomes probable that the performance target will be achieved. ASU 2014-12 will be effective for our
fiscal year beginning fiscal 2016 and interim reporting periods within that year, using either the retrospective or prospective transition method. Early
adoption is permitted. We are currently evaluating the effect of the adoption of this guidance on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (subtopic 310-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), to provide guidance on management’s responsibility in
evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU
2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently
evaluating the effect of the adoption of this guidance on our consolidated financial statements and disclosures.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires
that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. ASU 2015-03 is effective for our fiscal year beginning January 1, 2016 and subsequent interim periods, with
earlier adoption permitted. We will adopt this guidance in the first quarter of 2016. We do not expect the adoption of this guidance to have a material
effect on our consolidated financial statements.
52
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 price 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”) 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 our fiscal year beginning January 1, 2017 and
subsequent interim periods, with earlier adoption permitted. We are currently evaluating the effect of the adoption of this guidance on our consolidated
financial statements.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” ("ASU 2015-17'), which amends
existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior
guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance
sheet. The standard is effective for our fiscal year 2017. Early adoption is permitted. As permitted by ASU 2015-17, we have early-adopted this standard
and applied it retrospectively to all periods of the tax provision presented. As we have a full valuation allowance against the deferred assets, there is no
impact to the consolidated financial statements.
Off-Balance Sheet Transactions
We do not have any off-balance sheet transactions.
Trends, Events and Uncertainties
Research and development of new technologies is, by its nature, unpredictable. Although we will undertake development efforts, including
efforts to obtain approvals from U.S. and foreign regulatory agencies, with commercially reasonable diligence, there can be no assurance that we will
have adequate capital to develop our technology to the extent needed to create future sales to sustain our operations.
We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will
ever be profitable. Furthermore, since we have no committed source of financing other than the bank term loan, which is fully drawn down, we cannot
assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we
may be required to severely curtail, or even to cease, our operations.
Other than as discussed above and elsewhere in this Annual Report, we are not aware of any trends, events or uncertainties that are likely to have
a material effect on our financial condition.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this
Item.
Item 8. Financial Statements and Supplementary Data
See pages beginning with page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
53
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal
financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures
that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and
directors; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.
Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control –
Integrated Framework (2013 Framework).
Based on this assessment, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief
Financial Officer (principal financial and accounting officer), has concluded that, as of December 31, 2015, our internal control over financial reporting
was effective based on those criteria.
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to
ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our
management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding
required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015, the end of the
period covered by this Annual Report on Form 10-K. Based upon the evaluation of our disclosure controls and procedures as of December 31, 2015, our
Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the
reasonable assurance level.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting have come to the attention of management, including our Chief Executive Officer
and our Chief Financial Officer, during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information
None.
54
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Set forth below is certain information regarding our current executive officers and directors. Each of the directors was elected to serve until our
next annual meeting of stockholders or until his or her successor is elected and qualified. Our officers are appointed by, and serve at the pleasure of, the
board of directors.
Name
Patricia Scheller
Brigitte Smith
Mark S. Colella
Carl Simpson
Daniel Janney
Jon Plexico
Scott Durbin
James Atkinson
Age
55
48
43
75
50
47
47
58
Position
Chief Executive Officer and Director
Chairperson of the Board of Directors
Director
Director
Director
Director
Chief Financial Officer
President and Chief Business Officer
Biographical information with respect to our executive officers and directors is provided below. There are no family relationships between any
of our executive officers or directors.
Patricia Scheller. Ms. Scheller was elected as a director of Viveve Medical, Inc. on September 18, 2014 (with her service beginning following
the Merger) and has been a director of our wholly-owned subsidiary, Viveve, Inc., since June 2012. Ms. Scheller also serves as our Chief Executive
Officer and, since May 2012, as Chief Executive Officer of Viveve, Inc. Prior to joining Viveve, Inc., she served as the Chief Executive Officer of
Prescient Medical, Inc. (“PMI”), a privately held company that developed diagnostic imaging catheters and coronary stents designed to reduce deaths
from heart attacks, from September 2004 through April 2012 and as a director of PMI from July 2004 to September 2011. Prior to joining PMI, from
August 2003 to September 2004, she was the Chief Executive Officer of SomaLogic, a biotechnology company focused on the development of
diagnostic products using aptamer technology. From December 2000 to April 2003, Ms. Scheller also managed several business units at Ortho-Clinical
Diagnostics, a Johnson & Johnson company, and from October 1997 to November 2000 served in key executive positions at Dade Behring, a clinical
diagnostics firm. While at Dade Behring Holdings, Inc., she directed the commercialization of the hsCRP diagnostic test, a screening test for systemic
inflammation, which has been shown to increase the risk of heart attacks. The hsCRP test was the first diagnostic test added to the cardiac test panel by
the Centers for Disease Control and Prevention and the American Heart Association in over 30 years. As Director of cardiology systems at Cordis
Corporation (a Johnson & Johnson company) from February 1994 to February 1996, Ms. Scheller managed the launch of the first Palmaz-Schatz®
balloon-expandable coronary stent, the first major product entry into what became a $6 billion market. Ms. Scheller received a B.S.E. degree in
Biomedical Engineering from Duke University and completed executive business education programs at Harvard University, Massachusetts Institute of
Technology, Columbia University and Northwestern University. Because of her extensive experience in the healthcare industry, we concluded that Ms.
Scheller should serve as a director.
Brigitte Smith. Ms. Smith was elected as a director of Viveve Medical, Inc. on September 18, 2014 (with her service beginning following the
Merger) and has been a director of Viveve, Inc. since January 2007. Ms. Smith is co-founder and Managing Director of GBS Venture Partners, a leading
Australian life science venture capital investor founded in 1998 whose fund, GBS Bioventures III, is one of our significant stockholders. GBS Venture
Partners has completed more than 40 medical device and life science investments for companies based in Australia and the U.S. Before joining GBS
Venture Partners, Ms. Smith worked with high-tech start-up companies in Australia and the U.S. in fundraising and business development roles. From
1990 to 1992 Ms. Smith also served as a consultant for Bain & Company, a strategic management consulting firm. Ms. Smith is also on the board of GBS
Venture Partners portfolio companies in Australia and the United States. Ms. Smith previously served on the board of KaloBios Pharmaceuticals, Inc.,
which is listed on the NASDAQ Global Market (KBIO). Ms. Smith earned her Bachelor of Chemical Engineering with Honors from the University of
Melbourne, her Master of Business Administration with Honors from the Harvard Business School and her Master of International Relations from the
Fletcher School of Law and Diplomacy in Boston, Massachusetts, where she was also a Fulbright Scholar. Ms. Smith is a Fellow of The Australian
Institute of Company Directors. Because of her significant experience in assessing early stage medical device and life sciences companies and her
investing experience, we concluded that Ms. Smith should serve as a director.
55
Mark S. Colella. Mark S. Colella has over 19 years of venture capital and operating experience in life science, medical device and healthcare
companies. Mr. Colella is a Partner at Stamos Capital Partners, having joined in 2015, and leads the private capital investment team. Stamos Capital is a
private investment management firm specializing in alternative and multi-asset investment solutions. Previously a Principal, Mr. Colella is now an
Advisor to 5AM Ventures where he has held board and advisory roles with a number of public and private companies. Currently, in addition to being a
director of Viveve, Mr. Colella serves as a director to Ceterix, a surgical medical device company. Mr. Colella has served, in board or advisory roles, with
Biodesy, Ceterix, DVS (acquired by Fluidigm), Flexion (IPO), Incline (acquired by The Medicines Company), Pearl (acquired by AstraZeneca), Semprus
(acquired by Teleflex) and WaveRx. Mr. Colella was an executive, and part of the early team, for BÂRRX Medical, a medical device company sold to
Covidien for $413 million, and he held management roles with Stryker, a medical device company focused on orthopedics, laparoscopy, urology,
gynecology, and minimally invasive general surgery. He spent four years on the founding team and as an Executive Director managing healthcare
facilities with Primrose Alzheimer’s Living, an early-stage healthcare service start-up company, and one year working as an analyst for Versant Ventures,
a life science venture capital firm.
Mr. Colella holds a B.S. in Biology from Williams College and earned his M.B.A. from Northwestern University, the Kellogg School of
Management, where he sits on the Advisory Board for the Innovation and New Ventures Office. Prior to Williams College, he spent two years at the
United States Air Force Academy. Mr. Colella's extensive experience in serving on boards of medical device companies led us to conclude he should
serve as a director.
Carl Simpson. Mr. Simpson was elected as a director of Viveve Medical, Inc. on September 18, 2014 (with his service beginning following the
Merger) and has been a director of Viveve, Inc. since its inception in September of 2005. Mr. Simpson has worked in the medical device industry for over
40 years. In 2005, Mr. Simpson founded and became the Managing Director of Coronis Medical Ventures, LLC, a venture capital entity. From 2001 to
2004, Mr. Simpson was a partner for Versant Ventures. In 1993, he founded CardioGenesis Corp. a medical device company that designs, manufactures
and distributes laser-based surgical products that promote cardiac angiogenesis and served as Vice President of Development until 1997. In 1979, Mr.
Simpson founded Advanced Cardiovascular Systems (“ACS”) a medical device company that develops and markets medical devices for treatment of
cardiovascular diseases and served as Senior Vice President of Research and Development until 2001. ACS was sold to Eli Lilly in 1984 and spun-off
into Guidant Vascular Intervention. Mr. Simpson currently serves on the board of Novobionics, Curant Medical, Uptake Medical and Entent. He also
served on the board of Silver Bullet from 2009 to 2012, CoRepair from 2007 to 2013, Revascular Therapeutics from 2004 to 2011, Conor MedSystems
Inc. from 2003 to 2005, Thermage from 1997 to 2004, Interventional Thermodynamics (Innerdyne) from 1989 to 1991 and Interventional Technologies
from 1985 to 1989. His undergraduate training is in Microbiology and Biochemistry. His graduate degree is in Electrical Engineering/Computer Science
and he holds an M.B.A., both from the University of Santa Clara. Because of Mr. Simpson’s prior experience with multiple start-up companies, his
understanding of venture capital business models and 40 years of operational and clinical experience, we concluded that he should serve as a director.
Daniel Janney. Mr. Janney was elected as a director of Viveve Medical, Inc. on September 18, 2014 (with his service beginning following the
Merger). Since November 2012, Mr. Janney has served as a director of Esperion Therapeutics, Inc. (NASDAQ: ESPR). Mr. Janney is a managing
director at Alta Partners, a life sciences venture capital firm, which he joined in 1996. Prior to joining Alta, from 1993 to 1996, he was a Vice President in
Montgomery Securities' healthcare and biotechnology investment banking group, focusing on life sciences companies. Mr. Janney is a director of a
number of companies including Alba Therapeutics Corporation, Lithera, Inc., Prolacta Bioscience, Inc., Sutro Biopharma and ViroBay, Inc. He holds a
Bachelor of Arts in History from Georgetown University and an M.B.A. from the Anderson School at the University of California, Los Angeles. Because
of Mr. Janney's experience working with and serving on the board of directors of various life sciences companies and his experience working in the
venture capital industry, we concluded that he should serve as a director.
Jon Plexico. Mr. Plexico was appointed as a director of Viveve Medical, Inc. on March 14, 2016. Mr. Plexico is currently one of two Managing
Members of Stonepine Capital Management, LLC ("Stonepine Management"). Stonepine Management, is the General Partner of Stonepine Capital, L.P.
("Stonepine"), a holder of approximately 30.7% of the outstanding common stock of the Company. Mr. Plexico was appointed to the board of directors
as a representative of Stonepine, at Stonepine's election, under the terms of that certain letter agreement, dated May 12, 2015 (the "Letter Agreement"),
by and between the Company and Stonepine, pursuant to which, among other things, for so long as Stonepine owns at least 15% of the Company's
outstanding equity securities, Stonepine shall have the option, but not the obligation, to designate a Stonepine representative to serve on the board. The
Company and Stonepine entered into the Letter Agreement in connection with the May 2015 Offering. Mr. Plexico has not been appointed to any board
committees.
Mr. Plexico has approximately 24 years of life science industry operational and advisory experience, including eight years as Managing Member
and Founder of Stonepine Management. Previously, Mr. Plexico was Managing Director at Merriman Curhan Ford & Co., now known as Merriman
Capital, where he ran healthcare corporate finance focusing on private investments in public equity, secondary offerings, and mergers and acquisitions.
Prior to that, Mr. Plexico was co-founding partner of Venture Ready Partners, a life science advisor providing capital raising services to private
biotechnology companies. Mr. Plexico was employee #5 and served as director of business development at Chemdex Corporation, an electronic life-
science commerce company that grew to 500 employees and completed an initial public offering during his tenure. He began his career at Quidel
Corporation, where he became National Sales Manager for the Autoimmune Division. He has served on the Boards of Directors of Zila, Inc. and
Immunetech, Inc. Mr. Plexico is a graduate of Colgate University. Mr. Plexico's extensive experience in advising and raising funding for life sciences
companies led us to believe that he should serve as a director.
56
Scott Durbin. Mr. Durbin joined Viveve, Inc. as its Chief Financial Officer in February 2013 and was appointed as the Chief Financial Officer
of Viveve Medical, Inc. on September 23, 2014. From June 2012 to January 2013, he served as an advisor and Acting Chief Financial Officer for Viveve,
Inc. Prior to joining Viveve, Inc., from June 2010 to October 2011, he was Chief Financial Officer of Aastrom Biosciences (“Aastrom”), a publicly
traded, cardiovascular cell therapy company. Before Aastrom, he spent six years as Chief Operating and Financial Officer for Prescient Medical
(“Prescient”) from May 2004 to June 2010, a privately held company that developed diagnostic imaging catheters and coronary stents designed to reduce
deaths from heart attacks. Prior to Prescient, from January 2003 to April 2004, he spent several years as a financial consultant for two publicly traded
biotech companies, Scios Inc.,a Johnson & Johnson company, and Alteon Inc. Mr. Durbin began his career in corporate finance as an investment banker
in the Healthcare and M&A groups at Lehman Brothers Inc. from August 1999 to January 2003, where he focused on mergers and acquisitions and
financings for the life science industry. At Lehman, he successfully executed over $5 billion in transactions for medical device and biotechnology
companies. He began his career as a Director of Neurophysiology for Biotronic, Inc. Mr. Durbin received a B.S. from the University of Michigan and an
M.P.H. in Health Management with Honors from the Yale University School of Medicine and School of Management.
