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, 2018
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)
Delaware
(State or other jurisdiction of incorporation or organization)
04-3153858
(I.R.S. Employer Identification No.)
345 Inverness Drive South
Building B, Suite 250
Englewood, CO 80112
(Address of principal executive offices - Zip Code)
Registrant's telephone number, including area code: (720)-696-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None.
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 every Interactive Data File required to be submitted
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 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, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Non-accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 29,2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant,
based on the last reported sales price of the Registrant’s common stock, par value $0.0001 per share, on The Nasdaq Capital Market on
such date, was approximately $68,489,676
Number of shares outstanding of the Registrant’s common stock, as of March 8, 2019: 46,364,570
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2018 Annual Meeting of Stockholders, which the registrant intends to file
with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year
ended December 31, 2018, are incorporated by reference into Part III of this Annual Report on Form 10-K.
VIVEVE MEDICAL, INC.
Table of Contents
Part I
Risk Factors
Item 1 Business
Item
1A
Item 1BUnresolved Staff Comments
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Mine Safety Disclosures
Part II
Quantitative and Qualitative Disclosure about Market Risk
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6 Selected Financial Data
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item
7A
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item
9A
Item 9BOther Information
Controls and Procedures
Part III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accountant Fees and Services
Item 15 Exhibits, Financial Statement Schedules
Signatures
Part IV
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Unless otherwise noted, the terms “Viveve”, “the Company,” “we,” “us,” “our” and similar designations in this Annual Report on
Form 10-K refer to Viveve Medical, Inc. and its wholly-owned subsidiaries, Viveve, Inc. and Viveve BV.
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 or cleared for sale by the U.S. Food and Drug
Administration (“FDA”) for all indications;
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
Viveve designs, develops, manufactures and markets a platform medical technology, which we refer to as Cryogen-cooled
Monopolar RadioFrequency, or CMRF. Our proprietary CMRF technology is delivered through a radiofrequency generator, handpiece
and treatment tip, that collectively, we refer to as the Viveve® System. The Viveve System is currently being marketed around the
world (outside of the United States) for the non-invasive treatment of vaginal introital laxity, sexual function, vaginal rejuvenation, and
stress urinary incontinence depending on the relevant country-specific clearance or approval, that we refer to as the Viveve treatment.
At this time, the Viveve System is indicated for use and being marketed for use in general surgical procedures for
electrocoagulation and hemostasis in the United States; the device has not been cleared or approved for use for the treatment of vaginal
laxity, to improve sexual function, for vaginal rejuvenation, or for stress urinary incontinence in the United States. Accordingly, the
Company is prohibited under current U.S. regulations from promoting it to physicians or consumers for these unapproved uses.
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We believe the Viveve System and Viveve treatment, provides a number of benefits for physicians and patients, including:
● a safe, minimally-invasive, non-ablative procedure;
● requiring only a single treatment;
● compelling physician economics; and
● ease of use.
In North America, which includes the U.S. and Canada, the Viveve System is sold through a direct sales force, as well as
distribution partners. In most other regions, we market and sell primarily through a network of distribution partners.
Currently, the Viveve System is cleared for marketing in 60 countries throughout the world under the following indications for
use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis (including the U.S.)
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and for the treatment of
vaginal laxity
For treatment of vaginal laxity
For treatment of the vaginal introitus, after vaginal childbirth, to improve sexual function
General surgical procedures for electrocoagulation and hemostasis and for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity, urinary incontinence and sexual function
No. of Countries:
3
32
6
16
1
1
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The Viveve System is comprised of three main components: a radiofrequency generator housed in a table-top console; a
reusable handpiece; and a single-use treatment tip. Single-use accessories (e.g. RF return pad, coupling fluid), a cryogen canister that
can be used for approximately two to five procedures (depending on the procedure type and pulses used), and a foot pedal are also
included with the System. Practitioners attach the single-use treatment tip to the handpiece. The generator then authenticates the
treatment tip and programs the system for the desired treatment without further intervention. The treatment is performed in a physician’s
office and does not require the use of anesthesia. The tissue remodeling effect resulting from the Viveve treatment has been
demonstrated by our pre-clinical and clinical research.
Our goal is to become the leading provider of non-invasive solutions to treat certain women’s intimate health conditions by:
● Broadening the conditions, we treat through robust clinical trials and regulatory label expansion. In addition to pursuing
clearance/approval in the U.S. for the improvement of sexual function, we intend to conduct several clinical trials, and if
successful, submit for regulatory clearance/approval in the U.S. and abroad for stress urinary incontinence and potentially
vulvovaginal atrophy.
● Increasing the Number of Installed Base of Viveve Systems. In our existing markets, we plan to (i) expand the number of
Viveve Systems by leveraging our current and future clinical study results and through innovative marketing programs
directed at both physicians and patients, where permissible by law, and (ii) expand our efforts and obtain regulatory
approvals in additional markets, although there are no assurances that we will ever receive such approvals.
● Driving Increased Treatment Tip Usage. 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, where permitted by law. We intend to launch innovative marketing programs with physician customers, where
permitted by law, to develop high volume Viveve practices.
● Broadening Our Customer Base. While our initial focus is on marketing our procedure to the aesthetics and OB/GYN
specialty, we intend to selectively expand our sales efforts into other physician specialties, such as 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 treatments.
● Developing New Treatment Tips and System Enhancements. We intend to continue to expand our line of treatment tips
that, in the future, may allow for 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.
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● Investing in Intellectual Property and Patent Protection. We will continue to defend and invest in expanding our
intellectual property portfolio, and we intend to file for additional patents to strengthen our intellectual property rights.
As of December 31, 2018, we have sold 703 Viveve Systems and approximately 33,300 single-use treatment tips worldwide.
On September 23, 2014, Viveve Medical, Inc. (formerly PLC Systems, Inc.), a Delaware corporation (“Viveve Medical”,
“Viveve”, “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 and the Viveve treatment as a way to improve the overall sexual well-being and quality
of life of women suffering from vaginal laxity and/or urinary incontinence, depending on the relevant country-specific clearance or
approval. We are currently located at 345 Inverness Drive South, Building B, Suite 250, Englewood, Colorado 80112 and our telephone
number is (720) 696-8100. 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 and was
incorporated in 2005.
Our Products
The Viveve System
The Viveve System is comprised of three main components: a radiofrequency generator housed in a table-top console; a
reusable handpiece; and a single-use treatment tip. Single-use accessories (e.g. RF return pad, coupling fluid), cryogen canister for
approximately two to five procedures (depending on the procedure type and pulses used), and a foot pedal are also included with the
System. Physicians or medical practitioners 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 Viveve treatment without further 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, through 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 tissue.
● Treatment Tip. The single-use treatment tip is available in two sizes and comes pre-sterilized. Each treatment tip contains
a proprietary internal EEPROM or Electrically Erasable Programmable Read-Only Memory chip, which stores treatment
parameters and safety limits in order to optimize performance and safety. To enhance procedural safety, we have
programmed the EEPROM for single-use treatments. Using the same treatment tip to perform multiple procedures could
result in injury, therefore, the EEPROM 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 two to five procedures (depending on the procedure type and pulses used). Each procedure requires a new return pad,
which is typically adhered to the patient’s thigh or buttocks 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.
Technology Platform - Cryogen-cooled Monopolar Radiofrequency (CMRF)
The Viveve System uses a patented and proprietary method of delivering monopolar radiofrequency (RF) energy for treating
tissue:
● Monopolar Radiofrequency Energy. Monopolar RF delivery uses an active electrode applied to the target tissue and a
passive return electrode adhered to the patient’s thigh or buttocks. RF current is concentrated where the active electrode
touches the body and expands as it is drawn through progressively deeper layers of tissue toward the return electrode.
Providing both precise placement and deep energy penetration, the monopolar arrangement draws higher levels of
therapeutic energy into deeper tissue layers than competing bipolar arrangements that rely on passive dispersion of current
passing between two closely spaced electrodes on the tissue surface.
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● 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 one to three months, as part of the body’s natural response to the activation of
fibroblasts that results from the application of low-energy hyperthermic RF energy, aging collagen is reorganized into
stronger, tighter bundles and can be supplemented with new collagen. This renewal of the tissue support matrix leads to
improved tissue integrity and function.
The Viveve System also uses a proprietary, controlled cryogen surface cooling that enables deep volumetric heating of vaginal
tissue:
● Reverse Thermal Gradient. With radiofrequency delivery, it is typical to expect higher temperatures closest to the surface
electrode and a comparatively lower temperature distal to the electrode. However, with the Viveve System the opposite is
true, hence a “reverse” thermal gradient. Maintaining a well-cooled, protected surface allows our treatment tips to safely
remain on the tissue longer, allowing an optimal amount of RF energy penetration into the deeper tissue layers, while
helping to ensure a comfortable patient experience.
● Algorithmically-controlled Cryogen Delivery. The Viveve System software actively monitors the temperature of the
surface tissue and delivers the appropriate amount of cryogen necessary to keep the surface near normal body
temperature. It does so consistently, automatically and completely independently of the actions of the operator, providing
an important built-in safety mechanism to protect the delicate surface of vaginal tissue.
Market Overview
Overview of Vaginal Laxity and Sexual Function
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 infrequently discussed in a 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.
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 may happen with the first vaginal
delivery and can be 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 options. 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.
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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.
Market for a Proven Solution for Vaginal Laxity & Sexual Function
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), income, education and other factors. 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 nearly 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 from these studies, we estimate there are
approximately 9 million post-partum women who are potential candidates for this procedure in the U.S. alone, approximately 4.5
million of whom could be candidates for the Viveve treatment for vaginal laxity or sexual function.
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 candidates for the Viveve treatment for vaginal laxity or sexual function.
In January 2018, we sponsored a survey of 1,500 women in Great Britain having had a vaginal delivery, and nearly half (48%)
worried before having a child about physical changes in their body from childbirth affecting their sex life; this increased to 67% of
women in the age range of 25-34. Approximately 4 in 10 (38% overall, 44% ages 25-34) have experienced vaginal tissue changes
impacting their physical sensation during sex, with the most common impacts consisting of feeling less confident overall, feeling
embarrassed and self-conscious, and feeling less enjoyment or intimacy with their partner.
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Current Approved Treatments for Vaginal Laxity/Sexual Function and Their Limitations
Currently, few clinically proven medical treatments are available to effectively treat vaginal laxity or sexual function. 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 introital laxity.
● 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.