James Atkinson. Mr. Atkinson was appointed to serve as the Chief Business Officer and President of the Company and Viveve, Inc. effective
as of February 4, 2015. Mr. Atkinson has over 30 years of experience in medical device sales, marketing and business development with both Fortune 50
and start-up medical device companies. Mr. Atkinson was a founding principal at Ulthera, Inc. where he served as Senior Vice President of Sales and
Marketing from October 2006 through April 2014. While at Ulthera, he assisted in growing the company from 3 to 165 employees and established a
global distribution network that included 42 distributors, covering 52 countries. Mr. Atkinson’s prior experience includes various executive positions,
including (i) Vice President of Sales and Marketing for the Cardiac Surgery Division at St. Jude Medical, Inc. from October 2004 to October 2006 where
his responsibilities included launching the Biocor® stented tissue valve, recognized as the fastest growing heart valve brand in the industry, (ii) Vice
President of Sales for Medtronic Vascular, a $200 million division of Medtronic, Inc., a company whose stock is traded on the New York Stock
Exchange (Ticker: MDT), from January 2003 to September 2004 and (iii) co-founder and Vice President of Sales and Business Development for Medical
Simulation Corporation. Mr. Atkinson’s career began as a sales representative at Ethicon Endosurgery, a Johnson and Johnson company, where he
progressed through positions with increasing responsibility to Regional Manager.
Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings
described in subparagraph (f) of Item 401 of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting Compliance
During the year ended December 31, 2015, Jim Robbins, the Company’s Vice President of Finance, overlooked reporting the grant of a warrant.
On February 17, 2015, the Company granted to Mr. Robbins a 10-year warrant for the purchase of 43,024 shares of the Company’s common stock at a
price of $0.50 per share. The warrant is subject to vesting conditions. Mr. Robbins reported the grant on December 22, 2015.
During the year ended December 31, 2015, James Atkinson was late in reporting two transactions. On May 12, 2015 Mr. Atkinson received a
10-year warrant with an exercise price of $0.53 per share for the purchase of 217,733 shares of the Company’s common stock. The warrant was issued to
him in conjunction with a consulting agreement entered into on May 12, 2015 and the transaction was reported on May 28, 2015. On June 12, 2015 Mr.
Atkinson, as the custodian for his minor child and through a10b5-1 Plan, purchased 30,600 shares of the Company’s common stock at a price of $0.899
per share. The purchase was reported on July 22, 2015.
57
During the year ended December 31, 2015, Mark Colella, a director, was late in reporting the purchase of a total of 675,675 shares of the
Company’s common stock at a price of $0.37 per share made on May 14, 2015. The shares were purchased by 5AM II, L.P. and 5 AM Co-Investors II,
L.P. (together, the “Funds”). Mr. Colella may be deemed to hold shared voting and investment control of the common stock owned by the Funds. Mr.
Colella disclaims beneficial ownership of the shares of common stock owned by the Funds. The purchase was reported on May 29, 2015.
Except as set forth above, we believe that, during the year ended December 31, 2015, our directors, executive officers and beneficial owners of
more than 10% of the Company’s common stock complied with all Section 16(a) filing requirements. In making this statement, we have relied upon
examination of the copies of Forms 3, 4 and 5, and amendments thereto, provided to the Company and the written representations of its directors and
executive officers.
Code of Ethics
The Company has adopted a Code of Conduct that applies to every director, officer and employee of the Company. Such Code of Conduct
includes written standards that are reasonably designed to deter wrongdoing and to promote:
● Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
● Full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the Commission and
in other public communications made by the Company;
● Compliance with applicable governmental laws, rules and regulations;
● The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
● Accountability for adherence to the code.
Director Nominations
The Company does not have any defined procedures by which stockholders may submit nominations for directors and there has been no change
to that policy.
Audit Committee and Audit Committee Financial Expert
The board of directors of the Company has an audit committee to oversee the accounting and financial reporting processes of the Company and the
audits of the Company’s consolidated financial statements. The members of our audit committee are Mark Colella, Carl Simpson and Daniel Janney.
The board of directors has determined that Mark Colella is an “audit committee financial expert” as defined by applicable SEC rules.
58
Item 11. Executive Compensation
The following table sets forth, for the last two fiscal years, the compensation earned by or paid to (i) each individual who served as our principal
executive officer during the last fiscal year, and (ii) our two most highly compensated executive officers, other than our principal executive officer, who
were serving as our executive officers at the end of the last fiscal year. We refer to these individuals in the discussion below as our “named executive
officers”.
Name and
Principal Position Year Salary ($)
Bonus
($)
Summary Compensation Table
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Patricia Scheller,
Chief Executive
Officer, Viveve
Medical, Inc.
Scott Durbin,
Chief Financial
Officer, Viveve
Medical, Inc.
James Atkinson,
Chief Business
Officer and
President,
Viveve Medical,
Inc.
2015
2014
2015
2014
2015
2014
346,000
154,696(1)
785,552(3)
335,000
82,943(2)
297,744(4)
311,000
97,965(1)
314,059(3)
298,000
133,882(2)(5)
121,219(4)
290,667
144,904(1)(9)
417,442(3)
45,247(6) 1,331,495
19,520(6)
735,207
24,222(6)
747,246
17,364(6)
570,463
120,447(7)
973,457
50,000(8)
50,000
(1) The amounts represent the cash and the fair market value of restricted stock (received in lieu of cash) issued to employees for 2015 performance
bonuses: (i) Ms. Scheller: cash of $108,990 and restricted stock of $45,706; (ii) Mr. Durbin: cash of $105,819 and restricted stock of $0; and (iii) Mr.
Atkinson: cash of $0 and restricted stock of $114,654. The cash portion of the bonus was paid on January 7, 2016. The fair market value of the restricted
stock was determined based on the closing stock price of $0.78 on the date of grant - January 4, 2016.
(2) The amounts represent the aggregate fair value of common stock warrants issued for 2014 performance bonuses. The warrants have a contractual life
of ten years and are exercisable immediately in whole or in part, on or before ten years from the issuance date. The Company determined the fair value of
the warrants using the Black-Scholes option pricing model. The assumptions underlying the equity awards are as follows: (i) contractual life: ten years;
(ii) risk free interest rate: 2.14%; (iii) average volatility: 77.6%; and (iv) expected dividend yield: none.
(3) The amounts represent the aggregate grant date fair value of the stock option awards granted by the Company during 2015. The grant date fair value
is computed using the Black-Scholes option pricing model. The assumptions underlying the valuation of the equity awards are as follows: (i) expected
term: 5 years; (ii) risk-free interest rate: 1.70%; (iii) average volatility: 63%, and (iv) expected dividend yield: none.
(4) The amounts represent the aggregate grant date fair value of the stock option awards granted by the Company during 2014. The grant date fair value
is computed using the Black-Scholes option pricing model. The assumptions underlying the valuation of the equity awards are as follows: (i) expected
term: 5 years; (ii) risk-free interest rate: 1.80%; (iii) average volatility: 61%; and (iv) expected dividend yield: none.
59
(5) The 2014 bonus amount for Mr. Durbin also includes a cash bonus payment of $50,000.
(6) These amounts represent a cash-out of accrued PTO hours in accordance with the Company’s PTO Policy per the Employee Handbook.
(7) The amount represents compensation paid pursuant to the terms of a consulting arrangement with Mr. Atkinson entered into in February 2015, prior
to his employment with the Company: (i) cash payments of $33,000; (ii) the aggregate fair value of a common stock warrant issued of $55,086; and (iii)
commissions earned of $32,358 but not yet paid. The warrant has a contractual life of ten years and is exercisable immediately in whole or in part, on or
before ten years from the issuance date. The Company determined the fair value of the warrant using the Black-Scholes option pricing model. The
assumptions underlying the equity awards are as follows: (i) contractual life: ten years; (ii) risk free interest rate: 2.28%; (iii) average volatility: 80.1%;
and (iv) expected dividend yield: none.
(8) The amount represents consulting compensation paid pursuant to the terms of a consulting arrangement with Mr. Atkinson entered into in February
2015, prior to his employment with the Company.
(9) The 2015 bonus amount for Mr. Atkinson also includes the aggregate fair value of common stock warrant issued for a 2015 performance bonus of
$30,250. The warrant has a contractual life of ten years and is exercisable immediately in whole or in part, on or before ten years from the issuance date.
The Company determined the fair value of the warrant using the Black-Scholes option pricing model. The assumptions underlying the equity awards are
as follows: (i) contractual life: ten years; (ii) risk free interest rate: 2.27%; (iii) average volatility: 76.8%; and (iv) expected dividend yield: none.
Outstanding Equity Awards at Fiscal Year End
Other than as set forth below, there were no outstanding unexercised options, unvested stock, and/or equity incentive plan awards issued to our
named executive officers as of December 31, 2015.
Equity Incentive
Plan
Awards: Number
of
Securities
Underlying
Unexercised
Unearned Options
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable)
221,681
293,5370
82,579
119,5060
0
0
0
645,781
1,936,001
0
262,914
774,001
535,000
704,000
Option Exercise
Price
0 $
0 $
0 $
0 $
0 $
0 $
0
0
1.24
0.60
0.75
1.24
0.60
0.75
0.47
0.75
Option
Expiration
Date
October 24, 2022
September 26, 2024
December 16, 2025
February 2, 2023
September 26, 2024
December 16, 2025
February 3,,2025
December 16, 2025
Name
Patricia Scheller
Scott Durbin
Jim Atkinson
Employment Agreements, Termination of Employment and Change-in Control Agreements
Patricia Scheller
On May 14, 2012, Viveve, Inc. extended a written offer of employment to Patricia Scheller, the terms of which we have assumed. Pursuant to
the agreement, Ms. Scheller serves as our Chief Executive Officer on an at-will basis and as a director. The agreement provides that Ms. Scheller will
receive a base salary of $335,000 per year, which is subject to adjustment in accordance with our employee compensation policies in effect from time-to-
time.
60
In addition the agreement provides for: (i) an annual incentive bonus (if approved by the board of directors, in their sole discretion) in an amount
to be determined by the board of directors; (ii) an incentive payment of $1,000 for every $1 million in new equity financing raised during her first year of
service, up to $20,000 (iii) an option for the purchase of 27,539,116 shares of Viveve, Inc. common stock exercisable at the fair market value on the date
of grant, with the right to purchase 25% of the option shares vesting after 12 months of continuous service and the right to purchase the remainder of the
option shares vesting in equal monthly installments over the next 36 months of continuous service, with accelerated vesting upon an Involuntary
Termination within 12 months of a Change in Control (as those terms are defined in the agreement); (iv) Company-sponsored benefits as in effect from
time to time; (v) paid vacation in accordance with our vacation policy, as in effect from time to time; and (vi) continued base salary and benefits for
twelve months following an Involuntary Termination. In conjunction with the Merger, the option issued to Ms. Scheller was assumed by us. As a result of
the assumption, the number of shares of our common stock subject to the option was computed by multiplying the number of shares of Viveve, Inc.
common stock into which the option was exercisable immediately prior to the effective time of the Merger by 0.0080497, the Merger exchange ratio. The
exercise price of the option was determined by dividing the option exercise price immediately prior to the effective time of the Merger by the exchange
ratio (rounded up to the nearest cent).
Scott Durbin
On January 23, 2013, Viveve, Inc. extended a written offer of employment to Scott Durbin, the terms of which we have assumed. Pursuant to the
agreement, Mr. Durbin serves as our Chief Financial Officer on an at-will basis. The agreement provides that Mr. Durbin will receive a base salary of
$298,000, which is subject to adjustment in accordance with our employee compensation policies in effect from time-to-time.
In addition the agreement provides for: (i) an annual incentive bonus (if approved by the board of directors, in their sole discretion) in an amount
to be determined by the board of directors; (ii) an incentive bonus of $50,000 in the event a minimum of $1.5 million is raised in equity financing from
new investors; (iii) an option for the purchase of 10,258,690 shares of Viveve, Inc. common stock exercisable at the fair market value on the date of
grant, with the right to purchase 100,000 option shares vesting on the grant date, 2,614,672 option shares vesting after 12 months of continuous service
and the right to purchase the remainder of the option shares vesting in equal monthly installments over the next 36 months of continuous service, with
accelerated vesting upon a Change in Control before Mr. Durbin’s service terminates; (iv) Company-sponsored benefits in effect from time to time; (v)
paid vacation in accordance with our vacation policy, as in effect from time to time; and (vi) continued base salary and benefits for ten months following
an Involuntary Termination. In conjunction with the Merger, the option issued to Mr. Durbin was assumed by us. As a result of the assumption, the
number of shares of our common stock subject to the option was computed by multiplying the number of shares of Viveve, Inc. common stock into
which the option was exercisable immediately prior to the effective time of the Merger by .0080497, the Merger exchange ratio. The exercise price of the
option was determined by dividing the option exercise price immediately prior to the effective time of the Merger by the exchange ratio (rounded up to
the nearest cent).
James Atkinson
In accordance with the terms of an offer letter dated February 4, 2015 (the “Offer Letter”), Mr. Atkinson will receive (i) an annual base salary of
$320,000, (ii) an initial target bonus of up to 30% of the annual base salary as shall be approved by the board of directors, (iii) an overachievement bonus
in the form of a five-year warrant to purchase up to 110,000 shares of the Company’s common stock at an exercise price equal to the greater of $0.53 per
share or the fair market value of the Company’s common stock on the date of grant, contingent upon the achievement of certain goals to be determined
by the board of directors, (iv) an option to purchase 535,000 shares of the Company’s common stock, issued under the Company’s 2013 Stock Option
Plan and subject to the terms of the applicable stock option agreement and (v) various other standard employee benefits.
61
In addition, the Offer Letter further provides that Mr. Atkinson’s employment is “at will” and may be terminated at any time and for any reason
by either party. In the event of involuntary termination, upon return of all Company property and execution of a general release of any claims against the
Company, Mr. Atkinson shall be entitled to (i) continued payment of his base salary for a period of six months and (ii) either (a) a continuation of health
insurance coverage until the earlier of the close of six months following his date of termination or eligibility for substantially equivalent health insurance
coverage in connection with new employment or self-employment or (b) a lump sum payment in lieu of health insurance coverage, at the sole and
absolute discretion of the Company.
The Company provides a 401(k) plan. Participation is voluntary and open to all employees. The Company has not made any contributions to the
plan to date.
Director Compensation
The table below sets forth the compensation paid to our directors, exclusive of reimbursed out-of-pocket expenses, during the year ended
December 31, 2015 for services provided as a director.
Name
Brigitte Smith
Mark Colella
Carl Simpson
Daniel Janney
Fees
Earned or
Paid in
Cash
--
--
--
--
Stock
Awards
($)
--
--
--
--
Option Awards
($)
43,822(1)(2)(3)
43,822(1)(2)(3)
43822(1)(2)(3)
43,822(1)(2)(3)
Non-Equity
Incentive Plan
Compensation
--
--
--
--
Nonqualified
Deferred
Compensation
Earnings
--
--
--
--
All Other
Compensation
--
--
--
--
Total
43,822
43,822
43,822
43,822
(1) The high and low trading prices of our common stock on the OTCQB during the 30-day period prior to December 16, 2015, the date of grant, were
$0.96 and $0.67. Options issued to these directors on December 16, 2015 have an exercise price of $0.75.
(2) Amounts represent the aggregate grant date fair value of the stock option as of December 16, 2015, the option grant date.
(3) As of December 31, 2015, each of Ms. Smith and Messrs. Colella, and Janney held options to purchase an aggregate of 155,000 shares of our
common stock (2015 option grant: 108,000 shares; and 2014 option grant: 47,000 shares). Mr. Simpson held options to purchase an aggregate of 156,811
shares of our common stock (2015 option grant: 108,000 shares; 2014 option grant: 47,000 shares; and 2007 option grant; 1,811 shares). The grant date
fair value is computed using the Black-Scholes option pricing model. The assumptions underlying the valuation of the equity awards in 2015 are as
follows: (i) expected life: 5 years; (ii) interest rate: 1.70%; (iii) volatility: 63%; and (iv) expected dividend yield: none.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The disclosure in Item 5 under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” is hereby incorporated by
reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 15, 2016 regarding the beneficial ownership of our common stock by the
following persons:
● each person who, to our knowledge, owns more than 5% of our common stock;
● each of our named executive officers;
● each director; and
● all of our executive officers and directors as a group.
Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power. The
address for each of our named executive officers and directors is c/o Viveve Medical, Inc., 150 Commercial Street, Sunnyvale, California 94086. Shares
of common stock subject to options, warrants or other rights currently exercisable or exercisable within 60 days of March 15, 2016, are deemed to be
beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding the options, warrants or other rights,
but are not deemed outstanding for computing the percentage of any other stockholder. As of March 15, 2016, we had 59,929,535 shares of common
stock outstanding.
62
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership (1)
Percent of Class
Named Executive Officers and Directors
Patricia Scheller
Scott Durbin
James Atkinson
Brigitte Smith
Mark S. Colella
Carl Simpson
Daniel Janney
Jon Plexico
All named executive officers and directors as a group (8 persons)
1,115,859
482,635
3,978,852
(2)
(3)
(4)
(5)(13)
3,818,673
27,604
44,799
5,685,236
(6)
(7)
(8)(11)
(9)
18,397,682
33,551,340
Owners of More than 5% of Our Common Stock
Stonepine Capital, L.P. (9)
919 NW Bond Street, Suite 208
Bend, Oregon 97701
5AM Ventures II, L.P. (10)
2200 Sand Hill Road, Suite 110
Menlo Park, California 94025
Alta BioEquities, L.P. (11)
One Embarcadero Center, Suite 3700
San Francisco, California 94111
RTW Master Fund, Ltd. (12)
c/o Intertrust Corporate Services (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman KY1-9001, Cayman Islands
GBS Venture Partners Limited (13)
71 Collins Street, Level 5
Melbourne, Australia C3 VIC 3000
Wexford Spectrum Investors LLC (14)
411 West Putnam Avenue, Suite 125
Greenwich, Connecticut 06830
18,397,682
7,310,231
5,657,632
4,753,806
3,598,807
3,416,987
1.83%
0.80%
6.58%
6.37%
0.05%
0.07%
9.45%
30.70%
53.99%
30.70%
12.20%
9.41%
7.93%
6.01%
5.70%
(1) Based on 59,929,535 shares issued and outstanding as of March 15, 2016. Beneficial ownership is determined in accordance with Rule 13d-3
under the Exchange Act and is generally determined by voting power and/or investment power with respect to securities. Unless otherwise noted, the
shares of common stock listed above are owned as of March 15, 2016, and are owned of record by each individual named as the beneficial owner and
such individual has sole voting and dispositive power with respect to the shares of common stock owned by each of them.
(2) Included in this amount are 155,218 shares of common stock, the right to purchase 221,681 shares of common stock underlying a 10-year option
having an exercise price of $1.24 per share, the right to purchase 371,813 shares of common stock underlying a 10-year option having an exercise
price of $0.60 per share, the right to purchase 161,333 shares of common stock underlying a 10-year option having an exercise price of $0.75 per
share, and a 10-year warrant to purchase 205,814 shares of common stock at an exercise price of $0.50 per share. Excludes 58,597 shares of common
stock underlying a restricted stock award that will vest within one-year of January 4, 2016. Excludes 2,342,173 shares of common stock underlying
unvested options.
63
(3) Included in this amount are 40,541 shares of common stock, the right to purchase 82,579 shares of common stock underlying a 10-year option
having an exercise price of $1.24 per share, the right to purchase 151,375 shares of common stock underlying a 10-year option having an exercise
price of $0.60 per share, and a 10-year warrant to purchase 208,140 shares of common stock at an exercise price of $0.50 per share. Excludes
1,005,046 shares of common stock underlying unvested options.
(4) Included in this amount are 2,669,884 shares of common stock owned of record by Charles Schwab & Co. Inc. for the benefit of James Gregory
Atkinson IRA Contributory Account #3027-4954, of which James Atkinson is the sole beneficiary, 784,780 shares of common stock owned of record
by the Atkinson Family Revocable Trust Dated 08/26/2013, of which Mr. Atkinson is co-trustee, 30,600 shares of common stock owned of record by
Mr. Atkinson as custodian for the account of a minor child, the right to purchase 167,188 shares of common stock underlying a 10-year option having
an exercise price of $0.47 per share, the right to purchase 58,667 shares of common stock underlying a 10-year option having an exercise price of
$0.75 per share, a 10-year warrant to purchase 217,733 shares of common stock at an exercise price of $0.53 per share, and a 10-year warrant to
purchase 50,000 shares of common stock at an exercise price of $0.70 per share. Excludes 92,194 shares of common stock underlying a restricted
stock award that will vest within one-year of January 4, 2016. Excludes 1,013,145 shares of common stock underlying unvested options.
(5) Includes 3,598,807 shares of common stock owned of record by GBS Venture Partners Limited as trustee for GBS BioVentures III, 192,262
shares of common stock owned of record by Ms. Smith, the right to purchase 18,604 shares of common stock underlying a 10-year option having an
exercise price of $0.60 per share, and the right to purchase 9,000 shares of common stock underlying a 10-year option having an exercise price of
$0.75 per share. Excludes 127,396 shares of common stock underlying unvested options. GBS Venture Partners Limited is trustee for GBS
BioVentures III. Brigitte Smith is the Managing Partner of GBS Venture Partners Limited and has voting and investment power over the shares
beneficially owned by GBS BioVentures III. Voting and investment power over the shares of common stock owned of record by GBS Venture
Partners Limited as trustee for GBS BioVentures III is held by Ms. Smith.
(6) Includes the right to purchase 18,604 shares of common stock underlying a 10-year option having an exercise price of $0.60 per share and the
right to purchase 9,000 shares of common stock underlying a 10-year option having an exercise price of $0.75 per share. Excludes 127,396 shares of
common stock underlying unvested options.
(7) Included in this amount are 15,384 shares of common stock, the right to purchase 1,811 shares of common stock underlying a 10-year option
having an exercise price of $7.45 per share, the right to purchase 18,604 shares of common stock underlying a 10-year option having an exercise price
of $0.60 per share, and the right to purchase 9,000 shares of common stock underlying a 10-year option having an exercise price of $0.75 per share.
Excludes 127,396 shares of common stock underlying unvested options.
(8) Includes 5,455,632 shares of common stock owned of record by Alta BioEquities, L.P. and a 10-year warrant to purchase 202,000 shares of
common stock at an exercise price of $0.53 per share held by Alta BioEquities, L.P. Includes the right to purchase 18,604 shares of common stock
underlying a 10-year option having an exercise price of $0.60 per share, and the right to purchase 9,000 shares of common stock underlying a 10-year
option having an exercise price of $0.75 per share. Excludes 127,396 shares of common stock underlying unvested options. Alta BioEquities
Management, LLC is the general partner of Alta BioEquities, L.P. Daniel Janney is the Managing Director of Alta BioEquities Management, LLC
and has voting and investment power over the shares beneficially owned by Alta BioEquities, L.P.
(9) Includes 18,397,682 shares of common stock owned of record by Stonepine Capital, L.P. Stonepine Capital Management, LLC is the general
partner of Stonepine Capital, L.P. Jon M. Plexico and Timothy P. Lynch are the Managing Members of Stonepine Capital Management, LLC and
have shared voting and investment power over the shares beneficially owned by Stonepine Capital, L.P.
(10) Dr. John Diekman, Andrew J. Schwab and Dr. Scott M. Rocklage, the managing members of 5AM Partners II, LLC, have shared voting and
investment power over the shares beneficially owned by 5AM Ventures II, L.P. As the managing members of 5AM Partners II, LLC, these
individuals also have voting and investment power over 288,447 shares of common stock owned of record by 5AM Co-Investors II, L.P. 5AM
Partners II, LLC is the general partner of both 5AM Ventures II, L.P. and 5AM Co-Investors II, L.P.
64
(11) Included in this amount are 5,455,632 shares of common stock and a 10-year warrant to purchase 202,000 shares of common stock at an exercise
price of $0.53 per share. Alta BioEquities Management, LLC is the general partner of Alta BioEquities, L.P. Daniel Janney is the Managing Director
of Alta BioEquities Management, LLC and has voting and investment power over the shares beneficially owned by Alta BioEquities, L.P.
(12) RTW Investments, LLC is the investment manager of RTW Master Fund, Ltd. Roderick Wong is the Managing Member of RTW Investments,
LLC and has sole voting and investment power over the shares beneficially owned by RTW Master Fund, Ltd.
(13) GBS Venture Partners Limited is trustee for GBS BioVentures III. Brigitte Smith is the Managing Partner of GBS Venture Partners Limited and
has voting and investment power over the shares beneficially owned by GBS BioVentures III. Voting and investment power over the shares of
common stock owned of record by GBS Venture Partners Limited as trustee for GBS BioVentures III is held by Ms. Smith.
(14) Wexford Capital LP is a manager of Wexford Spectrum Investors LLC. Wexford GP LLC is the General Partner of Wexford Capital LP. Each
of Charles E. Davidson and Joseph M. Jacobs is a controlling person of Wexford GP LLC. Each of Wexford Capital LP, Wexford GP LLC, and Mr.
Davidson and Mr. Jacobs have shared voting and investment power over the shares beneficially owned by Wexford Spectrum Investors LLC.
Change in Control
As of the date of this report, we are not aware of any arrangements, including any pledge by any person of our securities, the operation of which
may at a subsequent date result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Commission regulations define the related person transactions that require disclosure to include any transaction, arrangement or relationship in
which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years in
which we were or are to be a participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i) an
executive officer, director or director nominee of the Company, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family
member of an executive officer, director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned
or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.
For the period from January 1, 2014, through the date of this Annual Report on Form 10-K, described below are certain transactions or series of
transactions between us and certain related persons. Information relating to employment agreements entered into by the Company and its executive
officers and executive officer compensation can be found at Item 11 – Executive Compensation.
Agreement for Consulting Services
On November 11, 2014, Viveve, Inc. entered into an Independent Contractor Agreement for Rendering Consulting Services with James
Atkinson (the “Consulting Agreement”), which provided that Mr. Atkinson shall provide certain consulting services related to product distribution and
international sales in exchange for (i) $30,000 per month to be paid in cash, 5-year warrants to purchase the Company’s common stock at an exercise
price of $0.53 per share, or a combination thereof, to be determined by the board of directors, (ii) reimbursement of any costs and expenses incurred by
Mr. Atkinson for travel in connection with the performance of his services under the Consulting Agreement and (iii) compensation at a rate of 35% of the
total annual cash compensation for each zone director hired by the Company as a result of a direct introduction by Mr. Atkinson, to be paid solely in
equity securities of the Company. The Consulting Agreement was terminated effective as of February 3, 2015. On February 4, 2015, the Company
entered into an offer letter with James Atkinson in connection with his appointment as Chief Business Officer and President of Viveve, Inc. For
information on the offer letter, see the discussion at Item 11 – Executive Compensation.
65
March 2014 Convertible Promissory Notes
On March 5, 2014 Viveve, Inc. entered into a note purchase agreement, as amended on May 9, 2014 and May 29, 2014, pursuant to which
Viveve issued convertible promissory notes, accruing interest at 9% per annum, in the aggregate principal amount of $1,500,000 to GCP, Alpha Capital
Anstalt, Sandor Capital Master Fund, Barry Honig, 5AM Ventures II, GBS, and Alta Bioequities, L.P. Other than the notes issued to 5AM Ventures II
and GBS, the dispositions of which are discussed below, the remaining notes were exchanged for common stock in the private offering that was
completed on September 23, 2014. The conversion price was $0.53 per share.