Overview of Stress Urinary Incontinence
Urinary incontinence (UI) is defined by the International Continence Society (ICS) as ‘‘the complaint of involuntary leakage of
urine.’’ UI is increasingly recognized globally as a health and economic problem, which affects the physical, psychological, social and
economic well-being of individuals and their families and poses a substantial economic burden on health and social services.
Women with urinary incontinence have a significantly poorer quality of life than their continent counterparts. The
psychological impact of this condition must neither be underestimated nor ignored. The need to use an external pad to absorb urine
leakage associated with even normal activities such as coughing or laughing is unsatisfactory, inconvenient, often embarrassing and
negatively impacts a woman’s quality of life. The main impact urinary incontinence has on women’s lives, in terms of social and
recreational withdrawal, stems from the fear and anxiety related to becoming incontinent in public and the possibility that others may
find out. The result is often reduced activities, decreased productivity, isolation, and depression. Additionally, between 25% to 50% of
women with urinary incontinence experience sexual dysfunction.
There are three types of UI. Stress Urinary Incontinence (SUI) is the complaint of involuntary leakage of urine due to increased
abdominal pressure caused by exertion, sneezing or coughing. Urge Urinary Incontinence (UUI) is the complaint of involuntary leakage
of urine accompanied by or immediately preceded by urgency. Mixed Urinary Incontinence (MUI) is the complaint of involuntary
leakage of urine associated with urgency and also with exertion, sneezing, or coughing.
According to the most recent National Center for Health Statistics (NCHS) Health Survey in the U.S., the prevalence of UI in
adult women is 33% which is the highest among the ten conditions tracked including obesity, joint pain and hypertension. Additionally,
a review of the epidemiologic literature on incontinence showed a prevalence range of 16% to 51% depending on UI definitions,
severity levels, and other factors included in the surveys. The average across the literature is 33%, which is similar to the NCHS survey.
This translates to 35 million women in the U.S. Of those 35 million 86% have SUI or MUI, 80% of them are bothered and only
approximately 700,000 are receiving treatment in the form of conservative therapy or surgical procedures. Accordingly, over 23 million
women in the US are bothered by SUI or MUI symptoms and are untreated. Viveve believes that its non-invasive treatment option for
SUI may fulfill this large unmet need.
SUI has two major subtypes: intrinsic sphincter deficiency (ISD) and urethral hypermobility. Patients with ISD leak urine
because their urethral sphincters do not effectively seal off the inner muscle of the bladder. Urethral hypermobility (UH) refers to the
urethral shift that occurs when there is an increase in intrabdominal pressure (e.g., cough/sneeze/jump) and insufficient urethral support
by the surrounding pelvic floor muscles and tissue. Most women with SUI have a degree of both ISD and UH.
Risk factors for SUI include pregnancy, childbirth, and menopause. For example, more than 55% of women who have
delivered a child vaginally will show symptoms of SUI and are twice as likely to suffer from long-term SUI when compared to cesarean
delivery.
Current Cleared Treatments for Stress Urinary Incontinence and Their Limitations
Currently available and effective treatment options for SUI are limited to conservative physiotherapy and more aggressive,
invasive options with a lack of efficacious options in between. Pelvic floor muscle training (Kegels), with or without use of a device to
assist in Kegels, are generally prescribed as a first step in treatment. Some women may find benefit from these exercises, but long-term
compliance and sustainability is challenging. At the other end of the treatment spectrum are bulking agents and surgery with native
tissue or mesh or a sling. Bulking agents are best used for women with primarily ISD and can be done in a clinic, however they have
limited efficacy and durability. Surgeries including synthetic sling placement have a proven success rate, however, mesh surgery often
leads to complications. In addition, surgery requires recovery time for the patient and often comes with risks including recurrence,
infection, pain, voiding dysfunction, and anesthetic concerns, leading many women to agree to surgery as a last resort for treatment. The
large gap between conservative and highly-invasive treatment options presents an opportunity to provide more effective, safe, and less-
invasive treatments for women suffering from SUI.
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The Viveve Solution
Radiofrequency (RF) energy has a long history of use in epithelial/mucosal tissue in the pharynx, skin, cornea, and vagina.
Additionally, RF devices have been used to treat a variety of health-related concerns, including SUI. We believe that the Viveve System
provides a compelling, safe, non-invasive treatment for vaginal laxity, improvement of sexual function that is supported by clinical
studies, and improvement of the symptoms of SUI. The Viveve treatment is conducted on an outpatient basis in a practitioner’s office.
The procedure typically takes approximately 30 - 45 minutes depending on the indication being treated and does not require any form of
anesthesia. To perform the procedure, a practitioner attaches the single-use treatment tip to the handpiece. As described above, 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.
Benefits of the Viveve Treatment
The Viveve treatment provides a number of benefits for physicians and patients:
● Minimally-Invasive, Non-Ablative Treatment with a Demonstrated History of Safety. The Viveve System has been tested
in pre-clinical tissue studies and has been used to treat over 500 clinical study patients. To date physicians have treated
approximately 15,000 patients. The procedure is non-invasive and offers a treatment option 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, sub-mucosal
tissue, or any extra vaginal tissues 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
approximately 30 – 45 minutes to complete depending on the indication being treated. Our studies have shown that the
clinical effect from our procedure occurs within one to three months and patients continue to report improvement over a
period of six months following treatment. In addition, 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 treatment can be easily
adapted into many physician practices and offers compelling per-procedure economics for the physician.
● Ease of Use. The Viveve System offers an easy-to-use, straightforward user interface that allows a trained physician or
nurse (where permitted by law) to perform the treatment in approximately 30 – 45 minutes depending on the indication
being treated. It provides real-time feedback, and the patient 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.
Business Strategy
Our goal is to become the leading provider of non-invasive solutions to treat certain women’s intimate health conditions by:
● Broadening the conditions, we treat through robust clinical trials and regulatory label expansion . In addition to pursuing
clearance/approval in the U.S. for the improvement of sexual function, we intend to conduct several clinical trials, and if
successful, submit for regulatory clearance/approval in the U.S. and abroad for stress urinary incontinence and potentially
vulvovaginal atrophy.
● Increasing the Number of Installed Base of Viveve Systems. In our existing markets, we plan to (i) expand the number of
Viveve Systems by leveraging our current and future clinical study results and through innovative marketing programs
directed at both physicians and patients, where permissible by law, and (ii) expand our efforts and obtain regulatory
approvals in additional markets, although there are no assurances that we will ever receive such approvals.
● Driving Increased Treatment Tip Usage. 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, where permitted by law. We intend to launch innovative marketing programs with physician customers, where
permitted by law, to develop a high volume Viveve practice.
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● Broadening Our Customer Base. While our initial focus is on marketing our procedure to the aesthetics and OB/GYN
specialty, we intend to selectively expand our sales efforts into other physician specialties, such as 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 treatments.
● Developing New Treatment Tips and System Enhancements. We intend to continue to expand our line of treatment tips
that, in the future, may allow for 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 defend and 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”.)
Our Customers
To date, we have focused our commercial efforts in markets where we have received regulatory clearances/approvals. Within
each market, we target thought leaders across multiple specialties in order to increase awareness of the conditions we treat and accelerate
patient acceptance of Viveve’s treatments. Currently we target a broad number of physician specialties, including; plastic surgeons,
aesthetic dermatologists, OBGYNs, urogynecologists, urologists and others.
Through our direct sales employees, and distributors, we currently target physicians who have a demonstrated commitment to
building a high-volume, non-invasive, treatment business within their practice. As sales of our product continue to expand globally, we
intend to continue to utilize distribution partners in most countries.
Sales and Marketing
International
We currently market the Viveve treatments and sell the Viveve System, including the single-use treatment tips in over 50
countries outside of the United States. At the present time, trained direct sales employees or distribution partners represent Viveve and
its products in 59 countries in markets in Canada, Europe, the Middle East, Asia Pacific, and Latin America.
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 treatments into their practices and market
procedures to their patients, to the extent permitted by law.
We, or our distribution partner, also provide comprehensive training and education to each physician upon delivery of the
Viveve System. We are not required to provide training but do so to support our physician customers in safely and effectively
performing the Viveve treatments.
Further, we intend to actively engage in promotional opportunities through participation in industry tradeshows and clinical
workshops, as permitted by law, as well as through trade journals, brochures, and our website. We intend to also actively engage in
direct-to-consumer marketing of the Viveve treatments where permitted by law, including extensive use of social media, in many cases
on a cooperative basis with our distribution partners.
United States
In October 2016, we received clearance from the FDA to sell the Viveve System for use in general surgical procedures for
electrocoagulation and hemostasis, and in January 2017 we hired our inaugural direct sales team. Currently, we have 14 direct sales reps
covering the United States and two distribution partners. We are actively seeking regulatory clearance from the FDA to allow us to
begin to market the Viveve System for the treatment of vaginal tissue to improve sexual function and the symptoms of stress urinary
incontinence, to physicians practicing in the U.S. and to build awareness of the Viveve treatment among patients residing in the U.S. If
we are successful in obtaining these clearances, we may expand our direct sales efforts in the future.
8
Clinical Studies
We have completed several pre-clinical and human clinical studies in vaginal tissue to assess the safety and efficacy of the
Viveve treatment in vaginal laxity/sexual function and SUI. We are currently conducting a sexual function trial under IDE in the U.S.
(VIVEVE II), an international trial in Canada for SUI (LIBERATE-International) and are preparing to conduct a clinical study in the
U.S. for SUI (LIBERATE-US), when we receive approval of our IDE application from the FDA. While we believe that our pre-clinical
and human clinical studies have, and will, show that the Viveve System and the Viveve treatment have a strong safety profile and are
effective, there is risk that the FDA will not agree with this assessment. Notwithstanding the safety in trials to date of the Viveve
System, patients may experience undesirable side effects such as temporary swelling or reddening of the treated tissue.
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 pathologists who were blinded as to the treated and untreated sheep.
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. Given the post-treatment absence of ulcerations, regional necrosis or diffuse fibrosis, throughout the six-month
follow-up period, we believe the studies help support the safety profile of the Viveve System.
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 of the Viveve procedure. 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, and the FDA could disagree. 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 – Vaginal Laxity and Sexual Function
United States Pilot Study
We conducted our first human study beginning in November 2008. The study was a single-arm 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 Viveve System for the treatment of vaginal laxity at three RF dosing levels.
Each woman underwent a single Viveve treatment, 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 (“VSQ”), Female Sexual Function Index (“FSFI”), 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 treatment 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 Pilot Study
Our second human clinical study 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 Viveve System for the treatment of vaginal laxity. Each woman was treated once with the Viveve System, with no
anesthesia, using 90 joules/cm2 of RF energy as the therapeutic dose.