Agreements related to the Merger
On September 23, 2014, we completed the Merger.
As a condition to and upon the closing of the Merger, an aggregate amount of $4,875,000 in convertible promissory notes and related accrued
interest of approximately $522,000 were extinguished pursuant to the terms and conditions of a Convertible Note Termination Agreement, dated May 9,
2014, by and between Viveve, Inc. and 5AM Co-Investors II, LP, a Convertible Note Termination Agreement, dated May 9, 2014 (collectively, the
“5AM Note Termination Agreements”), by and between Viveve, Inc. and 5AM Ventures II, LP (together with 5AM Co-Investors II, LP, the “5AM
Parties”) and a Convertible Note Exchange Agreement, dated May 9, 2014 (the “GBS Note Exchange Agreement”) by and between Viveve, Inc. and
GBS Venture Partners Limited, trustee for GBS BioVentures III (“GBS”). In accordance with the terms and conditions of the 5AM Note Termination
Agreements, the 5AM Parties agreed to cancel or extinguish all principal and interest underlying the notes held by such holders. Pursuant to the terms of
the Note Exchange Agreement, GBS agreed to cancel and extinguish all principal and interest underlying the notes held by GBS in exchange for a
warrant to acquire such number of shares of common stock of the Company equal to 5% of the issued and outstanding common stock of the Company
following the effective date of the Merger (the “GBS Warrant”). Upon the closing of the Merger, the Company issued an aggregate of 943,596 shares of
common stock to GBS upon the automatic conversion of the warrant.
Upon the closing of the Merger, all rights, title or interest in outstanding warrants to purchase securities of Viveve, Inc. were also terminated,
extinguishing approximately $572,000 in outstanding warrant liabilities, in accordance with the terms and conditions of a Warrant Termination
Agreement, dated May 9, 2014, by and between Viveve, Inc. and each of the 5AM Parties, a Warrant Termination Agreement, dated May 9, 2014, by and
between Viveve, Inc. and GBS, a Warrant Termination Agreement, dated May 9, 2014, by and between Viveve, Inc. and Oxford Finance LLC
(“Oxford”), and a Warrant Termination Agreement, dated May 9, 2014 (collectively, the “Warrant Termination Agreements”), by and between Viveve,
Inc. and SVB Financial Group (“SVB Financial”).
Private Placement
On November 24, 2015, the Company completed a private offering pursuant to which it issued 8,573,385 shares of common stock, no par value,
at a per share purchase price of $0.70 for gross proceeds of approximately $6,000,000 (the “Private Placement”) to 12 accredited investors pursuant to the
terms of a Securities Purchase Agreement, by and among the Company and the purchasers, dated as of November 20, 2015 (the “Securities Purchase
Agreement”). Purchasers in the offering included Stonepine Capital, L.P., Alta BioEquities L.P., an affiliate of director Dan Janney, Patricia Scheller, the
Company’s Chief Executive Officer, and James Atkinson, the Company’s Chief Business Officer and President.
In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the purchasers, dated as of
November 20, 2015, pursuant to which the Company agreed to register the shares on a registration statement to be filed with the Securities and Exchange
Commission within 60 days after the closing of the offering and to use its commercially reasonable efforts to cause the registration statement to be
declared effective within 90 days after the filing date. If the Company (i) failed to file the registration statement by the filing date, (ii) did not obtain
effectiveness of the registration statement within 90 days after the filing date or (iii) allows certain lapses in effectiveness, the Company is obligated to
pay to the purchasers liquidated damages equal to 1.5% of the original subscription amount paid by the purchasers upon the occurrence of the event and
for every seven days after the occurrence of an event until cured. The Company filed the registration statement within 60 days after the closing of the
Private Placement and the registration statement was declared effective by the SEC within 90 days after the filing date.
66
Policies and Procedures for Related Person Transactions
While our board of directors has not adopted a formal written related person transaction policy that sets forth the policies and procedures for the
review and approval or ratification of related person transactions, it the Company’s practice and procedure to present all transactions arrangements,
relationships, or any series of similar transactions, arrangements, or relationships, in which the Company was or is to be a participant and a related person
had or will have a direct or indirect material interest, to the board of directors for approval.
Director Independence
Our determination of the independence of our directors is made using the definition of “independent” contained in the listing standards of the
Nasdaq Stock Market. On the basis of information solicited from each director, the board has determined that each of Ms. Smith and Messrs. Colella,
Simpson and Janney are independent within the meaning of such rules.
Item 14. Principal Accounting Fees and Services
The following table sets forth fees billed and to be billed to us by our independent auditors for the years ended December 31, 2014 and 2015 for
(i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are
reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in
connection with tax preparation, compliance, advice and assistance.
Audit fees
Audit-related fees
Tax fees
All other fees
Total fees
Year Ended
December 31,
2015
2014
$
$
190,000 $
0
13,000
0
203,000 $
130,000
59,000
10,000
0
199,000
Audit Fees: Represents fees for professional services provided for the audit of our annual consolidated financial statements, services that are
performed to comply with generally accepted auditing standards, and review of our condensed consolidated financial statements included in our quarterly
reports and services in connection with statutory and regulatory filings.
Audit-Related Fees: Represents the fees for assurance and related services that are reasonably related to the performance of the audit or review
of our financial statements. The audit committee of the board of directors of the Company considers Burr Pilger Mayer, Inc. to be well qualified to serve
as our independent public accountants.
The audit committee of the board of directors of the Company approves all auditing services and the terms thereof and non-audit services (other
than non-audit services published under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Pubic Company Accounting
Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the
provisions of non-audit services for us if the "de minimus" provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied.
Tax Fees: Represents professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees: Our auditor was paid no other fees for professional services during the fiscal years ended December 31, 2014 and 2015.
67
PART IV
Item 15. Exhibits, Financial Statement Schedules
Financial Statements
See Index to Consolidated Financial Statements at Item 8 herein.
Financial Statement Schedules have been omitted as they are either not required, not applicable, or the information is otherwise included.
Exhibit Index
Exhibit No.
Description
2.1
2.1.1
2.2
3.1
3.1.1
3.2
3.2.1
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Agreement and Plan of Merger dated May 9, 2014 by and among Viveve, Inc., PLC Systems, Inc. and PLC Systems Acquisition
Corporation (1)
Amendment to Agreement and Plan of Merger (1)
RenalGuard Reorganization Agreement (2)
Articles of Continuance (3)
Articles of Amendment to Articles of Continuance (4)
Bylaw No. 1 (5)
Bylaw No. 2 (6)
Form of 5% Senior Secured Convertible Debenture issued on February 22, 2011, July 2, 2012, January 16, 2013, April 14, 2014, May
27, 2014, July 15, 2014 and August 6, 2014 (7)
Form of Common Stock Purchase Warrant issued on February 22, 2011, July 2, 2012, January 16, 2013, April 14, 2014, May 27, 2014,
July 15, 2014 and August 6, 2014 (7)
Common Stock Purchase Warrant issued on September 23, 2014 to GBS Venture Partners Limited (8)
Conversion Agreement dated May 9, 2014 between the Registrant and holders of the Registrant’s 5% Senior Secured Convertible
Debentures (8)
Warrant Exchange Agreement dated May 9, 2014 between the Registrant and certain holders of the Registrant’s warrants (8)
Form of Common Stock Purchase Warrant issued to investors in the private offering of the Registrant’s common stock which closed on
September 23, 2014 (8)
Warrant to Purchase Stock issued September 30, 2014 to Square 1 Bank (9)
First Amendment to Warrant to Purchase Stock dated February 19, 2015 between Viveve, Inc. and Square 1 Bank (14)
Common Stock Purchase Warrant (2015) (16)
Amended and Restated Warrant to Purchase Stock dated May 14, 2015 between Square 1 Financial, Inc. and Viveve, Inc. (16)
Second Warrant to Purchase Stock issued May 14, 2015 to Square 1 Bank (16)
Common Stock Purchase Warrant issued on February 17, 2015 to Scott Durbin*+
Common Stock Purchase Warrant issued on February 17, 2015 to Jim Robbins*+
Common Stock Purchase Warrant issued on February 17, 2015 to Patricia Scheller*+
Common Stock Purchase Warrant issued on May 12, 2015 to James Atkinson*+
Common Stock Purchase Warrant issued on December 16, 2015 to James Atkinson*+
Common Stock Purchase Warrant issued on December 16, 2015 to Jim Robbins*+
Financial Advisory Agreement dated May 9, 2014 between the Registrant and Bezalel Partners, LLC (8)
Form of Securities Purchase Agreement dated May 9, 2014 (8)
Securities Purchase Agreement, dated May 9, 2014, by and among the Registrant and GBS Venture Partners as trustee for GBS
BioVentures III Trust (8)
Escrow Deposit Agreement, dated May 9, 2014 by and among the Registrant, Palladium Capital Advisors LLC, Middlebury Securities
and Signature Bank, as escrow agent (8)
Registration Rights Agreement, dated May 9, 2014 (8)
First Amendment to Registration Rights Agreement, dated February 19, 2015 (14)
Right to Shares Letter Agreement dated May 9, 2014 between the Registrant and GCP IV LLC (8)
Promissory Note in the principal amount of $250,000 issued to GCP IV LLC on September 2, 2014 (11)
Form of Debenture Amendment Agreement dated September 2, 2014 (11)
68
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
14.1
21
23.1
24.1
31.1
31.2
32.1
32.2
Amendment dated September 10, 2014 to Securities Purchase Agreement dated February 22, 2013 (12)
Amendment dated September 11, 2014 to Securities Purchase Agreement dated February 22, 2013 (12)
PLC Systems Inc. 2013 Stock Option and Incentive Plan, as amended (6)
Offer of Employment dated May 14, 2012 from Viveve, Inc. to Patricia K. Scheller (4)+
Offer of Employment dated January 23, 2013 from Viveve, Inc. to Scott C. Durbin (4)+
Loan and Security Agreement dated September 30, 2014 between Viveve, Inc. and Square 1 Bank (9)
First Amendment to Loan and Security Agreement dated February 19, 2015 between Viveve, Inc. and Square 1 Bank (14)
Intellectual Property Security Agreement dated September 30, 2014 between Viveve, Inc. and Square 1 Bank (9)
Unconditional Guaranty issued by the Registrant in favor of Square 1 Bank (9)
Intellectual Property Assignment and License Agreement dated February 10, 2006, as amended, between Dr. Edward Knowlton and
TivaMed, Inc (6)
Development and Manufacturing Agreement dated June 12, 2006 between TivaMed, Inc. and Stellartech Research Corporation (6)
Amended and Restated Development and Manufacturing Agreement dated October 4, 2007 between TivaMed, Inc. and Stellartech
Research Corporation (6)
Right to Shares Letter Agreement, dated as of September 23, 2014 by and between the Registrant and GCP IV LLC (6)
Right to Shares Letter Agreement, dated as of September 23, 2014 by and between the Registrant and G-Ten Partners LLC (6)
Convertible Note Termination Agreement, dated May 9, 2014 by and between Viveve, Inc. and 5AM Ventures II, LP (10)
Convertible Note Termination Agreement, dated May 9, 2014 by and between Viveve, Inc. and 5AM Co-Investors II, LP (10)
Convertible Note Exchange Agreement, dated May 9, 2014 by and between Viveve, Inc. and GBS Venture Partners Limited, trustee for
GBS BioVentures III (10)
Warrant Termination Agreement, dated as of May 9, 2014, by and between the Viveve, Inc. and 5AM Ventures II, LP (10)
Warrant Termination Agreement, dated as of May 9, 2014, by and between the Viveve, Inc. and 5AM Co-Investors II, LP (10)
Warrant Termination Agreement, dated as of May 9, 2014, by and between the Viveve, Inc. and GBS Venture Partners Limited, trustee
for GBS BioVentures III (10)
Offer Letter to James G. Atkinson, dated February 4, 2015 (13)+
First Amendment to Lease dated January 15, 2015 between The Castine Group and Viveve, Inc. (16)
Second Amendment to Loan and Security Agreement dated May 14, 2015 between Viveve, Inc. and Square 1 Bank (16)
Form of Securities Purchase Agreement dated May 12, 2015 (16)
Form of Registration Rights Agreement dated May 12, 2015 (16)
Letter Agreement with Stonepine Capital dated May 12, 2015 (16)
Form of Securities Purchase Agreement dated November 20, 2015 (17)
Form of Registration Rights Agreement dated November 20, 2015 (17)
Third Amendment to Loan and Security Agreement dated November 30, 2015 between Pacific Western Bank, as successor in interest
by merger to Square 1 Bank, and Viveve, Inc. (18)
Fourth Amendment to Loan and Security Agreement dated March 18, 2016 between Pacific Western Bank, as successor in interest by
merger to Square 1 Bank, and Viveve, Inc. *
Code of Conduct, adopted September 23, 2014 (15)
List of the Registrant’s Subsidiaries (10)
Consent of Burr Pilger Mayer, Inc.*
Power of Attorney*
Certification of the Company’s Principal Executive Officer pursuant to 15d-15(e), under the Securities and Exchange Act of 1934.*
Certification of the Company’s Principal Financial Officer pursuant to 15d-15(e), under the Securities and Exchange Act of 1934.*
Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.**
Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.**
69
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document*
XBRL Taxonomy Extension Schema Document*
XBRL Taxonomy Extension Calculation Linkbase Document*
XBRL Taxonomy Extension Definition Linkbase Document*
XBRL Taxonomy Extension Label Linkbase Document*
XBRL Taxonomy Extension Presentation Linkbase Document*
* Filed herewith.
**These exhibits are furnished, not filed.
+ Contract with management.
(1)Incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange
Commission on August 11, 2014.
(2)Incorporated by reference to Annex B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange
Commission on August 11, 2014.
(3)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and
Exchange Commission on March 25, 2005.
(4)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2014.
(5)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 filed with the Securities and
Exchange Commission on March 30, 2000.
(6)Incorporated by reference to the Registrant’s Form S-1 filed with the Securities and Exchange Commission on November 21, 2014.
(7)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2011.
(8)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2014.
(9)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2014.
(10)Incorporated by reference to the Amendment No. 1 to the Registrant’s Form S-1 filed with the Securities and Exchange Commission on January 26,
2015.
(11)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2014.
(12)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16,
2014.
(13)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 10, 2015.
(14)Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 25, 2015.
(15)Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015.
(16)Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the Securities and
Exchange Commission on May 15, 2015.
(17)Incorporated by reference to the registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2015.
(18)Incorporated by reference to the registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2015.
70
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereto
SIGNATURES
duly authorized.
March 24, 2016
March 24, 2016
VIVEVE MEDICAL, INC.
(Registrant)
By:
By:
/s/ Patricia Scheller
Patricia Scheller
Chief Executive Officer
/s/ Scott Durbin
Scott Durbin
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature
Title
Date
*
(Patricia Scheller)
Chief Executive Officer
(Principal Executive Officer)
*
(Scott Durbin)
*
(Brigitte Smith)
*
(Mark Colella)
*
(Carl Simpson)
*
(Daniel Janney)
*
(Jon Plexico)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
March 24, 2016
March 24, 2016
March 24, 2016
March 24, 2016
March 24, 2016
March 24, 2016
March 24, 2016
* Patricia Scheller, by signing her name hereto, does hereby sign this report on behalf of the directors of the Registrant above whose typed names appear,
pursuant to powers of the attorney executed by such directors and filed with the Securities and Exchange Commission.
By: /s/ Patricia Scheller
Patricia Scheller, Attorney-in-Fact
71
VIVEVE MEDICAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2015 and 2014
Consolidated Statements of Operations - Years Ended December 31, 2015 and 2014
Consolidated Statements of Stockholders’ Equity (Deficit) - Years Ended December 31, 2015 and 2014
Consolidated Statements of Cash Flows - Years Ended December 31, 2015 and 2014
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7 – F24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Viveve Medical, Inc.
We have audited the accompanying consolidated balance sheets of Viveve Medical, Inc. (a Yukon Territory corporation) and its subsidiaries (the
“Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for
each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor have we been engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Viveve Medical,
Inc. and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the two years in the period
ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has incurred recurring losses and negative cash flow from operations since inception.
These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in
Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Burr Pilger Mayer, Inc.
San Jose, California
March 24, 2016
F-2
VIVEVE MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued liabilities
Note payable
Total liabilities
Commitments and contingences (Note 7)
Stockholders’ equity (deficit):
Preferred stock, no par value; unlimited shares authorized; no shares issued and outstanding as of
December 31, 2015 and 2014
Common stock and paid-in capital, no par value; unlimited shares authorized as of December 31, 2015
and 2014; 59,919,025 and 18,341,294 shares issued and outstanding as of December 31, 2015 and
2014, respectively
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
December 31,
2015
December 31,
2014
$
$
$
$
7,360 $
593
1,549
1,615
11,117
239
138
11,494 $
1,432 $
1,293
4,833
7,558
895
6
131
923
1,955
187
156
2,298
416
223
2,500
3,139
-
-
52,447
(48,511)
3,936
11,494 $
35,244
(36,085)
(841)
2,298
The accompanying notes are an integral part of these consolidated financial statements.
F-3
VIVEVE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Interest expense
Other income (expense), net
Comprehensive and net loss
Net loss per share:
Basic and diluted
Weighted average shares used in computing net loss per common share
Basic and diluted
Year Ended
December 31,
2015
2014
1,447 $
985
462
4,988
7,464
12,452
(11,990)
(415)
(21)
(12,426) $
90
50
40
1,426
4,276
5,702
(5,662)
(567)
49
(6,180)
(0.31) $
(1.27)
40,181,427
4,865,546
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
VIVEVE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For each of the two years in the period ended December 31, 2015
(in thousands, except share data)
Convertible
Preferred Stock
Series A
Convertible
Preferred Stock
Series B
Common Stock,
$0.001
par value
Common Stock and Additional
Paid-In Capital
Paid-In Accumulated
Shares
Amount
Shares
Amount Shares
Amount Shares
Amount Capital
Deficit
Total
Stockholders’
Equity
(Deficit)
23,863,302 $
24 171,199,348 $
171 6,555,305 $
7
- $
- $
22,396 $
(29,905) $
(7,307)
(23,863,302)
(24) (171,199,348)
(171) (6,555,305)
(7) 3,743,282 28,551
(28,365)
(16)
5,397
572
5,397
572
943,596
2,024,217
-
-
8,389,187
4,204
4,204
2,916,380
1,546
1,546
622
137
184
160
-
622
137
184
-
Balances as of
December 31,
2013
Extinguishment
of related party
convertible
notes and
related accrued
interest
Extinguishment
of warrants
Stock exchange
pursuant to
Merger
Agreement
Issuance of
common stock
upon automatic
conversion of
warrant in
connection
with
extinguishment
of related party
convertible
notes
PLC common
stock assumed
in connection
with Merger
Private
placement
offering, net of
issuance costs
Conversion of
outstanding
amount of
principal and
interest of
certain bridge
notes in
connection
with private
placement
offering
Issuance of
warrant in
connection
with note
payable
Issuance of
warrants to
vendors and
service
providers
Stock-based
compensation
expense
Exercise of stock
option
Cancellation of
shares in
exchange for
rights to shares
Issuance of
shares pursuant
to rights to
shares
Net loss
Balances as of
December 31,
2014
May 2015
Offering, net of
issuance costs
November 2015
Offering, net of
issuance costs
Issuance of
warrants to
employees for
performance
bonuses
Issuance of
warrants to
vendors and
service
providers
Issuance of
warrant in
connection
with note
payable
Stock-based
compensation
expense
Issuance of
shares pursuant
to rights to
shares
Exercise of
warrant
Net loss
Balances as of
December 31,
2015
(854,989)
-
1,179,461
(6,180)
-
(6,180)
-
-
-
-
-
- 18,341,294 35,244
-
(36,085)
(841)
32,432,432 11,040
8,573,385
5,393
286
251
10
220
11,040
5,393
286
251
10
220
566,038
5,876
-
3
-
3
(12,426)
(12,426)
- $
-
- $
-
- $
- 59,919,025 $ 52,447 $
- $
(48,511) $
3,936
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Year Ended
December 31,
2015
2014
$
(12,426) $
(6,180)
VIVEVE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation
Fair value of warrants issued to employees for bonuses
Fair value of warrants issued to service providers
Revaluation of fair value of warrant liability
Non-cash interest expense
Loss on disposal of property and equipment
Changes in assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other noncurrent assets
Accounts payable
Accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Net cash proceeds from issuance of common stock in connection with private placement offerings
Proceeds from note payable
Repayments of notes payable
Proceeds from exercise of warrant
Proceeds from related party convertible bridge notes
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents - beginning of period
Cash and cash equivalents - end of period
Supplemental disclosure:
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of cash flow information as of end of period:
Net transfer of equipment between inventory and property and equipment
Issuance of warrant in connection with note payable
Conversion of certain bridge notes and related accrued interest in connection with private placement
offering
Extinguishment of convertible notes debt and related related accrued interest pursuant to Merger
Agreement
Extinguishment of warrants pursuant to Merger Agreement
Payable to non-accredited investors in connection with Merger Agreement
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
77
220
286
251
-
197
-
(587)
(1,438)
(879)
18
1,016
1,070
(12,195)
(109)
(109)
16,433
2,500
(167)
3
-
18,769
6,465
895
7,360 $
196 $
1 $
20 $
10 $
- $
- $
- $
- $
56
184
-
137
(52)
418
2
(6)
97
(41)
(112)
(551)
57
(5,991)
(117)
(117)
4,204
2,500
(1,631)
-
1,500
6,573
465
430
895
149
1
-
622
1,546
5,397
572
16
VIVEVE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
The Company and Basis of Presentation
On September 23, 2014, Viveve® Medical, Inc. (formerly PLC Systems Inc.) a Yukon Territory corporation (“ Viveve Medical”, the “Company”,
“we”, “our”, or “us”) completed a reverse acquisition and recapitalization pursuant to the terms and conditions of an Agreement and Plan of
Merger (“Merger Agreement”) by and among the Company, Viveve, Inc., a Delaware corporation (“Viveve”) and PLC Systems Acquisition Corp.,
a wholly owned subsidiary of the Company (the “Merger”). As of that date, Viveve operates as a wholly-owned subsidiary of the Company and on
that date the Company changed its name from PLC Systems Inc. to Viveve Medical, Inc. Viveve Medical competes in the women’s health industry
by marketing the Viveve System™ as a way to improve the overall sexual well-being and quality of life of women suffering from vaginal laxity.
Viveve Medical retained all its personnel following the Merger and continues to be headquartered in Sunnyvale, California.
At the effective time of the Merger, the Company divested the ownership of its former operating subsidiaries, PLC Medical Systems, Inc. and PLC
Systemas Medicos Internacionais, which, following the Merger, operate as independent entities under new ownership.
In connection with the Merger, certain outstanding convertible bridge notes in the aggregate principal amount of $4,875,000 and related accrued
interest of approximately $522,000 were extinguished.
Additionally, warrant liabilities of Viveve for approximately $572,000 were extinguished in connection with the Merger.
Pursuant to the Merger Agreement, all shares of capital stock (including common and preferred stock) of Viveve owned by accredited investors
were converted into 3,743,282 shares of the Company's common stock which represented approximately 62% of the issued and outstanding shares
of common stock of the Company on a fully diluted basis. In addition, non-accredited investors of Viveve were entitled to receive, on a pro-rata
basis, an aggregate of approximately $16,000 in exchange for the shares of common stock of Viveve owned by such shareholders upon closing.
Upon the closing of the Merger, an additional 943,596 shares of the Company’s common stock were issued upon the automatic conversion of a
warrant issued in exchange for the cancellation of related party convertible bridge notes.
The acquisition was accounted for as a reverse merger and recapitalization effected by a share exchange. Viveve was considered the acquirer for
accounting and financial reporting purposes. The assets and liabilities of the acquired entity were brought forward at their book value and no
goodwill was recognized.
Concurrent with the Merger, Viveve Medical completed a private placement for total gross proceeds of approximately $6 million (including the
conversion of approximately $1.5 million in outstanding convertible bridge notes) (the “September 2014 Offering”). As a result, Viveve Medical
issued 11,305,567 shares of common stock (which excludes an additional 101,365 shares of common stock which were not issued as a result of
beneficial ownership limitations) and 5-year warrants to purchase up to 940,189 shares of common stock at an exercise price of $0.53 per share.
On May 14, 2015, in connection with the closing of a private placement (the “May 2015 Offering”), Viveve Medical issued an aggregate
of 32,432,432 shares of common stock at $0.37 per share for gross proceeds of approximately $12,000,000 in accordance with the terms and
conditions of those certain Securities Purchase Agreements by and between the Company and certain accredited investors. The net proceeds to the
Company after the deduction of placement agent commissions and other expenses were approximately $11,040,000.
F-7
On November 24, 2015, in connection with the closing of a private placement (the “November 2015 Offering”), Viveve Medical issued an
aggregate of 8,573,385 shares of common stock at $0.70 per share for gross proceeds of approximately $6,000,000 in accordance with the terms
and conditions of those certain Securities Purchase Agreements by and between the Company and certain accredited investors. The net proceeds to
the Company after the deduction of placement agent commissions and other expenses were approximately $5,393,000.
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses from operations since its inception and has
an accumulated deficit of $48,511,000 as of December 31, 2015. Management expects operating losses to continue through the foreseeable future.
The Company's ability to transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost
structure. The Company has not generated significant revenues and has funded its operating losses through the sale of preferred and common stock
and the issuance of debt. The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently
encountered by companies in the industry. These risks include, but are not limited to, the uncertainty of availability of additional financing and the
uncertainty of achieving future profitability. Management of the Company intends to raise additional funds through the issuance of equity
securities. There can be no assurance that such financing will be available or on terms which are favorable to the Company. Failure to generate
sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the
Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a
going concern. The consolidated financial statements do not contain any adjustments that might result from the outcome of this uncertainty.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, Viveve and Viveve BV (which
was established in January 2015). All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America (“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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less, at the time of purchase, to be
cash equivalents. The Company’s cash and cash equivalents are deposited in demand accounts primarily at one financial institution. Deposits in
this institution may, from time to time, exceed the federally insured amounts.
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.
F-8
The Company’s products may require 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 approvals. If the
Company was denied such approvals or such 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 outsources the manufacture and repair of the Viveve System to a single contract manufacturer. Also, certain other components and
materials that comprise the Viveve System 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.
During the year ended December 31, 2015, four customers accounted for 87% of the Company’s revenue. During the year ended December 31,
2014, two customers accounted for 91% of the Company’s revenue. As of December 31, 2015, three customers accounted for 86% of total
accounts receivable.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts
for estimated losses resulting from the inability of its customers to make required payments. The Company makes ongoing assumptions relating to
the collectibility of its accounts receivable in its calculation of the allowance for doubtful accounts. In determining the amount of the allowance,
the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations and assesses current economic trends
affecting its customers that might impact the level of credit losses in the future and result in different rates of bad debts than previously seen. The
Company also considers its historical level of credit losses. As of December 31, 2015 and 2014, there was no allowance for doubtful accounts.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined on an actual cost basis on a first-in, first-out method. Lower of cost or market
is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of
inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory
is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not
result in the restoration or increase in that newly established cost basis.
As part of the Company’s normal business, the Company generally utilizes various finished goods inventory as sales demos to facilitate the sale of
its products to prospective customers. The Company is amortizing these demos over an estimated useful life of five years. The amortization of the
demos is charged to selling, general and administrative expense and the demos are included in the medical equipment line within the property and
equipment, net balance on the consolidated balance sheets as of December 31, 2015 and 2014.