Patient reported outcomes were measured at baseline, one month, three months, six months, and 12 months using several
validated patient-reported outcome measures, including VSQ, FSFI, FSDS-R and the Global Response Assessment.
Within one month after the Viveve procedure, 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.
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The Viveve procedure 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.
VIVEVE I Clinical Study
In the fourth quarter of 2014, we began the VIVEVE I clinical study (VIveve treatment of the Vaginal introitus to EValuate
Effectiveness), 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 System versus a sham procedure for the treatment of vaginal
laxity. Nine clinical sites in four countries (Canada, Italy, Spain and Japan) enrolled 174 patients, which included pre-menopausal
females 18 years of age or older who 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 were 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-months.
The study also included a prospective interim data analysis at the three-month endpoint of 50% of the patients enrolled. Patients
randomized to the sham arm were offered the opportunity to receive a Viveve treatment once they had completed the six-month
evaluation following the sham intervention.
The primary endpoint of the study was the proportion of subjects in the active arm as compared to the proportion of subjects in
the sham arm reporting no vaginal laxity at six months post-intervention. “No vaginal laxity” was operationally defined as a score > 4
on the VSQ, a patient reported global assessment of vaginal laxity based on a 7-point scale. Additionally, the primary safety endpoint
was 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 included the
adjusted 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.
In April 2016, we completed the VIVEVE I study and reported the following results:
At six months (n=155), the proportion of patients reporting “no vaginal laxity” in the active arm, as measured by the VSQ, was
41.7%, while the proportion of patients reporting “no vaginal laxity” in the sham arm on the VSQ was 19.2% (p=0.005). Moreover, the
likelihood of having “no vaginal laxity” following treatment in the active arm was more than three times greater than for the sham arm
(p=0.006). Further, nearly 80% of the subjects in the active arm experienced a positive change in VSQ score versus baseline.
At six months, for those patients who scored less than a 26.5 total score on the FSFI at baseline (n=103), the adjusted mean
change from baseline score between the active arm and the sham arm was 3.2 (p=0.009). Moreover, for each of the six individual
domains of the FSFI, subjects in the active group reported a greater increase in score than in the sham group. Change in scores from
baseline for both the sexual arousal and orgasm domains were statistically significant and nearly 93% of subjects in the active arm
experienced an increase in score versus baseline.
At six months, FSDS-R and VALI were also assessed as part of the secondary end-point analysis. While subjects in the active
arm reported a greater increase in scores than the sham arm, the results for the FSDS-R and VALI were not statistically significant.
Safety for the study was assessed on the entire study population (n=174). Subjects reported the same level of unrelated (32.5%
active versus 35.1% sham), related (11.1% active versus 12.3% sham) and serious (0.0% active versus 1.8% sham) adverse events in
both the active and sham arm, further demonstrating that the Viveve treatment is well tolerated with no safety concerns.
We believe that the consistency of results across these three clinical study populations, is indicative of the cross-cultural
similarities in this medical condition and the positive impact that an effective non-invasive treatment can have on the sexual health of
women after vaginal childbirth.
VIVEVE II Clinical Study
In March 2019, enrollment was completed for the VIVEVE II (VIveve treatment of the Vaginal Introitus to EValuate
Effectiveness) clinical study following IDE approval by the FDA. This is a prospective, randomized, double-blind, sham controlled
study to evaluate the efficacy and safety of the Viveve System to improve symptoms of female sexual disfunction, associated with
vaginal laxity. 19 active clinical sites in the United States enrolled 250 female patients who were pre-menopausal, 18 years of age or
older who experienced at least one full term vaginal delivery at least twelve 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 twelve months post-treatment to assess the primary
effectiveness and safety endpoints of the study with data being collected at one, three, six, nine and twelve months. Patients randomized
to the sham arm will be offered the opportunity to receive a Viveve treatment once they had completed the twelve-month evaluation
following the sham intervention.
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The primary efficacy endpoint of the study is the mean change from baseline in the Female Sexual Function Index (FSFI) total
score at twelve months posttreatment. Secondary endpoints include evaluation of the mean change from baseline of the total FSFI score
at six months, as well as evaluation of the mean change from baseline of the six different domains within the FSFI at six and twelve
months. At months six and twelve, in addition to the FSFI, subjects will be asked to complete the Patient’s Global Impression of
Improvement (PGI-I). Subjects will also be assessed for adverse events throughout the study. The Company intends to report final
twelve-month clinical data from the study in the second quarter of 2020.
Clinical Studies – Stress Urinary Incontinence
Canadian Pilot Study
In 2017, Viveve funded a single-arm investigator sponsored study to assess the effects of our CMRF technology in treating
patients with mild-to-moderate SUI. The study was conducted in Calgary, Alberta and included 10 patients who underwent treatment
with our CMRF technology under a proprietary treatment protocol. Patients were followed for 12 months with safety and clinical results
reported at 4, 6, 9- and 12-months post-treatment. Clinical results included composite scores from the validated ICIQ-UI-SF
(International Consultation on Incontinence Questionnaire–Urinary Incontinence-Short Form) and UDI-6 (Urogenital Distress
Inventory-Short Form) outcome questionnaires.
Results at 12 months (n=9) included an 89% responder rate (percentage of patients showing an improvement from baseline) for
the ICIQ-UI-SF and a 100% responder rate on the UDI-6. Additionally, patients showed a 40% mean improvement on the ICIQ-UI-SF
and a 51% mean improvement on the UDI-6 at 12 months across both validated endpoints. No device-related safety issues were
reported in any of the patients.
Canadian Feasibility Study
In December 2018, we reported the results of a Viveve supported, single-arm, open label feasibility study that was conducted to
evaluate the efficacy and safety of our CMRF technology to improve urine leakage and quality of life associated with SUI. The study
was conducted in Calgary, Alberta and included 37 patients who underwent treatment with our CMRF technology under a proprietary
treatment protocol. Patients with mild to moderate SUI were treated with our proprietary treatment protocol and followed for 12 months
with safety and clinical results reported at 3, 6, 9- and 12-months post-treatment. Clinical results included evaluation of the one-hour pad
weight test, an FDA acceptable endpoint to assess the severity of and leakage associated with SUI, daily incontinence episodes, as well
as composite scores from the validated UDI-6, IIQ-7 (Incontinence Impact Questionnaire), and ICIQ-UI-SF outcome questionnaires.
Results at 12 months (n=25) included a 72% responder rate (percentage of patients showing an improvement from baseline) on
the one-hour pad weight test, a clinically meaningful benefit across all patient reported outcome measures, and a 64% reduction in daily
incontinence episodes. Additionally, 52% of patients experienced greater than a 50% reduction in the one-hour pad weight test from
baseline and 60% of patients had less than 1 gram of leakage at 12 months on the one-hour pad weight test. No device-related safety
issues were reported in any of the patients.
This feasibility study showed a significant reduction of SUI symptoms by the 1-month time point and subjects reported
durability of results lasting to the 12-month visit. While this study was on a small number of subjects, the Viveve treatment for SUI
showed significant promise and as a result Viveve planned two additional trials in SUI.
LIBERATE - International
In January 2019, enrollment was completed for the LIBERATE-International study in SUI. The study was conducted in Canada
to support SUI indications in Canada, the European Union and several other international countries. LIBERATE International is a
randomized, double-blind, sham-controlled study conducted at 9 sites in Canada and included enrollment of 99 patients suffering from
mild-to-moderate SUI. Patients were 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 months.
The primary efficacy endpoint is the 6-month change from baseline in the one-hour pad weight test, and the study protocol
includes 6 months of safety follow-up, as well as assessments of other secondary endpoints, including: 24-hour pad weight test, daily
incontinence episodes, as well as composite scores from the validated UDI-6, IIQ-7, and ICIQ-UI-SF outcome questionnaires.
Health Canada issued an authorization to conduct the investigational testing. The treatment portion of the trial has been
completed, and if the results are favorable, the company expects to use the study for a registration filing in Canada, the EU and other
countries outside the US for the improvement of SUI symptoms. There can be no assurance that any regulatory authority will approve
our applications.
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LIBERATE - US
In 2018, the Company submitted an IDE to conduct LIBERATE-US to the FDA. LIBERATE-US is intended to be a
randomized, double-blind, sham-controlled study in up to 25 centers across the U.S. and including up to 240 patients who are suffering
from mild-to-moderate SUI. Subjects will be randomized in a 2:1 ratio to either an active treatment group or sham-control group. The
primary efficacy endpoint is expected to be a comparison of the proportion of patients who experience greater than a 50% reduction in
leakage at twelve months, as measured by the one-hour pad weight test, between the active treatment group and a sham control group.
Additionally, the trial will include 12 months of safety follow-up, as well as assessments of other secondary endpoints. Currently, the
Company is addressing requests for additional pre-clinical animal testing from the FDA. If the results of the pre-approval testing are
favorable, the Company anticipates resubmitting the IDE in the second or third quarter of 2019.
The FDA must approve the Company’s IDE application before the Company may begin conducting the LIBERATE-US study.
There can be no assurance that the FDA will approve our IDE application, or that the FDA may not require that the protocols be
changed or that additional pre-clinical work be conducted prior to approving the IDE.
Research and Development
We intend to focus on various research and development efforts, including but not limited to:
● conducting additional human clinical trials, in order to support marketing applications for additional indications in the U.S.
and internationally, including but not limited to SUI and vulvovaginal atrophy;
● implementing cost improvement programs to further increase gross margins and our gross profit opportunity;
● designing new treatment tips and system enhancements to further optimize ease-of-use and reduce procedure times for
patients and physicians; and
● continuing to enhance the security within the Viveve System to prevent counterfeiting and refurbishment.
We have formed strategic relationships with outside contractors for assistance on research and development 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, 2018 and 2017 were $13,716,000 and $12,343,000, 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 contract manufacturers, approved suppliers and internal
manufacturing resources and expertise. We outsource the manufacture of components, subassemblies and finished products that are
produced to our specifications and shipped to our Englewood, Colorado facility for inspection, testing and distribution. Our internal
manufacturing activities include the testing of Viveve treatment tips and handpieces, as well as the final integration and system testing
of the Viveve System. Our finished products are stored at and distributed from our Englewood, Colorado facility.
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.
Our first commercial Viveve system which consists of a generator, handpiece and disposable tip was designed and is currently
manufactured by Stellartech Research Corporation (“Stellartech”). Stellartech is the sole source supplier for this version of the Viveve
system. We have manufacturing, quality and regulatory agreements with Stellartech that define the relationship and responsibilities of
both parties in these areas. We also have technology licenses with Stellartech that are discussed in the Patents and Proprietary
Technology section of this document.
Our second generation Viveve system consists of a generator and handpiece designed and manufactured by Sparton
Corporation (“Sparton”), and a disposable treatment tip designed and manufactured by Cirtec Corporation (“Cirtec”). Both Sparton and
Cirtec are sole source suppliers for their respective components. We have a Professional Services Agreement with Sparton that governs
the design and development relationship and a Manufacturing and Supply Agreement that defines our manufacturing, shipping and
servicing relationship. We manage our relationship with Cirtec with long range (12 month) forecasts and purchase orders
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In addition to our primary system suppliers, we also have critical suppliers at the component level. We obtain proprietary
flexible electronic circuits for our treatment tips and the coolant valve for the handpiece from single suppliers (AllFlex and Lee Valve
Co.), for which we attempt to mitigate risks through inventory management and either long term supply agreements or 12- to 18-month
purchase orders. We currently have two sterilization vendors to mitigate risks. Other products and components come from single
suppliers, but alternate suppliers have been qualified or, we believe, can be readily identified and qualified. To date, shipments of
finished products to our customers have not been significantly 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 (known as the Quality System Regulation or QSR). 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.
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. In anticipation of future restrictions, we have qualified a more
environmentally friendly HFC (1234ZE) for use in our generators. 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.
We generally 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. We also sell a small number of extended service agreements on certain
products for the period subsequent to the normal one-year warranty provided with the original product sale. Warranties are assessed for
proper revenue recognition. Most warranties are classified as assurance type warranties thereby allowing immediate recognition of
revenue with accrual for estimated future warranty expenses. Revenue from sale of such extended service agreements was immaterial
for the years ended December 31, 2018 and 2017.
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 (with a field of use limitation) to one issue U.S. patent and own 3 issued U.S. patents
directed to our technology and the Viveve System. Additionally, we have 9 pending U.S. patent applications, 65 issued foreign patents,
and 32 pending foreign patent applications, some of which foreign applications preserve an opportunity to pursue patent rights in
multiple countries.
U.S. Patents
Foreign Patents
Issued
3
Pending
9
Issued
65
Pending
32
All 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. All our manufacturing suppliers are required to execute
confidentiality agreements and contracts for our approved suppliers include confidentiality provisions. 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 various
foreign registrations protecting the various marks in numerous 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.
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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 200,000 shares of our common
stock to Knowlton and agreed to engage the consulting services of Knowlton.
Also 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 assignment of the intellectual property developed during the term of the Knowlton Consulting
Agreement survives termination.
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. As of December 31, 2018, the Company has purchased 809
units. In conjunction with the Agreement, Stellartech purchased 37,500 shares of Viveve, Inc.’s common stock at $0.008. Under the
Stellartech Agreement, we paid Stellartech $10,150,000 and $7,912,000 for goods and services during the years ended December 31,
2018 and 2017, 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.
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 met the Minimum Commitment requirement,
and therefore we are 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.
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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;
Pre-clinical and Clinical experiences; 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/clearances already received and being sought in the U.S., we are currently seeking
regulatory approval or clearance for the sale of our product in many other countries around the world.
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 a medical device that is legally marketed in the U.S. (e.g., an FDA cleared Class II medical
device) may do so without prior FDA notification or approval.
Because the Viveve System has been cleared by the FDA for “use in general surgical procedures for electrocoagulation and
hemostasis,” Viveve does not obtain approval from the FDA prior to exporting the device to foreign countries. Additionally, products
exported from the U.S. and those with certain levels of U.S. content are subject to the U.S. export control and sanctions laws and
regulations, which may restrict proposed transactions to certain countries, end-users and end-uses. Certain products may be controlled
for export and reexport and may require licensing or other authorization from the U.S. government prior to engaging in the export or
reexport transaction. Changes to these regulations may impact the ability to pursue potential opportunities to export and reexport the
products overseas.
Moreover, entities legally exporting products from the U.S. are often asked by foreign customers or foreign governments to
supply an export certificate issued by the FDA 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. We have requested the issuance of export
certificates to allow exports into many countries around the world, and the FDA has issued those export certificates to us. Accordingly,
we provide export certificates to many of our foreign customers.
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Currently, the Viveve System is cleared for marketing in 60 countries throughout the world under the following indications for
use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis (including the U.S.)
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and for the treatment of
vaginal laxity
For treatment of vaginal laxity
For treatment of the vaginal introitus, after vaginal childbirth, to improve sexual function
General surgical procedures for electrocoagulation and hemostasis and for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity, urinary incontinence and sexual function
No. of Countries:
3 (including the U.S.)
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6
16
1
1
1
Outside the U.S., we market and sell through an extensive network of distribution partners. In the U.S., the Viveve System is
indicated for use in general surgical procedures for electrocoagulation and hemostasis and we market and sell primarily through a direct
sales force.
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 premarket
clearance from the FDA. The FDA classifies medical devices into one of three classes. The classification system is risk based, with
devices deemed to pose the lowest risk being Class I, and devices posing the most risk being Class III. Most Class I devices are exempt
from the requirement to obtain FDA premarket clearance or approval. For most Class II devices (and a small number of Class I devices),
a company must submit to the FDA a premarket notification (known as 510(k) submission) requesting clearance to commercially
distribute the device. 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) devices, are placed in Class III, requiring either
FDA premarket approval via a Premarket Approval (“PMA”) application or a De Novo petition requesting that the FDA reclassify the
device into a lower class (i.e., Class II or Class I). The FDA has issued regulations identifying the Class into which different types of
devices fall and identifying whether the device type is exempt from the 510(k) process or if a 510(k) is needed.
510(k) Clearance Pathway
When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our device is
substantially equivalent to a previously cleared and legally marketed 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 PMAs (known as a predicate device). The FDA strives to make a
determination that the device is substantially equivalent (SE) (i.e., clear the device) or not substantially equivalent (NSE) within 90 days
of submission of the notification. 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 is
not substantially equivalent to a previously cleared device, the FDA will issue an NSE letter and place the device into Class III. If the
device is placed into Class III automatically based only on the lack of a predicate device and the device is lower risk, a De Novo
submission may be submitted petitioning the FDA to reclassify the device into Class II or Class I, as appropriate.
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), the FDA could require the manufacturer to cease marketing and distribution and/or recall the modified device until 510(k)
clearance or PMA clearance is obtained and the manufacturer could be subject to significant regulatory fines or penalties.
In December 2008, a predecessor company to Viveve received 510(k) clearance for a previous version of the Viveve System.
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 seeking clearance for the updated Viveve System to take into account the design modifications to the original 510(k)-cleared
device, which included improved user interface capabilities and enhanced manufacturability. In October 2016, we received clearance
from the FDA to sell the updated device for use in general surgical procedures for electrocoagulation and hemostasis. In 2017 we
received clearance to add an 8 cm tip to the product family.
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De Novo Process
If FDA has not issued a regulation classifying a particular type of device as Class I, and if there is no known predicate for a
device (i.e., a legally-marketed device that is not subject to premarket approval with comparable indications for use and technological
characteristics), the device is automatically Class III, regardless of the risk the device poses. If a device is automatically/statutorily
classified into Class III in this manner, a company can petition FDA to reclassify the category of devices into Class II or Class I via a
process known as “Evaluation of Automatic Class III Designation,” which is typically referred to as the “de novo process.” The direct de
novo process allows a company to request that a new product classification be established without the company first submitting a 510(k)
notification for the device. The reclassification petition should include a risk-benefit analysis demonstrating that, when subject to
general controls or general and special controls, the probable benefits to health from use of the device outweigh any probable injury or
illness from such use. The submitter also must describe why general controls or general and special controls are adequate to provide
reasonable assurance of safety and effectiveness and for proposed Class II devices, provide proposed special controls. If a product is
classified as Class II through the de novo review process, then that device may serve as a predicate device for subsequent 510(k)
premarket notifications, including by competitors.
We intend to seek FDA authorization to market the Viveve System for the treatment of vaginal tissue to improve sexual
function and to improve SUI by utilizing the direct de novo process. However, we cannot predict when or if approval of such a petition
will be obtained. In addition, if FDA fails to grant a de novo petition, we will be required to seek FDA premarket approval (via the more
stringent PMA process). Delays in receipt of FDA clearance or failure to receive FDA clearance or approval for expanded indication
could reduce our sales, profitability and future growth prospects.
Clinical Trials
Clinical trials are almost always required to support an FDA 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 IDE, to support a future
product submission (e.g., a 510(k) or a de novo petition) for the sexual function indication. In the U.S., clinical trials on medical devices
generally require submission of an application for an IDE to the FDA if the device is a “significant risk” device. 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.
Clinical trials for significant risk devices may not begin until the IDE application is approved by both 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, in compliance 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 for the sexual function
indication. 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. In September 2016 we submitted an IDE application to FDA
to begin a U.S. clinical study and the FDA has responded with additional questions regarding the proposed protocol and other aspects of
the clinical study design, which we addressed. Approval of the IDE was received in 2018, and we began our U.S. clinical study to
demonstrate the safety and effectiveness of the device to improve sexual function. Completion of enrollment for the clinical study is
anticipated in March 2019.
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 regulatory inspections and other regulatory action;
● submission of Unique Device Identifiers (UDIs) or the equivalent to regulatory authorities;
● Good Manufacturing Practice (GMP) and Quality System Regulations (QSRs), which require those who design,
manufacture, package, label, store, install, and service devices to follow stringent design, testing, control, documentation
and other quality assurance procedures during all aspects of these processes;
● labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses
to both physician and consumers;
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● regulations governing our interactions with healthcare practitioners;
● U.S. export control and sanctions regulations associated with the export and reexport of the products;
● complaint handling and adverse event reporting requirements, such as the Medical Device Reporting (MDR), regulations in
the U.S., 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;
● regulations pertaining to recalls and notices of corrections or removals; and
● any other post-market requirements that the FDA or foreign regulatory bodies might impose as part of the device approval
or clearance process.
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 foreign governments or designated representatives to determine compliance
with the quality system requirements and other regulations. In the past, our Sunnyvale, California facility (now closed) was inspected,
and observations were noted, including an April 2012 California Department of Public Health (CDPH) 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 CDRH have accepted our responses to these observations,
and we believe that we and our third-party manufacturer are in substantial compliance with the QSR.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, states, or foreign
governments, 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, de novo reclassification, or premarket approval of new products or new intended
uses;
● refusing to grant export certificates for our product;
● reclassifying a device that previously received a 510(k) clearance or withdrawing premarket approvals that are already
granted; and
● criminal prosecution.