F-9
Property and Equipment, net
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation of property and equipment is computed
using the straight line method over their estimated useful lives of three to seven years. Leasehold improvements are amortized on a straight-line
basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation
and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged
to operations as incurred.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
might not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the
anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to
fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has
not identified any such impairment losses to date.
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 delivery, 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 outside the U.S. and currently sells the Viveve System in Canada, Hong Kong, Japan, Europe, the Middle East
and Southeast Asia.
The Company does not provide its customers with a contractual right of return.
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.
Shipping and Handling Costs
The Company includes amounts billed for shipping and handling in revenue and shipping and handling costs in cost of revenue.
Advertising Costs
Advertising costs are charged to general and administrative expenses as incurred. Advertising expenses, which are recorded in selling, general and
administrative expenses, were immaterial for the years ended December 31, 2015 and 2014.
Research and Development
Research and development costs are charged to operations as incurred. Research and development costs include, but are not limited to, payroll and
personnel expenses, prototype materials, laboratory supplies, consulting costs, and allocated overhead, including rent, equipment depreciation, and
utilities.
F-10
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach,
deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.
The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.
Deferred taxes result from differences between the financial and tax basis of the Company’s assets and liabilities and are adjusted for changes in
tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not
that a tax benefit will not be realized.
The Company must assess the likelihood that the Company’s deferred tax assets will be recovered from future taxable income, and to the extent
the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management judgment is required in
determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net
deferred tax assets. The Company recorded a full valuation allowance as of December 31, 2015 and 2014. Based on the available evidence, the
Company believes it is more likely than not that it will not be able to utilize its deferred tax assets in the future. The Company intends to
maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes
estimates and judgments about its future taxable income that are based on assumptions that are consistent with its plans. Should the actual
amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted.
The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax
benefits as a component of income tax expense. The Company does not believe there are any tax positions for which it is reasonably possible
that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.
Accounting for Stock-Based Compensation
Share-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee’s
service period. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award.
We determined that the Black-Scholes option pricing model is the most appropriate method for determining the estimated fair value for stock
options. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of
share-based awards, including the option’s expected term and the price volatility of the underlying stock.
Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the
underlying equity instruments vest.
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 years ended December 31, 2015 and 2014, 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, warrants to purchase common stock, stock options and rights to common stock 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.
F-11
The following securities were excluded from the calculation of net loss per share because the inclusion would be anti-dilutive.
Stock options to purchase common stock
Warrants to purchase common stock
Rights to common stock
Recently Issued and Adopted Accounting Standards
Year Ended
December 31,
2015
2014
8,177,291
3,066,447
-
2,291,783
1,793,887
566,038
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 U.S. 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. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, “Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could be Achieved After a Requisite Service Period” (“ASU 2014-12”).
Companies commonly issue share-based payment awards that require a specific performance target to be achieved in order for employees to
become eligible to vest in the awards. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the
requisite service period should be treated as a performance condition. The performance target should not be reflected in estimating the grant date
fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be
achieved. ASU 2014-12 will be effective for the Company’s fiscal year beginning fiscal 2016 and interim reporting periods within that year, using
either the retrospective or prospective transition method. Early adoption is permitted. We are currently evaluating the effect of the adoption of this
guidance on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 310-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), to provide guidance on management’s responsibility in
evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures.
ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are
currently evaluating the effect of the adoption of this guidance on our consolidated financial statements and disclosures.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires
that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. ASU 2015-03 is effective for the Company’s fiscal year beginning January 1, 2016 and
subsequent interim periods, with earlier adoption permitted. We will adopt this guidance in the first quarter of 2016. We do not expect the adoption
of this guidance to have a material effect on our consolidated financial statements.
F-12
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”) 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 are currently evaluating the effect of the
adoption of this guidance on our consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” ("ASU 2015-17'), which amends
existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates
the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a
classified balance sheet. The standard is effective for the Company’s fiscal year 2017. Early adoption is permitted. As permitted by ASU 2015-17,
the Company early-adopted this standard and applied it retrospectively to all periods of the tax provision presented. As the Company has a full
valuation allowance against the deferred assets, there is no impact to the consolidated financial statements. The Company has reflected the change
of this pronouncement in Note 12 to the consolidated financial statements.
3.
Fair Value Measurements
The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the
valuation (Level 3 measurements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.
Level 1
Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or
liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require
significant judgment, and the estimation is not difficult.
Level 2
Pricing is provided by third party sources of market information obtained through investment advisors. The Company does not
adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.
Level 3
Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of
significant management judgment. These values are generally determined using pricing models for which the assumptions
utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 instruments
involves the most management judgment and subjectivity.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires
management to make judgments and consider factors specific to the asset or liability.
There were no financial instruments that were measured at fair value on a recurring basis as of December 31, 2015 and 2014.
The carrying amounts of the Company’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable,
and accrued expenses as of December 31, 2015 and 2014 approximate fair value because of the short maturity of these instruments. Based on
borrowing rates currently available to the Company for loans with similar terms, the carrying value of the notes payable approximates fair value.
There were no changes in valuation technique from prior periods.
F-13
4.
Property and Equipment, Net
Property and equipment, net, consisted of the following as of December 31, 2015 and 2014 (in thousands):
Medical equipment
Computer equipment
Furniture and fixtures
Less: Accumulated depreciation and amortization
Property and equipment, net
Life
(in years)
December 31,
2015
2014
5
3
7
$
$
454 $
56
24
534
(295)
239 $
367
39
13
419
(232)
187
Depreciation and amortization expense for the years ended December 31, 2015 and 2014 was $77,000 and $56,000, respectively.
5.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2015 and 2014 (in thousands):
Accrued professional fees
Accrued clinical trial costs
Accrued bonuses
Accrued vacation
Other accruals
Total accrued liabilities
F-14
December 31,
2015
December 31,
2014
$
$
388 $
112
613
68
112
1,293 $
117
-
-
86
20
223
6.
Note Payable
On September 30, 2014, we entered into a Loan and Security Agreement, as amended on February 19, 2015 and May 14, 2015 (collectively, the
“Loan Agreement”), pursuant to which we received a term loan in the amount of $5.0 million, funded in 3 tranches. The first tranche of $2.5
million was provided to us on October 1, 2014. The proceeds from the first tranche were used to repay the existing loan with a financial institution
which totaled approximately $1,631,000 and the balance was used for general working capital purposes and capital expenditures. The first tranche
borrowing is repayable in interest only payments until November 1, 2015 and then 30 equal monthly installments of principal and interest at a rate
of 5.25% per annum. The second tranche of the term loan is equal to $1.5 million, of which $500,000 was provided to us on each of February 19,
2015, March 16, 2015 and April 6, 2015. The second tranche borrowings in February, March and April 2015 are repayable in interest only
payments until March 1, 2016 and then 30 equal monthly installments of principal and interest at a rate of 5.00%, 5.06% and 5.00% per annum,
respectively. The Company provided evidence to the lender of positive three month interim results with respect to the Company’s randomized,
blinded and sham-controlled clinical trial in Europe and Canada (the “OUS Clinical Trial”), and on July 15, 2015 we received the final $1,000,000
drawdown of funds from the third tranche. The third tranche borrowing is repayable in interest only payments until August 1, 2016 and then 30
equal monthly installments of principal and interest at a rate of 6.56% per annum. The proceeds from the second and third tranches will be used for
general working capital purposes and capital expenditures. As of December 31, 2015 and 2014, the note payable had an outstanding term loan
principal balance of $4.8 million and $2.5 million, respectively, which is recorded as a current liability on the consolidated balance sheets. All
borrowings under the Loan Agreement are collateralized by substantially all of the Company’s assets, including intellectual property.
The Loan Agreement also requires that the Company comply with certain financial covenants and milestones in connection with the OUS Clinical
Trial, including, but not limited to, (a) full enrollment as of March 31, 2015, (b) positive 3-month interim data as of July 10, 2015, and (c) positive
results from the trial as of January 31, 2016. Full enrollment of the OUS Clinical Trial was achieved prior to March 31, 2015 and the Company
provided evidence to the lender of positive 3-month interim results with respect to the Company’s OUS Clinical Trial prior to July 10, 2015. As of
December 31, 2015, the Company was in compliance with all covenants of the Loan Agreement.
In connection with the Loan Agreement, the Company issued a 10-year warrant to the lender for the purchase of 471,698 shares of the Company’s
common stock at $0.53 per share. In connection with the first loan amendment in February 2015, the Company also amended the terms of the
warrant issued to the lender to provide for an automatic increase of the number of shares the lender may acquire in the event the Company fails to
meet certain covenants. In connection with the second loan amendment in May 2015, the Company issued a second 10-year warrant to the lender
to purchase a total of 25,000 shares of common stock at an exercise price of $0.37 per share. (See Note 8.)
The Loan Agreement with the financial institution contains a material adverse change clause, as defined in the Loan Agreement, which would
result in an event of default if the lender deems a material adverse change to have occurred to the Company’s business. The continuing liquidity
issues the Company faces could be construed by the lender (or any subsequent note holder) as a material adverse change which could trigger an
acceleration of all of the outstanding debt. As such, the Company has classified all of its outstanding debt balance as a current liability as of
December 31, 2015 and 2014.
As of December 31, 2015, future minimum payments under the note payable are as follows (in thousands):
Year Ending December 31,
2016
2017
2018
2019
Total payments
Less: Amount representing interest
Present value of obligations
Less: Notes payable, current portion
Note payable, noncurrent portion
7.
Commitments and Contingencies
Operating Lease
$
$
1,894
2,124
1,161
34
5,213
(380)
4,833
4,833
-
In January 2012, the Company entered into a lease agreement for office and laboratory facilities. The lease agreement, as amended in January
2015, commenced in March 2012 and will terminate in March 2017. Rent expense for the years ended December 31, 2015 and 2014 was $210,000
and $171,000, respectively.
F-15
As of December 31, 2015, future minimum payments under the lease are as follows (in thousands):
Year Ending December 31,
2016
2017
Total minimum lease payments
Indemnification Agreements
229
58
287
$
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company
indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection
with performance of services within the scope of the agreement, breach of the agreement by the Company, or noncompliance of regulations or
laws by the Company, in all cases provided the indemnified party has not breached the agreement and/or the loss is not attributable to the
indemnified party’s negligence or willful malfeasance. The term of these indemnification agreements is generally perpetual any time after the
execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these
arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification
agreements. As a result, the Company believes the estimated fair value of these agreements is minimal.
Loss Contingencies
The Company is or has been subject to proceedings, lawsuits and other claims arising in the ordinary course of business. The Company evaluates
contingent liabilities, including threatened or pending litigation, for potential losses. If the potential loss from any claim or legal proceedings in
considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Because of uncertainties related to
these matters, accruals are based upon the best information available. For potential losses for which there is a reasonable possibility (meaning the
likelihood is more than remote but less than probable) that a loss exists, the Company will disclose an estimate of the potential loss or range of
such potential loss or include a statement that an estimate of the potential loss cannot be made. As additional information becomes available, the
Company reassesses the potential liability related to pending claims and litigation and may revise its estimates, which could materially impact the
consolidated financial statements.
8.
Common Stock
In conjunction with the September 2014 Offering, the Company entered into a Right to Shares Agreement with certain investors. Pursuant to this
agreement, 854,989 shares of common stock purchased by the investors in the September 2014 Offering were cancelled. The Company is
obligated to issue, and the investors have the right to receive up to 956,354 shares of the Company’s common stock, which includes 101,365
shares that were not issued in the September 2014 Offering due to beneficial ownership limitations. No additional consideration will be paid upon
the issuance of the shares and the subscription amount has been paid in full by the investors and is non-refundable. The Company is obligated to
deliver the shares to the investors within 3 days of the investors’ request for the share issuance. If the Company fails to deliver the shares within 3
days of the request, under certain circumstances defined in the Right to Shares Agreement, the Company may be obligated to reimburse the
investors in cash for losses that the investors incur as a result of not having access to the shares (the “Buy-In Shares”). In December 2014, certain
investors exercised their right to such shares and the Company issued 390,316 shares of common stock. In June 2015, certain investors exercised
their right to such shares and the Company issued 566,038 shares of common stock. As of December 31, 2015, there were no additional shares
issuable or reserved pursuant to the Rights to Shares Agreement.
F-16
The Company assessed the provisions of the Buy-In Share feature of the Right to Shares Agreements as an embedded derivative and has
concluded that the feature meets the definition of a derivative and is not clearly and closely related to the Rights to Shares equity host agreement.
The Buy-In Shares feature has been bifurcated from the Rights to Shares agreement and accounted for separately. The value of this feature was
nominal as of the issuance date and December 31, 2014.
On May 14, 2015, in connection with the closing of the May 2015 Offering, we issued an aggregate of 32,432,432 shares of common stock
at $0.37 per share for gross proceeds of approximately $12,000,000 in accordance with the terms and conditions of those certain Securities
Purchase Agreements by and between the Company and certain accredited investors. The net proceeds to the Company after the deduction of
placement agent commissions and other expenses were approximately $11,040,000.
On November 24, 2015, in connection with the closing of the November 2015 Offering, we issued an aggregate of 8,573,385 shares of common
stock at $0.70 per share for gross proceeds of approximately $6,000,000 in accordance with the terms and conditions of those certain Securities
Purchase Agreements by and between the Company and certain accredited investors. The net proceeds to the Company after the deduction of
placement agent commissions and other expenses were approximately $5,393,000.