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 distribution of
medical devices, the environment, health and safety, fraud and abuse, land use, advertising, 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 solutions
to treat vaginal laxity and SUI are unique and offer a more effective treatment options from that which is on the market currently, we
also believe that the market for the treatment of vaginal laxity, women’s sexual function, and incontinence remain tremendous, under-
developed opportunities. Therefore, competition is expected to increase, particularly as the market becomes further developed with
additional treatment options. Aside from Kegel exercises and invasive surgical procedures, such as LVR, fillers, bulking agents, slings,
and mesh there are many companies that may be developing or that have developed energy-based technologies for vaginal use as well as
others developing modalities for the treatment of female sexual dysfunction and incontinence. Further, the overall size and attractiveness
of the market may compel larger companies focused in the Urology, 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 indications. Potential
energy-based competitors include, but are not limited to, Hologic, Syneron Medical, Fotona, Thermi Aesthetics, Cutera, Inmode, BTL,
Venus Concepts and others, some of whom have more established products and customer relationships than we have.
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Employees
As of March 8, 2019, we had 67 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.
Continuance into Delaware
On July 22, 2015, at our 2015 Annual and Special Meeting of Stockholders, our stockholders approved a special resolution
authorizing a continuance of the Company (the “Continuance”) into the State of Delaware under the Delaware General Corporation
Law (the “DGCL”) and the adoption of charter documents that comply with the DGCL in connection therewith, effective as of a date to
be determined by the Board, in its sole discretion, no more than 12 months from the date of the meeting. On May 9, 2016, the Company
filed the necessary Application for Authorization to Continue into Another Jurisdiction and Statutory Declaration with the Yukon
registrar. On May 10, 2016, the Company filed a Certificate of Conversion and Certificate of Incorporation with the Secretary of State
of the State of Delaware to move its domicile from the Yukon Territory to Delaware.
The Continuance did not involve any change in our business, properties, corporate headquarters or management. The officers
of the Company immediately prior to the Continuance continued to serve as our officers following the Continuance, and the current
members of the Board of Directors continued to serve as the members of the Board following the Continuance. There was no change in
our operations, assets, liabilities or obligations as a result of the Continuance. Other than the approval of our stockholders and the
filings with the Yukon Registrar of Corporations and the Secretary of State of Delaware, there were no federal or state regulatory
requirements that we were required to comply with or approvals that we were required to obtain in connection with the Continuance.
Upon the effectiveness of the Continuance, each outstanding share of our common stock continued to be an outstanding share
of our common stock as incorporated in Delaware and each outstanding option, right or warrant to acquire shares of our common stock
continued to be an option, right or warrant to acquire an equal number of shares of common stock under the same terms and conditions.
Upon effectiveness of the Continuance, we were governed by the Certificate of Incorporation filed with the Secretary of State of
Delaware and by bylaws prepared in accordance with the DGCL, which were approved by our stockholders at the 2015 Annual and
Special Meeting. Following the Continuance, we were governed by the DGCL instead of the Yukon Business Corporation Act.
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 device fails to gain or loses
market acceptance, our business will suffer.
In 2012, we began marketing the Viveve System (radiofrequency generator, handpiece and single-use treatment tips) and other
ancillary consumables, in Canada, Hong Kong and Japan. Since then, we have expanded our market to a total of 60 countries, including
the United States. Our continued success depends on our ability to significantly penetrate current or new markets. If demand for the
Viveve System and Viveve treatment does not expand in new markets or does not increase in existing markets 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, Viveve 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, the Viveve System, and the Viveve treatment 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 or vaginoplasty 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 with the Viveve System, and collecting data from the Viveve treatment is inherently subjective, and we
have limited data regarding the efficacy of the Viveve procedure. 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 in process and future clinical studies of the
effectiveness of the Viveve System and Viveve treatment. Clinical studies of sexual function and SUI are subject to a number of
limitations. First, some of 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 treatments, 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
degree of vaginal laxity, sexual function, and SUI of the patient, among other things.
Current reported studies of Viveve’s CMRF technology have investigated improvement in vaginal laxity, sexual function and
SUI using single-arm studies where all patients enrolled in the trial received the same treatment without comparison to a control group.
Clinical studies designed in a randomized, blinded and controlled fashion (e.g., assessing the efficacy of a product or therapy versus a
placebo or sham group) represent the gold-standard in clinical trial design. 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. Future clinical studies, which may be required to drive physician adoption or support regulatory clearance or
approval, will likely require randomized, blinded and controlled trial designs. In the fourth quarter of 2014, we initiated a randomized,
blinded and sham-controlled clinical trial in Europe and Canada designed to demonstrate the efficacy of the Viveve procedure versus a
sham-controlled procedure for the treatment of vaginal laxity and sexual function (the “OUS Clinical Trial”). In April 2016, we
completed this study. In the second quarter of 2018, we initiated a randomized, double-blind, sham-controlled clinical trial in the United
States designed to evaluate the efficacy and safety on the Viveve procedure versus the sham-controlled procedure for the treatment of
vaginal laxity and sexual function. We expect to complete this study at the end of the first quarter of 2020 (See discussion under the
heading “Clinical Studies”.)
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 procedure may not become widely adopted, physicians may recommend alternative treatments for their patients, and our
business may be harmed.
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We currently have clearance to market the Viveve System in the U.S. for use in general surgical procedures for electrocoagulation
and hemostasis but not for vaginal laxity, sexual function, or stress urinary incontinence. If we want to sell our device and single-
use treatment tips in the U.S. for the treatment of vaginal laxity, sexual function, or stress urinary incontinence, we will need to
obtain additional FDA clearance or approval, which may not be granted.
Developing and promoting our CMRF technology in additional countries for additional indications, including the U.S., is a key
element of our future growth strategy. We currently do not have FDA clearance or approval to market the Viveve System in the U.S. for
the treatment of vaginal laxity, sexual function, or stress urinary incontinence. We intend to seek clearance or approval from the FDA to
expand our marketing efforts and have engaged with the FDA to help improve our likelihood of success. However, we cannot predict
whether we will receive such clearances or approvals. The FDA has required us to conduct clinical trials to support regulatory clearance
or approval, which trials are be time-consuming and expensive, and may produce results that do not result in clearance or approval of
our FDA marketing application. In the event that we do not obtain FDA clearance or approval of the Viveve System for the treatment of
vaginal laxity, sexual function, or stress urinary incontinence, we will be unable to promote it in the U.S. for those indications, 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, 2018, we have incurred losses since inception of approximately $155.4 million. In 2018, we incurred a
loss of $50.0 million and in 2017 a loss of $37.0 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.
If there is not sufficient consumer demand for the procedures performed with our products, demand for our products could decline,
which would adversely affect our operating results.
The medical device and aesthetic markets in which we operate are particularly vulnerable to economic trends. The procedures
performed using the Viveve System are elective procedures that are not currently reimbursable through government or private health
insurance. The cost of these elective procedures must be borne by the patient. As a result, the decision to undergo a procedure that uses
our products may be influenced by the cost.
Consumer demand, and therefore our business, is sensitive to a number of factors that affect consumer spending, including
political and macroeconomic conditions, health of credit markets, disposable consumer income levels, consumer debt levels, interest
rates, consumer confidence and other factors. If there is not sufficient consumer demand for the procedures performed with our
products, practitioner demand for our products would decline, and our business would suffer.
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 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.
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If there is not sufficient patient demand for our treatments, practitioner demand for the Viveve System could drop, resulting in
unfavorable operating results.
All procedures performed using the Viveve System are elective procedures, the cost of which must be borne by the patient and
are not currently reimbursable through government or private health insurance. The decision to undergo a 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 and indications, are successful;
● the extent to which physicians recommend the Viveve treatment to their patients;
● the cost, safety and effectiveness of the Viveve procedure 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 treatment to meet patient expectations or the occurrence of unpleasant side effects from a 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 what we believe to be 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 the Viveve procedure 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 the procedure 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.
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 a Viveve System depends on the success of our sales and marketing efforts. Our business model involves both a
capital equipment purchase 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 our device 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 27%, 28% and 96% of our revenue during the year ended December 31, 2018, 2017 and
2016, respectively. 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;
● Compliance with anti-bribery laws such as U.S. Foreign Corrupt Practices Act and its foreign counterparts;
● 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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If we violate the U.S. Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries our business could be harmed.
We earn a significant portion of our total revenues from international sales. As a result, we are subject to the U.S. Foreign
Corrupt Practices Act (FCPA), which generally prohibits U.S. companies and their intermediaries from making corrupt payments to
foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment and requires companies to
maintain appropriate record-keeping and internal accounting practices to accurately reflect the transactions of the company. The FCPA
applies to companies, individual directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for
actions taken by agents or local partners or representatives. In addition, the government may seek to hold us liable for successor liability
FCPA violations committed by companies which we acquire. We are also subject to the U.K. Bribery Act and may be subject to certain
anti-corruption laws of other countries in which we do business. If we or our intermediaries fail to comply with the requirements of the
FCPA or the anti-corruption laws of other countries, governmental authorities in the U.S. or other countries could seek to impose civil
and/or criminal penalties, which could have a material adverse effect on our business, results of operations, financial conditions and
cash flows.
We depend on distributors to market and sell the Viveve System internationally. If they are not successful, our marketing and sales
efforts will be harmed.
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 our device 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.
Our sales and marketing organization is structured so that we rely on a direct sales force to sell the Viveve System in the
United States. However, in the first quarter of 2019, we reorganized and reduced the number of direct sales reps selling our products.
We now expect to rely more heavily on distribution partnerships, including (i) our existing partnership with Aesthetic Management
Partners (AMP), which is a network of independent partnership sales representatives, and regional distribution partners for the sales and
marketing of our products. We believe our reorganization will help reduce our operating expenses through 2019 and 2020. We do not
currently anticipate making any significant changes to our international distribution network.
Our reorganization may not have the desired effect of reducing our operating expenses and may result in a disruption to our
business, adversely affect our sales and marketing organization and make it more difficult to retain qualified personnel. In addition, our
management may divert a disproportionate amount of time away from its day-to-day activities to devoting a substantial amount of time
to managing the reorganization which may increase our expenses. Our future financial performance and ability to compete effectively
will depend, in part, on our ability to effectively manage the reorganization and future growth. To that end, we must be able to:
● hire qualified individuals as needed;
● provide adequate training for the effective sale of our device; and
● retain and motivate sales employees.
We may not be able to accomplish these tasks and successfully execute the reorganization which could harm our financial
results and have a material adverse effect on our business.
Competition among providers of devices for the medical device and aesthetics markets is characterized by rapid innovation, and we
must continuously innovate technology and develop new products or our revenue may decline.
While we attempt to protect our technology 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, sexual dysfunction, and SUI 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 our 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.
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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, and we may be required
to seek new manufacturing partners in the future. 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 or any future manufacturing partner 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, or a potential new
manufacturer, if necessary, upon favorable terms or at all.
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 our device 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.
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 our device, may require us to recall product from customers or replace components and could
disrupt our operations. 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.
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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 our device 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.
We rely on a limited number of suppliers and third-party manufacturers, and if they are unable or unwilling to continue to work
with us, our business could be materially adversely affected.
We rely on a limited number of suppliers and third-party manufacturers. Our reliance on them increases our risk since in the
event of an interruption from one or more of them, we may not be able to develop alternative resources without incurring additional
costs or delays.
We forecast sales to determine requirements for components and materials used in Viveve procedures , 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 twelve 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 it 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 device, nor can we be assured
that direct physician supervision of our equipment occurs according to our recommendations. We and our distributors require purchasers
of our device 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 device to companies that rent it 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 only sell the Viveve System to licensed physicians who have met certain training requirements. However,
current federal regulations will allow us to sell our device to “licensed practitioners,” 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 our device 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.
25
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 device 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 device. 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 device 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.
A data breach or cyberattack affecting our devices, information technology systems, or protected data could expose us to regulatory
liability and litigation and dilute our brand quality.
Our information technology systems and the Viveve System, like other medical devices with software that may be accessible in
some manner to users, are vulnerable to security breaches, cyberattacks, malicious intrusion, breakdown, destruction, loss of data
privacy, or other significant disruption. We also collect, manage, and process protected personal information, including health
information, in connection with our operations. A significant breach, attack, or other disruption could result in adverse consequences,
including increased costs and expenses, regulatory inquiries, litigation, problems with product functionality, reputational damage, lost
revenue, and fines or penalties. We invest in systems and technology and in the protection of our products and data to reduce the risk of
an attack or other significant disruption. However, there can be no assurance that these measures and efforts will prevent future attacks
or other significant disruptions to our information technology systems and the Viveve System. Additionally, Viveve products have no
WiFi nor do they contain a receiver or transmitter effectively making a cyber attack impossible.
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
of our device and benefits of the Viveve System and treatment. 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 or in-licenses 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, including in-license opportunities. 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, as applicable, on favorable terms or at all. Furthermore, the integration of any acquisition or in-license 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 or in-licensing of technologies. If we decide to expand our product offerings, we
may spend time and money on projects that do not increase our revenues. Our inability to identify and secure such opportunities may
harm our financial condition and our ability to compete and grow our business.
26
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations which could affect our
ability to realize tax benefits from our net operating losses.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. As of December
31, 2018, we had federal and state net operating loss carryforwards (“NOLs”), of approximately $126.9 million and $97.7 million,
respectively, due to prior period losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a
corporation that undergoes an “ownership change” can be subject to limitations on its ability to utilize its NOLs to offset future taxable
income. Our existing NOLs may be subject to limitations arising from past ownership changes, including in connection with this
offering. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under
Section 382 of the Code. In addition, under the Tax Cuts and Jobs Act (the “Tax Act”), the amount of future NOLs that we are
permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined
without regard to the NOL deduction itself. In addition, the Tax Act generally eliminates the ability to carry back any future NOL to
prior taxable years, while allowing unused future NOLs to be carried forward indefinitely. There is a risk that due to changes under the
Tax Act, regulatory changes, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future
income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain
profitability.
Risks Related to Regulatory Matters
We or our distributors may be unable to obtain or maintain international regulatory clearances or approvals for our current or
future products, or our distributors may be unable to obtain necessary qualifications, 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 marketing approval or clearance 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 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 clearances, 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.
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, or FDCA, (unless the device is exempt from the 510(k)
requirements), has been classified pursuant to a de novo classification request, or is the subject of an approved premarket approval
application, or PMA. The FDA will permit marketing of a lower risk medical device through the 510(k) process if the manufacturer
demonstrates that the new product is substantially equivalent to a previously cleared and legally marketed 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 PMA, referred to as a
predicate device. 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, unless a de novo submission is
appropriate. 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, preclinical, clinical trial, manufacturing and labeling data, to
demonstrate to the FDA a reasonable assurance of the safety and efficacy of the device for its intended use.
27
If FDA has not issued a regulation classifying a particular type of device as Class I, and if there is no known predicate for a
device and/or it’s indication, the device is automatically Class III, regardless of the risk the device poses. If a device is
automatically/statutorily classified into Class III in this manner, a company can petition FDA to reclassify the category of devices into
Class II or Class I via a process known as “Evaluation of Automatic Class III Designation,” which is typically referred to as the de novo
process. The direct de novo process allows a company to request that a new product classification be established without the company
first submitting a 510(k) notification for the device. Our plan is to seek FDA authorization to market the Viveve System for the
treatment of vaginal tissue to improve sexual function and SUI by utilizing the direct de novo process. However, we cannot predict when
or if such de novo classification will be obtained. If FDA fails to reclassify the device pursuant to the de novo process, we will be
required to seek FDA premarket approval (via the more stringent PMA process) for the Viveve System. Delays in receipt of FDA
clearance or approval or failure to receive FDA clearance or approval could adversely affect our business, results of operations and
future growth prospects.
Our marketed products may be used by physicians for indications that are not cleared by the FDA. If the FDA finds that we
marketed our products in a manner that promoted off-label use, we may be subject to civil or criminal penalties.
Under the FDCA and other laws, we are prohibited from promoting our products for off-label uses. This means that we may
not make claims about the use of any of our marketed medical device products outside of their approved or cleared indications, and that
our website, advertising promotional materials and training methods may not promote or encourage unapproved uses. Therefore, we
may not provide information to physicians or patients that promote off-label uses, except in limited circumstances, such as in response
to unsolicited requests for off-label information or the distribution of scientific and medical publications under certain circumstances.
The FDA does not generally restrict physicians from prescribing products for off-label uses (or using products in an off-label manner) in
their practice of medicine. Should the FDA determine that our activities constitute the promotion of off-label uses, the FDA could bring
action to prevent us from distributing our devices for the off-label use and could impose fines and penalties on us and our executives. In
addition, failure to follow FDA rules and guidelines relating to promotion and advertising can result in, among other things, the FDA’s
refusal to approve or clear products, the withdrawal of an approved product from the market, product recalls, fines, disgorgement of
profits, operating restrictions, injunctions or criminal prosecutions. Any of these adverse regulatory actions could result in substantial
costs and could significantly and adversely impact our reputation and divert management’s attention and resources, which could have a
material adverse effect on our business.
If the Office of Inspector General within the Department of Health and Human Services, the U.S. Department of Justice (DOJ), or
another federal or state agency determines that we have promoted off-label use of our products, we may be subject to various
penalties, including civil or criminal penalties, and the off-label use of our products may result in injuries that lead to product
liability suits, which could be costly to our business.
In addition to the FDA restrictions on our marketed products, other state and federal healthcare laws have been applied by DOJ
and state attorneys general to restrict certain marketing practices in the medical device industry. While physicians may
generally prescribe and administer products for off-label uses, if we engage in off-label promotion, we may be subject to civil or
criminal penalties including significant fines and could be prohibited from participating in government healthcare programs such as
Medicaid and Medicare. Even if we are successful in resolving such matters without incurring penalties, responding to investigations or
prosecutions will likely result in substantial costs and could significantly and adversely impact our reputation and divert management’s
attention and resources, which could have a material adverse effect on our business, operating results, financial condition and ability to
finance our operations. In addition, the off-label use of our products may increase the risk of injury to patients, and, in turn, the risk of
product liability claims. Product liability claims are expensive to defend and could divert our management’s attention and result in
substantial damage awards against us.
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. We 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 or approvals 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.
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Clinical trials necessary to support a 510(k)notification, de novo petition or 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 a clinical study, pursuant to the agency’s investigational device exemption, or IDE,
regulations, to support a future product submission for the Viveve System. Initiating and completing clinical trials necessary to support a
510(k) notification, de novo petition, or PMA application for the Viveve System, as well as other possible future product candidates, is
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.
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 or 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 or clearance 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 preclinical 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 preclinical studies 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 studies and 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 preclinical development activities or
clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or 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.
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 preclinical 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 preclinical 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.
29
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 Public Health (CDPH). In particular, we and our suppliers are required to comply with the FDA’s QSR, and International
Standards Organization, or ISO, standards 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 Sunnyvale, California facility has been inspected by the FDA and CDPH, and observations were noted. The
FDA and CDPH 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 and unanticipated expenditures to address or defend such
actions:
● untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
● 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, de novo classification, or premarket approval of new products or
modified products;
● operating restrictions;
● reclassifying a device that previously received a 510(k) clearance or withdrawing a PMA approval that was previously
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 by the FDA or other foreign regulatory bodies 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 the 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.
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 device 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 our device. 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.
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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’s 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 be
likely to 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 corrections, removals, or 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, adverse health consequences or
death. 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 correction or removal actions involving our product
that we determine do not require notification to the FDA. If the FDA disagrees with our determinations, the FDA 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 corrections, removals, or recalls when they were conducted.
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 the U.S. 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 will be 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) pre-market 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, most of which have now been implemented by the agency. In August 2016, the FDA
released its proposals for reforming long-standing procedures and requirements related to modifications to medical devices already on
the market. In December 2016, Congress passed the 21st Century Cures Act, which makes multiple changes to FDA’s rules for medical
devices as well as for clinical trials, and Congress (passed the Medical Device User Fee reauthorization package in 2017.
The FDA or Congress may implement other reforms in the future. Future reforms could have the effect of making it more
difficult and expensive for us to obtain FDA clearance or approval. Such changes may also be made by legislators or regulators in the
foreign jurisdictions in which we do business and could similarly affect our operations and profitability in those markets.
In addition, a state could change its statutes or regulations at any time, disallowing sales to particular types of end users or
placing restrictions on certain chemicals, such as those used in our cryogen. We cannot predict the impact or effect of future legislation
or regulations at the federal or state levels, or in any foreign jurisdiction in which we do business.
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 recent
years, the medical device and pharmaceutical industries have been a focus of the U.S. government’s FCPA enforcement priorities, and
settlements often include very significant payments potentially consisting of millions of dollars. Other countries have similar laws to
which we may be subject, including the United Kingdom Bribery Act.
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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. At the present
time, we have not conducted formal FCPA compliance training for our foreign distributors and partners, but 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.