Warrants for Common Stock
As of December 31, 2015, outstanding warrants to purchase an aggregate of 3,066,447 shares of common stock were as follows:
Issuance Date
September 2014
September 2014
October 2014
October 2014
November 2014
February 2015
March 2015
May 2015
May 2015
May 2015
December 2015
Exercisable
for
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Expiration
Date
Exercise
Price
September 23, 2019
September 30, 2024
October 13, 2019
October 31, 2019
November 12, 2019
February 17, 2025
March 26, 2025
May 12, 2025
May 14, 2025
May 17, 2020
December 16, 2025
$
$
$
$
$
$
$
$
$
$
$
Number of
Shares
Outstanding
Under
Warrants
934,313
471,698
237,000
3,750
100,000
605,556
11,628
289,827
25,000
172,675
215,000
3,066,447
0.53
0.53
0.53
0.53
0.53
0.50
0.34
0.53
0.37
0.53
0.70
In connection with the September 2014 Offering, the Company issued warrants to purchase a total of 940,189 shares of common stock at an
exercise price of $0.53 per share. The warrants have a contractual life of five years and are exercisable immediately in whole or in part, on or
before five years from the issuance date.
In connection with the Loan Agreement entered into on September 30, 2014, the Company issued a warrant to purchase a total of 471,698 shares
of common stock at an exercise price of $0.53 per share. The warrant has a contractual life of ten years and is exercisable immediately in whole or
in part, on or before ten years from the issuance date. The Company determined the fair value of the warrant on the date of issuance to be
$622,000 using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 77%, risk free interest rate of
2.5% and a contractual life of ten years. The warrant will expire on September 30, 2024. The fair value of the warrant was recorded as debt
issuance costs, included in prepaid expenses and other current assets on the consolidated balance sheets and will be amortized to interest expense
over the loan term. During the years ended December 31, 2015 and 2014, the Company recorded $187,000 and $48,000, respectively, of interest
expense relating to the debt issuance costs. As of December 31, 2015, the remaining unamortized debt issuance costs were $387,000.
F-17
In connection with the first loan amendment in February 2015, the Company also amended the terms of the warrant issued to the lender to provide
for an automatic increase of the number of shares the lender may acquire in the event the Company fails to meet certain covenants to achieve
certain OUS Clinical Trial milestones or capital raising requirements as set forth in the Loan Agreement, as amended, by a number equal to the
quotient derived by dividing (i) 1% of the principal balance outstanding under the Loan Agreement by (ii) the exercise price of $0.53 per share.
In October and November of 2014, the Company issued common stock warrants to various vendors and nonemployee contractors to purchase a
total of 382,000 shares of common stock at an exercise price of $0.53 per share. The warrants have a contractual life of five years and are
exercisable in whole or in part, either immediately upon grant or in some cases upon achieving certain milestones or vesting terms. The Company
determined the fair value of the warrants using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of
61.3%, risk free interest rate of 1.55% to 1.65% and a contractual life of five years. The fair values of the warrants were recorded as professional
consulting fees or clinical costs, which are included in selling, general and administrative and research and development expenses in the
consolidated statements of operations for the years ended December 31, 2015 and 2014, depending on the nature of the services provided. Stock-
based compensation expense related to these warrants is recognized as the warrants are earned and was $40,000 and $137,000 for the years ended
December 31, 2015 and 2014, respectively. A total of 41,250 shares issuable pursuant to warrants issued to two vendors in October 2014 were
cancelled in 2015 as the milestones related to these shares were not achieved.
In February 2015, the Company issued common stock warrants to employees for performance bonuses to purchase a total of 605,556 shares of
common stock at an exercise price of $0.50 per share. The warrants have a contractual life of ten years and are exercisable immediately in whole or
in part, on or before ten years from the issuance date. The Company determined the fair value of the warrants using the Black-Scholes option
pricing model. Assumptions used were dividend yield of 0%, volatility of 77.6%, risk free interest rate of 2.14% and a contractual life of ten years.
The fair values of the warrants were recorded in selling, general and administrative and research and development expenses in the consolidated
statements of operations, depending on the department classification of the employee. The stock-based compensation expense related to these
warrants was $244,000 for the year ended December 31, 2015.
In March 2015, the Company issued a common stock warrant to a nonemployee contractor to purchase a total of 11,628 shares of common stock at
an exercise price of $0.34 per share. The warrant has a contractual life of ten years and is exercisable immediately in whole or in part, on or before
ten years from the issuance date. The Company determined the fair value of the warrant using the Black-Scholes option pricing model.
Assumptions used were dividend yield of 0%, volatility of 78.9%, risk free interest rate of 1.94% and a contractual life of ten years. The fair value
of the warrant was recorded as professional consulting fees, which are included in selling, general and administrative expenses in the consolidated
statements of operations. The stock-based compensation expense related to this warrant was $3,000 for the year ended December 31, 2015.
In May 2015, the Company issued common stock warrants to nonemployee contractors to purchase a total of 289,827 shares of common stock at
an exercise price of $0.53 per share. The warrants have a contractual life of ten years and are exercisable immediately in whole or in part, on or
before ten years from the issuance date. The Company determined the fair value of the warrants using the Black-Scholes option pricing model.
Assumptions used were dividend yield of 0%, volatility of 80.1%, risk free interest rate of 2.28% and a contractual life of ten years. The fair values
of the warrants were recorded as professional consulting fees, which are included in selling, general and administrative expenses in the
consolidated statements of operations. The stock-based compensation expense related to these warrants was $73,000 for the year ended December
31, 2015.
F-18
In conjunction with the second loan amendment in May 2015, the Company issued a warrant to the lender to purchase a total of 25,000 shares of
common stock at an exercise price of $0.37 per share. The warrant has a contractual life of ten years and is exercisable immediately in whole or in
part, on or before ten years from the issuance date. The Company determined the fair value of the warrant on the date of issuance to be $10,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 80.1%, risk free interest rate of 2.23%
and a contractual life of ten years. The fair value of the warrant was recorded as debt issuance costs, included in prepaid expenses and other
current assets on the consolidated balance sheets and was amortized to interest expense over the period from the date of issuance to the end of the
extended period to draw down the additional funds in connection with the third tranche or July 15, 2015. During the year ended December 31,
2015, the Company recorded $10,000 of interest expense relating to the debt issuance costs. As of December 31, 2015, the remaining unamortized
debt issuance costs were zero.
In May 2015, the Company issued a common stock warrant to a nonemployee contractor to purchase a total of 172,675 shares of common stock at
an exercise price of $0.53 per share. The warrant has a contractual life of five years and is exercisable immediately in whole or in part, on or before
five years from the issuance date. The Company determined the fair value of the warrant using the Black-Scholes option pricing model.
Assumptions used were dividend yield of 0%, volatility of 64.4%, risk free interest rate of 1.54% and a contractual life of five years. The fair value
of the warrant was recorded as professional consulting fees, which are included in selling, general and administrative expenses in the consolidated
statements of operations. The stock-based compensation expense related to these warrants was $47,000 for the year ended December 31, 2015.
In December 2015, the Company issued common stock warrants to employees and nonemployee contractors for performance bonuses to purchase
a total of 215,000 shares of common stock at an exercise price of $0.70 per share. The warrants have a contractual life of ten years and are
exercisable immediately in whole or in part, on or before ten years from the issuance date. The Company determined the fair value of the warrants
using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 76.8%, risk free interest rate of 2.27%
and a contractual life of ten years. The fair values of the warrants were recorded in selling, general and administrative and research and
development expenses in the consolidated statements of operations, depending on the department classification of the employee or nonemployee
contractor. The stock-based compensation expense related to these warrants was $130,000 for the year ended December 31, 2015.
9.
Summary of Stock Options
Stock Option Plans
The Company has issued equity awards in the form of stock options 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 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 December 31, 2015, 22,095 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 22,095 shares of the Company’s common stock. The
weighted average exercise price of the outstanding stock options is $12.83 per share and the weighted average remaining contractual term is 1.36
years.
F-19
The 2006 Plan was adopted by the board of directors of Viveve and was terminated in conjunction with 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). The number of shares of the Company’s common stock into
which the 2006 Plan options were converted was determined by multiplying the number of shares covered by each 2006 Plan option by the
exchange ratio of 0.0080497. The exercise price of each 2006 Plan option was determined by dividing the exercise price of each 2006 Plan option
immediately prior to the Merger by the exchange ratio of 0.0080497 (rounded up to the nearest cent). There are currently outstanding stock option
awards issued from the 2006 Plan covering a total of 322,069 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 $1.54 per share and the weighted average remaining contractual
term is 6.64 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 July 22, 2015, 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 3,111,587 shares to a total of 10,100,000 shares. As of December 31, 2015, there are outstanding stock option awards issued from the 2013
Plan covering a total of 7,833,127 shares of the Company’s common stock and there remain reserved for future awards 1,944,644 shares of the
Company’s common stock. The weighted average exercise price of the outstanding stock options is $0.74 per share, and the remaining contractual
term is 9.51 years.
Activity under the 2005 Plan, the 2006 Plan and the 2013 Plan is as follows:
Year Ended December 31, 2015
Weighted
Weighted Average
Number Average Remaining
Exercise Contractual
Aggregate
Intrinsic
Value
of
Shares
Number Average Remaining
Exercise Contractual
Price
of
Price
Term (years) (in thousands) Shares
Term (years) (in thousands)
Aggregate
Intrinsic
Value
Year Ended December 31, 2014
Weighted
Weighted Average
Options outstanding,
beginning of period 2,291,783 $
Options granted
6,031,004 $
Options assumed
from PLC
Options exercised
Options canceled
Options outstanding,
end of period
- $
- $
(145,496) $
8,177,291 $
1.02
0.73
-
-
0.69
0.81
9.32 $
- 363,413 $
1,901,476 $
1.24
0.60
8.80
68,238 $
(160) $
(41,184) $
10.24
0.12
1.83
9.37 $
1,194,180 2,291,783 $
1.02
9.32 $
Vested and
exercisable and
expected to vest, end
of period
Vested and
exercisable, end of
period
7,418,006 $
0.82
9.33 $
1,094,069 2,099,687 $
1.06
9.29 $
974,849 $
1.58
7.20 $
143,458 519,901 $
2.45
7.89 $
-
-
-
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 December 31, 2015.
F-20
The options outstanding and exercisable as of December 31, 2015 are as follows:
Options Outstanding
Options Exercisable
Number
Outstanding
as of
December 31,
2015
Weighted
Average
Exercise
Weighted
Average
Remaining
Contractual
Price
Term (Years)
Number
Exercisable
as of
December 31,
2015
Weighted
Average
Exercise
Price
Range of
Exercise Prices
$0.46
$0.89
$7.00
$12.00
$0.33
-
$0.60
$0.75
-
$1.24
-
-
$37.00
$0.47
$0.99
$9.00
$18.63
100,000 $
635,000 $
1,768,980 $
4,949,004 $
335,000 $
312,373 $
57,603 $
19,081 $
250 $
8,177,291 $
0.33
0.47
0.60
0.75
0.96
1.24
8.64
15.29
37.00
0.81
9.37
9.11
8.55
9.97
9.60
6.79
1.61
1.75
1.73
9.37
- $
- $
585,542 $
- $
- $
312,373 $
57,603 $
19,081 $
250 $
974,849 $
-
-
0.60
-
-
1.24
8.64
15.29
37.00
1.58
Stock-Based Compensation
During the years ended December 31, 2015 and 2014, the weighted-average grant date fair value of options granted was $0.39 and $0.32 per share,
respectively. Stock-based compensation expense recognized during the year ended December 31, 2015 and 2014 was $220,000 and $184,000,
respectively. As of December 31, 2015, the total unrecognized compensation cost in connection with unvested stock options was approximately
$2.4 million. These costs are expected to be recognized over a period of approximately 3.71 years. The aggregate intrinsic value of options
exercised during the years ended December 31, 2015 and 2014 was $0.
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 assumptions:
Expected term (in years)
Average volatility
Risk-free interest rate
Dividend yield
Year Ended
December 31,
2015
5%
63%
1.70%
0%
2014
5%
61%
1.80%
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 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.
F-21
The following table shows stock-based compensation expense included in the consolidated statements of operations for the years ended December
31, 2015 and 2014 (in thousands):
Research and development
Selling, general and administrative
Total
Year Ended
December 31,
2015
2014
$
$
18 $
202
220 $
5
179
184
Prior to the Merger, the Company’s board of directors approved the acceleration of vesting of all unvested stock options that were outstanding
under the 2006 Plan as of the date of the Merger. For the year ended December 31, 2014, the Company recorded additional stock-based
compensation expense (primarily in selling, general and administrative expenses in the consolidated statement of operations for the year ended
December 31, 2014) of approximately $103,000 associated with the acceleration of vesting of approximately 140,000 affected stock options.
12.
Income Taxes
No provision for income taxes has been recorded due to the net operating losses incurred from inception to date, for which no benefit has been
recorded.
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
Income tax provision (benefit) at statutory rate
State income taxes, net of federal benefit
Merger transaction costs
Change in valuation allowance
Other
Effective tax rate
Year Ended
December 31,
2015
2014
(34)%
(6)%
0%
39%
1%
0%
The components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Capitalized start up costs
Research and development credits
Accruals and reserves
Total deferred tax assets
Deferred tax liabilities:
Fixed assets and depreciation
Valuation allowance
Net deferred tax assets
December 31,
2015
2014
$
10,726 $
7,225
248
497
18,696
(8)
(18,688)
$
- $
F-22
(34)%
(6)%
6%
37%
(3)%
0%
5,770
7,751
189
169
13,879
(13)
(13,866)
-
The Company has recorded a full valuation allowance for its deferred tax assets based on it past losses and the uncertainty regarding the ability to
project future taxable income. The valuation allowance increased by approximately $4,822,000 and $2,257,000 during the years ended December
31, 2015 and 2014, respectively.
As of December 31, 2015, the Company has net operating loss carryforwards for federal and state income tax purposes of approximately
$26,927,000 and $26,915,000, respectively, which expire beginning in the year 2017.
The Company also has federal and California research and development tax credits of approximately $214,000 and $212,000, respectively. The
federal research credits will begin to expire in 2027 and the California research and development credits have no expiration date.
The above net operating losses and research and development credits are subject to Sections 382 and 383 of the Internal Revenue Code. In the
event of a change in ownership as defined by these code sections, the usage of the above mentioned net operating losses and research and
development credits may be limited.