Viveve’s relationships with customers and healthcare providers and professionals may be subject to applicable anti-
kickback, fraud and abuse and other healthcare laws and regulations, as well as comparable state and foreign laws, which could
expose Viveve to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future
earnings.
Healthcare providers and physicians play a primary role in the recommendation and prescription of any medical product,
including the Viveve System marketed by the Company. Viveve’s future arrangements with customers, healthcare providers and other
medical professionals could expose Viveve to broadly applicable fraud and abuse and other healthcare laws and regulations that may
constrain the business or financial arrangements and relationships through which Viveve markets, sells and distributes its medical device
products. There are various federal and state healthcare laws and regulations that impose restrictions that may apply to Viveve, and
there may also be comparable foreign laws and regulations that similarly could apply to the Company.
The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federally
funded healthcare programs. This statute has been broadly interpreted to apply to manufacturer arrangements with prescribers and
purchasers, among others. There are similar laws at the state level in the U.S., and several other countries, including the United
Kingdom, have enacted similar anti-kickback, fraud and abuse, and healthcare laws and regulations.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare
benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security
and transmission of individually identifiable health information. HIPAA also imposes criminal liability for knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or
payment for healthcare benefits, items or services.
The federal Physician Sunshine Act requirements under the Patient Protection and Affordable Care Act of 2010, as amended by
the Health Care and Education Reconciliation Act of 2010, referred to together as the Affordable Care Act, require manufacturers of
drugs, devices, biologics and medical supplies for which payment is available under title XVIII of the Social Security Act [Medicare] or
under a State plan under title XIX [Medicaid] or XXI [SCHIP] of the Social Security Act (or a waiver of such a plan) to report to the
Department of Health and Human Services information related to payments and other transfers of value made to or at the request of
covered recipients, such as physicians and teaching hospitals, and physician ownership and investment interests in such manufacturers.
Payments made to physicians and research institutions for clinical trials are included within the scope of this federal disclosure law.
Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by nongovernmental third-party payors, including private
insurers. Some state laws also require pharmaceutical and medical device companies to comply with the relevant industry’s voluntary
compliance guidelines, in addition to requiring manufacturers to report information related to payments to physicians and other health
care providers or marketing expenditures. There may also be comparable foreign laws and regulations that could impact Viveve’s
business and operations.
32
If Viveve’s operations are found to be in violation of any of these laws or any other governmental regulations that may apply to
it, the Company may be subject to significant civil, criminal and administrative penalties, damages, or fines. Moreover, if any of the
physicians or other providers or entities with whom Viveve expects to do business are found to be not in compliance with applicable
laws, they may be subject to criminal, civil or administrative sanctions, or potentially to other sanctions in foreign jurisdictions.
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
Viveve treatment. We have an exclusive license (with a field of use limitation) to one issue U.S. patent and own 3 issued U.S. patents
primarily covering our technology and Viveve treatment and methods of use. Additionally, we have 9 pending U.S. patent applications;
65 issued foreign patents; and 32 pending foreign patent applications, some of which foreign applications preserve an opportunity to
pursue patent rights in multiple countries. Some of the Viveve System’s 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 have been involved in and 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 our device and the methods we employ are covered by their patents. If our device 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. For example, in October 2016 we filed
a patent infringement lawsuit against ThermiGen, LLC, ThermiAesthetics, LLC and Dr. Red Alinsod alleging unauthorized use of
certain of our patented technologies. based on Viveve’s U.S. Patent Number 8,961,511 (the “‘511 patent”). Viveve, Inc. v. ThermiGen,
LLC et al., No. 2:16-cv-1189-JRG (E.D.Tx.), filed October 16, 2016. On October 20, 2017, ThermiGen and ThermiAesthetics filed two
petitions for inter partes review (IPR) of the ‘511 patent at the U.S. Patent Trial and Appeal Board (PTAB) challenging the validity of
the ‘511 patent claims. ThermiGen, LLC et al. v. Viveve, Inc. , No. IPR2018-00088 (October 20, 2017) and ThermiGen, LLC et al. v.
Viveve, Inc., No. IPR2018-00089 (October 20, 2017). On June 4, 2018, we entered into a Settlement and License Agreement (the
“Settlement Agreement”) with ThermiGen LLC and ThermiAesthetics LLC (“ThermiGen,” collectively) as well as Red Alinsod, M.D.
resolving our patent litigation against ThermiGen and Dr. Alinsod. The Settlement Agreement also resolved ThermiGen’s IPR
proceedings against the Viveve.
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 and Viveve
treatment, 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.
33
In addition, we may hereafter become involved in litigation to protect our trademark rights associated with our device name or
treatment name. Names used 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, device or treatment, we may experience a loss in goodwill associated with our brand name, customer
confusion and a loss of sales.
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 Securities and Exchange 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.
As of March 8, 2019, our officers, directors and principal stockholders, i.e., stockholders who beneficially own greater than
10% of our outstanding common stock, collectively beneficially own approximately 18.5% 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.
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.
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;
● 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.
34
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.
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 8, 2019, there were approximately 1,549,236 shares of common stock of the 46,364,570 shares issued and
outstanding that could be sold pursuant to Rule 144, 420,947 shares of restricted stock, 642,622 shares subject to outstanding warrants,
5,808,625 shares subject to outstanding options and an additional 488,632 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, which could
reduce a return in your investment in us. We intend to retain any earnings to develop, carry on, and expand our business. In addition, the
terms of the indebtedness of our existing credit facility also restrict us from paying cash dividends to stockholders under some
circumstances.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
In January 2012, we entered into a lease agreement for office and laboratory facilities in Sunnyvale, California. The term of the
lease agreement, dated January 25, 2012, as amended, commenced in March 2012 and terminated on April 30, 2018.
On February 1, 2017, we entered into a Sublease for approximately 12,400 square feet of building space for the relocation of
the Company’s corporate headquarters to Englewood, Colorado, which was effective as of January 26, 2017. The lease term is 36
months. The lease term commenced on June 1, 2017 and will terminate in May 2020. The Company relocated its corporate headquarters
from Sunnyvale, California to Englewood, Colorado in June 2017. We believe that these facilities are adequate for our current business
operations.
35
Rent expense for the years ended December 31, 2018 and 2017 was $358,000 and $442,000, respectively. Future minimum
payments under the lease are approximately as follows:
Year Ending December 31,
2019 – $296,000
2020 – $143,000
2021 – $23,000
Item 3. Legal Proceedings
In December 2018, the Company settled an arbitration matter with a former employee, and the arbitration has now been
dismissed with prejudice. The matter involved affirmative claims for negligence by the Company against the employee arising out of
her negligent performance of certain work duties, as well as various employment-related counterclaims by the employee.
On June 4, 2018, the Company entered into a Settlement and License Agreement (the “Settlement Agreement”) with
ThermiGen LLC and ThermiAesthetics LLC (“ThermiGen,” collectively) as well as Red Alinsod, M.D. resolving the Company’s patent
litigation against ThermiGen and Dr. Alinsod. The Settlement Agreement also resolved ThermiGen’s inter partes review proceedings
against the Company. The litigation arose from the Company’s claim that ThermiGen and Dr. Alinsod were improperly using the
Company’s patented technology without consent. Pursuant to the Settlement Agreement, the parties agreed to resolve all currently
pending disputes between them.
Under the terms of the Settlement Agreement, the Company received an initial monetary payment to settle the litigation and
past claims and an on-going royalty for future sales. Viveve granted to ThermiGen a non-exclusive, non-transferable license to use the
Company’s U.S. patent for the current version of ThermiGen’s ThermiVa system (which includes RF generators and consumables).
Item 4. Mine Safety Disclosures
Not applicable.
36
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
As of March 8, 2019, our common stock is trading on The Nasdaq Capital Market under the symbol “VIVE”.
Holders of Common Stock
As of March 8, 2019, there were approximately 640 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
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual
Report.
Issuances of Unregistered Securities
Not applicable.
37
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.
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 of Our Business
In the discussion below, when we use the terms “we”, “us” and “our”, we are referring to Viveve Medical, Inc. and our wholly-
owned subsidiaries, Viveve, Inc. and Viveve BV.
We design, develop, manufacture and market a platform medical technology, which we refer to as Cryogen-cooled Monopolar
Radiofrequency, or CMRF. Our proprietary CMRF technology is delivered through a radiofrequency generator, handpiece and treatment
tip that, collectively, we refer to as the Viveve® System. The Viveve System is currently marketed and sold for a number of indications,
depending on the relevant country-specific clearance or approval. Currently, the Viveve System is cleared for marketing in 60 countries
throughout the world under the following indications for use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis (including the U.S.)
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and for the treatment of
vaginal laxity
For treatment of vaginal laxity
For treatment of the vaginal introitus, after vaginal childbirth, to improve sexual function
General surgical procedures for electrocoagulation and hemostasis and for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity, urinary incontinence and sexual function
No. of Countries:
3 (including the U.S.)
32
6
16
1
1
1
In the U.S., the Viveve System is indicated for use in general surgical procedures for electrocoagulation and hemostasis and we
market and sell primarily through a direct sales force. Outside the U.S., we primarily market and sell through distribution partners. As of
December 31, 2018, we have sold 703 Viveve Systems and approximately 33,300 single-use treatment tips worldwide.
Because the revenues we have earned to date have not been sufficient to support our operations, we have relied on sales of our
securities, bank term loans and loans from related parties to fund our operations.
38
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 and other governmental
clearance or approval for the sale of our product for all desired indications and whether there will be a demand for the Viveve System,
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 clearance or approval for our
products, including in 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 the sales of our securities, bank
term loans and loans from related parties. Various factors, including our limited operating history with limited revenues to date and our
limited ability to market and sell our products have resulted in limited working capital available to fund our operations. 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.
Recent Events
Effective Shelf Registration Statements
In November 2017, we filed a universal shelf registration statement with the SEC on Form S-3 for the proposed offering from
time to time of up to $50,000,000 of our securities, including common stock, preferred stock, and/or warrants (the “2017 Shelf
Registration Statement”). The 2017 Shelf Registration Statement currently has a remaining capacity of $25,000,000.
December 2018 Offering
In connection with the closing of the December 2018 Offering, the Company issued an aggregate of 14,728,504 shares of
common stock, including the shares issued in connection with the exercise of the underwriters’ overallotment option, at a public
offering price of $1.50 per share for gross proceeds of approximately $22,093,000. The net proceeds to the Company, after deducting
underwriting discounts and commissions and other offering expenses, were approximately $20,385,000.