As of December 31, 2015, the Company had not accrued any interest or penalties related to uncertain tax positions.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year Ended
December 31,
2015
2014
Balance at the beginning of the year
Additions based upon tax positions related to the current year
Balance at the end of the year
$
$
97 $
31
128 $
83
14
97
If the ending balance of $128,000 of unrecognized tax benefits as of December 31, 2015 were recognized, none of the recognition would affect the
income tax rate. The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months. The
unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.
The Company files U.S. federal and state income tax returns with varying statutes of limitations. All tax years since inception remain open to
examination due to the carryover of unused net operating losses and tax credits.
13. Related Party Transactions
In June 2006, the Company entered into a Development and Manufacturing Agreement with Stellartech Research Corporation (the “Agreement”).
The Agreement was amended on October 4, 2007. Under the Agreement, the Company agreed to purchase 300 generators manufactured by
Stellartech. As of December 31, 2015, the Company has purchased 112 units. The price per unit is variable and dependent on the volume and
timing of units ordered. In conjunction with the Agreement, Stellartech purchased 300,000 shares of Viveve’s common stock at par value (2,415
shares of the Company’s common stock post-Merger based on the exchange ratio of 0.0080497). These shares are subject to a right of repurchase
by the Company, which lapses over a four-year period. As of December 31, 2015, none of the shares of common stock were subject to repurchase.
Under the Agreement, the Company paid Stellartech $3,446,000 and $484,000 for goods and services during the years ended December 31, 2015
and 2014, respectively.
F-23
14.
Segments and Geographic Information
Revenue from unaffiliated customers by geographic area were as follows (in thousands):
Asia
Europe and Middle East
Rest of the world
Total
Year Ended
December 31,
2015
2014
$
$
889 $
551
7
1,447 $
The Company’s long-lived assets by geographic area were as follows (in thousands):
United States
Europe
Asia
Canada
Total
Year Ended
December 31,
2015
2014
$
$
100 $
99
32
8
239 $
83
-
7
90
60
106
-
21
187
Long-lived assets, comprised of property and equipment, are reported based on the location of the assets at each balance sheet date.
15.
Subsequent Events
In January 2016, the Company entered into a commercial relationship with a specialized supplier of medical devices to certain Asian Pacific
countries. The supplier is headquartered in Taipei, Taiwan. This exclusive, 3 year distribution relationship expands our global presence and
includes minimum purchase requirements of 47 Viveve Systems in 2016, 75 in 2017 and 109 in 2018.
On March 18, 2016, we entered into the Fourth Amendment to the Loan Agreement (the "Fourth Amendment") pursuant to which the lender
waived certain covenant failures subsequent to December 31, 2015 including providing evidence of positive results from the OUS Clinical Trial as
of January 31, 2016 and maintaining a minimum cash balance. The Fourth Amendment also extended the date for the requirement that we provide
evidence of positive results from the OUS Clinical Trial and revised the minimum cash balance requirement to April 30, 2016. Following
execution of the Fourth Amendment, we must maintain a balance of cash of at least $3,000,000 at the lender’s institution.
F-24
Exhibit 4.12
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: February 17, 2015
To Purchase 208,140 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Scott Durbin (the “Holder”), is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the “ Termination
Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the “Company”), up to
an aggregate of 208,140 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common Stock”) in
accordance with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under this
Warrant shall be $0.50 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
2
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
3
11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
4
1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
6
(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: February 23, 2015
VIVEVE MEDICAL, INC.
By: /s/ Patricia Scheller
Name: Patricia Scheller
Title: Chief Executive Officer
8
To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
Exhibit 4.13
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: February 17, 2015
To Purchase 43,024 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Jim Robbins (the “Holder”), is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the “ Termination
Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the “Company”), up to
an aggregate of 43,024 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common Stock”) in accordance
with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be
$0.50, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
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Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
3
11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
4
1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
6
(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: February 23, 2015
VIVEVE MEDICAL, INC.
By: /s/ Scott Durbin
Name: Scott C. Durbin
Title: Chief Financial Officer
8
To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
Exhibit 4.14
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: February 17, 2015
To Purchase 205,814 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Pat Scheller (the “Holder”), is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the “ Termination
Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the “Company”), up to
an aggregate of 205,814 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common Stock”) in
accordance with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under this
Warrant shall be $0.50 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
2
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
3
11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
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1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
6
(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: February 23, 2015
VIVEVE MEDICAL, INC.
By: /s/ Scott Durbin
Name: Scott C. Durbin
Title: Chief Financial Officer
8
To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
Exhibit 4.15
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: May 12, 2015
To Purchase 217,733 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, James Atkinson (the “Holder”), is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the “ Termination
Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the “Company”), up to
an aggregate of 217,733 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common Stock”) in
accordance with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under this
Warrant shall be $0.53, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
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Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
3
11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
4
1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
6
(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: May 27, 2015
VIVEVE MEDICAL, INC.
By: /s/ Patricia Scheller
Name: Patricia Scheller
Title: Chief Executive Officer
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To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
Exhibit 4.16
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: December 16, 2015
To Purchase 50,000 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, James Atkinson (the “Holder”), is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the
“Termination Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the
“Company”), up to an aggregate of 50,000 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common
Stock”) in accordance with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under
this Warrant shall be $0.70 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant
is exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
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Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
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11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
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1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
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(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: December 17, 2015
VIVEVE MEDICAL, INC.
By: /s/ Patricia Scheller
Name: Patricia Scheller
Title: Chief Executive Officer
8
To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other
name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
Exhibit 4.17
THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
Issue Date: December 16, 2015
To Purchase 15,000 Shares of Common Stock of
VIVEVE MEDICAL, INC.
THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Jim Robbins (the “Holder”), is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the
“Initial Exercise Date”) and on or prior to the close of business on the earlier of the tenth anniversary of the Issue Date (the
“Termination Date”) but not thereafter, to subscribe for and purchase from Viveve Medical, Inc., a Yukon Territory corporation (the
“Company”), up to an aggregate of 15,000 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common
Stock”) in accordance with Section 3 or Section 4 herein. The purchase price of one share of Common Stock (the “Exercise Price”) under
this Warrant shall be $0.70 subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant
is exercisable shall be subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date, this Warrant and all rights hereunder are non-transferable.
2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part,
at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Upon
payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the
Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for Warrant Shares purchased
hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as
aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant
Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 prior to the issuance of such shares, have been paid. If the Company fails to
deliver to the Holder a certificate or certificates representing the number of Warrant Shares exercised pursuant to this Section 3(a) by the
fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
4. Cashless Exercise. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at
any time or times on or after the Initial Exercise Date and on or before the Termination Date, by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by
means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
2
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via
cashless exercise pursuant to this Section 4.
5 . Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant.
6 . No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
7 . Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name of the Holder.
8 . Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.
9. Division and Combination.
(a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the Holder’s and the denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(c) The Company agrees to maintain, at its aforesaid office, books for the registration of this Warrant and any
other new Warrants that may be issued upon the division or combination of this Warrant under this Section 7.
1 0 . No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as
of the close of business on the later of the date of such surrender or payment.
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11. Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
1 3 . Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares
or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in
advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from
such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
4
1 4 . Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this
Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
15. Voluntary Adjustment by the Company . The Company may at any time during the term of this Warrant reduce
the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
1 6 . Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice
thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
17. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
5
(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially
affected thereby), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance
with Section 19(c).
18. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the trading market upon which the Common Stock may be listed.
19. Miscellaneous.
conflicts of laws principles or rules.
( a ) Jurisdiction. This Warrant shall constitute a contract under the laws of California, without regard to its
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
( b ) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
6
(c) Notices. Any notice, request or other document required or permitted to be given or delivered pursuant to
this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has
been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight
courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail,
postage and charges prepaid, return receipt requested, to the following addresses:
If to the Company: Viveve Medical, Inc.
150 Commercial Street
Sunnyvale, CA 94086
Attn: Scott C. Durbin
Fax: (408) 530-1919
If to the Holder: At the Holder’s address in the Company’s Warrant register.
( d ) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(e) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.
( f ) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Holder and the Company.
(g) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
( h ) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.
[The remainder of this page has been intentionally left blank.]
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: December 17, 2015
VIVEVE MEDICAL, INC.
By: /s/ Patricia Scheller
Name: Patricia Scheller
Title: Chief Executive Officer
8
To: VIVEVE MEDICAL, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of VIVEVE MEDICAL, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:
Name:
Address:
SSN:
The Warrant Shares shall be delivered to the following:
HOLDER NAME
By:
Name:
Title:
Dated:
FOURTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
Exhibit 10.39
This Fourth Amendment to Loan and Security Agreement (the “Amendment”), is entered into as of March 18, 2016, by and between
PACIFIC WESTERN BANK, a California state chartered bank (“Bank”) and VIVEVE, INC. (“Borrower”).
RECITALS
Borrower and Bank (as successor in interest by merger to Square 1 Bank) are parties to that certain Loan and Security Agreement dated as
of September 30, 2014 (as amended from time to time, the “Agreement”). The parties desire to amend the Agreement in accordance with
the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1) Bank hereby waives Borrower’s non-compliance with (i) the OUS Clinical Trial Milestone covenant, as more particularly described in
Section 6.7(b)(iii) of the Agreement, on or before the date of this Amendment and (ii) the Minimum Cash covenant, as more
particularly described in Section 6.7(d) of the Agreement, from February 18, 2016 through the date of this Amendment.
2) Section 6.7 of the Agreement is hereby amended and restated in its entirety to read as follows:
“6.7 Financial Covenants. Borrower shall satisfy the following covenants and meet the following milestones:
(a) OUS Clinical Trial Milestones . Receive by April 30, 2016 evidence of positive results from the
OUS Clinical Trial.
( b ) Minimum Cash at Bank. Borrower shall at all times maintain a balance of Cash at Bank of at
least $3,000,000, monitored on a daily basis.
Bank and Borrower shall mutually agree to reset the foregoing covenants no later than June 15, 2016 and failure
by Borrower to so agree shall constitute an Event of Default hereunder.”
3) Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and
confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.
1
4) Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the
date of this Amendment.
5) This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one instrument.
6) As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the
following:
a)
this Amendment, duly executed by Borrower;
b) payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents,
and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrower’s accounts;
and
c)
such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.
[Signature Page Follows]
2
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.
VIVEVE, INC.
/s/ Patricia Scheller
By:
Name: Patricia Scheller
Title: CEO
PACIFIC WESTERN BANK
/s/ Brian Kirkpatrick
By:
Name:Brian Kirkpatrick
Title: VP
[Signature Page to Fourth Amendment to Loan and Security Agreement]
3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-206041, 333-201551, 333-
153535, 333-127770, 333-106100, 333-91430, 333-57752, 333-51136, 333-48706, 333-37814, and 333-51547) of Viveve Medical, Inc. of
our report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note
1 to the consolidated financial statements) dated March 24, 2016 relating to the consolidated financial statements, which appears in this
Form 10-K.
/s/ Burr Pilger Mayer, Inc.
San Jose, California
March 24, 2016
THE VIVEVE MEDICAL, INC.
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
Exhibit 24.1
Each undersigned officer and/or director of Viveve Medical, Inc., a Yukon Territory corporation (the “Company”), does hereby make,
constitute and appoint Patricia Scheller, Chief Executive Officer of the Company, and Scott Durbin, Chief Financial Officer of the
Company, and any other person holding the position of Chief Executive Officer or Chief Financial Officer of the Company from time to
time, or any one of them and each acting alone, as attorney-in-fact and agent of the undersigned, each with full power of substitution and
resubstitution, with the full power to execute, on behalf of the undersigned and to file with the Securities and Exchange Commission in
accordance with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder:
(i)
the Annual Report on Form 10-K (the “Form 10-K”) with respect to the fiscal year ended December 31, 2015;
(ii)
any and all amendments and exhibits to the Form 10-K, including this power of attorney; and
(iii)
any and all other documents to be filed with the Securities and Exchange Commission or any state securities commission or
other regulatory authority, including any applicable securities exchange or securities self-regulatory body, with respect to the
Form 10-K,
with full power and authority to do and perform any and all acts and things whatsoever necessary, appropriate or desirable to be done in
the premises, or in the name, place and stead of the said director and/or officer, hereby ratifying and approving the acts of said attorney.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned have subscribed to the above as of March 22, 2016.
Signature
Title
/s/ Patricia Scheller
Patricia Scheller
/s/ Scott Durbin
Scott Durbin
/s/ Brigitte Smith
Brigitte Smith
/s/ Mark Colella
Mark Colella
/s/ Carl Simpson
Carl Simpson
/s/ Daniel Janney
Daniel Janney
/s/ Jon Plexico
Jon Plexico
Chief Executive Officer (Principal Executive Officer) and
Director
Chief Financial Officer (Principal Financial
and Accounting Officer)
Chairman of the Board
Director
Director
Director
Director
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
I, Patricia Scheller, certify that:
1. I have reviewed this Annual Report on Form 10-K for Viveve Medical, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2016
/s/ Patricia Scheller
Patricia Scheller
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
I, Scott Durbin, certify that:
1. I have reviewed this Annual Report on Form 10-K for Viveve Medical, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 24, 2016
/s/ Scott Durbin
Scott Durbin
Chief Financial Officer
(Principal Financial and Accounting Officer)
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (A) and (B) of Section 1350, Chapter 63 of Title 18,
United States Code)
Exhibit 32.1
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States
Code), the undersigned officer of Viveve Medical, Inc. (the “Company”), does hereby certify with respect to the Annual Report of the
Company on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 24, 2016
/s/ Patricia Scheller
Patricia Scheller
Chief Executive Officer
(Principal Executive Officer)
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (A) and (B) of Section 1350, Chapter 63 of Title 18,
United States Code)
Exhibit 32.2
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States
Code), the undersigned officer of Viveve Medical, Inc. (the “Company”), does hereby certify with respect to the Annual Report of the
Company on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 24, 2016
/s/ Scott Durbin
Scott Durbin
Chief Financial Officer
(Principal Financial and Accounting Officer)