February 2018 Offering
In connection with the closing of the February 2018 Offering, the Company issued an aggregate of 11,500,000 shares of
common stock, including the shares issued in connection with the exercise of the underwriters’ overallotment option, at a public
offering price of $3.00 per share for gross proceeds of approximately $34,500,000. The net proceeds to the Company, after deducting
underwriting discounts and commissions and other offering expenses, were approximately $32,214,000.
“At-the-Market” Offering
The Company established an “at-the-market” equity offering program through the filing of a prospectus supplement to its shelf
registration statement on Form S-3, which was filed on November 8, 2017, under which the Company may offer and sell, from time-to-
time, up to $25,000,000 aggregate offering price of shares of its common stock (the “November 2017 ATM Facility”). As of December
31, 2018, the Company has sold 336,498 shares of common stock under the November 2017 ATM Facility for gross proceeds of
approximately $1,631,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other
offering expenses, were approximately $1,318,000.
Adoption of New Accounting Standard
On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606), which created Accounting
Standards Codification Topic 606 (“ASC 606”), using the modified retrospective method applied to those contracts which were not
completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior
period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605.
Under ASC 605, revenue from extended assurance warranties was deferred and recognized over the period of the warranty. On
the adoption of ASC 606, these warranties are not considered a separate performance obligation. Accordingly, on the transition date,
the Company recorded a net adjustment in retained earnings of $177,000, resulting from the reclassification of $195,000 for the amount
of extended warranties previously recorded in noncurrent liabilities, offset by $18,000 recorded in accrued liabilities for future costs
associated with the assurance-type extended warranties.
39
Submission of IDE to FDA for Approval to Conduct SUI Trial in the United States
In September 2018, the Company submitted an Investigational Device Exemption (IDE) to the U.S. Food and Drug
Administration (FDA) for authorization to begin LIBERATE-U.S., a multicenter, randomized, double-blinded, sham-controlled trial to
evaluate the safety and efficacy of the Company’s proprietary, cryogen-cooled monopolar radiofrequency (CMRF) technology for the
improvement of stress urinary incontinence (SUI) in women. Intended enrollment for the LIBERATE-U.S. trial is approximately 240
subjects at up to 25 study sites in the United States. Subjects will be randomized in a 2:1 ratio for active and sham treatments.
The expected primary efficacy endpoint in the study is the proportion of patients experiencing a greater than 50% reduction in
Pad Weight Gain in the standardized 1-hour Pad Weight Test at 12 months post-treatment. The 1-hour Pad Weight Test is an FDA
recommended endpoint in SUI clinical research. The proposed study design also includes a variety of secondary and exploratory
endpoints including safety, efficacy, as measured by a three-day voiding diary, and Quality of Life benefits measured by the Urogenital
Distress Inventory-6 (UDI-6), International Consultation on Incontinence Modular Questionnaire-Urinary Incontinence Short Form
(ICIQ-UI-SF), and Incontinence Quality of Life (I-QOL).
Viveve has had ongoing discussions with the FDA and a resultant safety case protocol is currently under formal review by the
Agency. The Company anticipates positive feedback from the Agency in the near future and to conduct the additional safety testing.
Upon completion of said testing, the Company plans to re-submit the IDE to the FDA in the third quarter 2019.
Enrollment Completed in LIBERATE-International SUI Trial
In January 2019, enrollment was completed for the LIBERATE-International study in SUI. The study was conducted in Canada
to support SUI indications in Canada, the European Union and several other international countries. LIBERATE International is a
randomized, double-blind, sham-controlled study conducted at 9 sites in Canada and included enrollment of 99 patients suffering from
mild-to-moderate SUI. Patients were 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 months.
The primary efficacy endpoint is the 6-month change from baseline in the one-hour pad weight test, and the study protocol
includes 6 months of safety follow-up, as well as assessments of other secondary endpoints, including: 24-hour pad weight test, daily
incontinence episodes, as well as composite scores from the validated UDI-6, IIQ-7, and ICIQ-UI-SF outcome questionnaires.
Health Canada issued an authorization to conduct the investigational testing. The treatment portion of the trial has been
completed, and if the results are favorable, the company expects to use the study for a registration filing in Canada, the EU and other
countries outside the US for the improvement of SUI symptoms. There can be no assurance that any regulatory authority will approve
our applications.
Reported Positive Twelve-Month Data from SUI Feasibility Study
In December 2018, the Company reported positive twelve-month interim data from its SUI feasibility study. At twelve months
post-treatment, 72% of women experienced improvement in one-hour pad weight test and 60% of patients experienced significant
benefit as they had ≤ 1 gram of urine leakage in the one-hour pad weight text at twelve months. A clinically meaningful benefit was
achieved across all patient-reported SUI symptoms and quality of life outcome measures. No device-related safety issues were reported
for any of the patients.
This single-arm feasibility study included 36 subjects with mild to moderate SUI (based on the one-hour pad weight test) who
underwent treatment with Viveve’s CMRF technology under a proprietary treatment protocol. Clinical results included the objective
one-hour pad weight assessment and seven-day bladder voiding diary, as well as composite scores from multiple validated patient-
reported outcomes, including: UDI-6 (Urogenital Distress Inventory-Short Form), IIQ-7 (Incontinence Impact Questionnaire) and ICIQ-
UI-SF (International Consultation on Incontinence Questionnaire-Urinary Incontinence-Short Form).
FDA Approval to Continue VIVEVE II Clinical Study
In March 2019, enrollment was completed for the VIVEVE II (VIveve treatment of the Vaginal Introitus to EValuate
Effectiveness) clinical study following IDE approval by the FDA. This is a prospective, randomized, double-blind, sham controlled
study to evaluate the efficacy and safety of the Viveve System to improve symptoms of female sexual disfunction, associated with
vaginal laxity. 19 active clinical sites in the United States enrolled 250 female patients who were pre-menopausal, 18 years of age or
older who experienced at least one full term vaginal delivery at least twelve 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 twelve months post-treatment to assess the primary
effectiveness and safety endpoints of the study with data being collected at one, three, six, nine and twelve months. Patients randomized
to the sham arm will be offered the opportunity to receive a Viveve treatment once they had completed the twelve-month evaluation
following the sham intervention.
40
The primary efficacy endpoint of the study is the mean change from baseline in the Female Sexual Function Index (FSFI) total
score at twelve months posttreatment. Secondary endpoints include evaluation of the mean change from baseline of the total FSFI score
at six months, as well as evaluation of the mean change from baseline of the six different domains within the FSFI at six and twelve
months. At months six and twelve, in addition to the FSFI, subjects will be asked to complete the Patient’s Global Impression of
Improvement (PGI-I). Subjects will also be assessed for adverse events throughout the study. The Company intends to report final
twelve-month clinical data from the study in the second quarter of 2020.
Plan of Operation
We intend to increase our sales both internationally and in the U.S. market by seeking additional regulatory clearances or
approvals for the sale and distribution of our products, identifying and training qualified distributors and expanding the scope of
physicians who offer the Viveve System to include plastic surgeons, general surgeons, urologists, and urogynecologists.
In addition, we intend to use the strategic relationships that we have developed with outside contractors and medical experts to
improve our products 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; and
● developing new RF consoles.
The net proceeds received from sales of our securities and the term loans 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 at least the
next twelve months, however, we may require additional capital from the sale of equity or debt securities 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 clearance and 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 $500,000 annually.
We intend to continue to meet our operating cash flow requirements through the sales of our products and by raising additional
capital 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 strategic
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 Annual Report on
Form 10-K, we do not have any committed sources of financing and there are no assurances that we will be able to secure additional
funding, or if we do secure additional financing that it will be on terms that are favorable to us. If we cannot obtain financing, then we
may be forced to curtail our operations or consider other strategic alternatives.
Results of Operations
Comparison of the Year Ended December 31, 2018 and 2017
Revenue
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Revenue
$
18,517 $
15,288 $
3,229
21%
We recorded revenue of $18,517,000 for the year ended December 31, 2018, compared to revenue of $15,288,000 for the year
ended December 31, 2017, an increase of $3,229,000, or approximately 21%. The increase in revenue was primarily due to sales of 259
Viveve Systems (which included 203 Viveve Systems sold in the U.S. market - 183 Viveve Systems through direct sales and 20 Viveve
Systems through our distribution partner), and higher quantities of disposable products sold (which included approximately 18,450
disposable treatment tips sold globally) in 2018. Sales in 2017 included 227 Viveve Systems (which included 160 Viveve Systems sold
in the U.S. market through direct sales) and approximately 10,800 disposable treatment tips.
41
Gross Profit
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Gross profit
$
7,320 $
7,444 $
(124)
(2)%
Gross profit was $7,320,000, or 40% of revenue, for the year ended December 31, 2018, compared to gross profit of
$7,444,0000, or 49% of revenue, for the year ended December 31, 2017, a decrease of $124,000, or approximately 2%. The decrease in
gross profit was primarily due to the unit mix of products sold during the year. Currently, the Viveve System has higher gross margins,
as compared to disposable treatment tips. The decrease in gross profit was also affected by lower average selling prices of Viveve
Systems in the U.S. market as a result of higher volumes of systems sold to our distribution partner during the year.
The decrease in gross margin was primarily due to the unit volume mix of products sold and the lower average selling prices of
Viveve Systems sold in the U.S. market during the year. We expect our gross margin to fluctuate in future periods based on the mix of
our products and direct sales versus distributor sales.
Research and development expenses
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Research and development
$
13,716 $
12,343 $
1,373
11%
Research and development expenses totaled $13,716,000 for the year ended December 31, 2018, compared to research and
development expenses of $12,343,000 for the year ended December 31, 2017, an increase of $1,373,000, or approximately 11%.
Spending on research and development increased in 2018 primarily due to costs associated with increased engineering and development
work with our contract manufacturer related to product improvement efforts. Research and development expense during 2018 also
included higher personnel costs for new employees and related additional stock-based compensation expense for stock options granted
to new employees and additional stock options granted to existing employees for performance bonuses.
Selling, general and administrative expenses
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Selling, general and administrative
$
38,569 $
28,831 $
9,738
34%
Selling, general and administrative expenses totaled $38,569,000 for the year ended December 31, 2018, compared to
$28,831,000 for the year ended December 31, 2017, an increase of $9,738,000, or approximately 34%. The increase in selling, general
and administrative expenses in 2018 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
2018 also included higher personnel costs for new employees (primarily in connection with our sales and marketing efforts) and related
additional stock-based compensation expense for stock options granted to new employees and additional stock options granted to
existing employees for performance bonuses, partially offset by gains from litigation settlement payments.
42
Interest expense
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Interest expense, net
$
4,372 $
3,169 $
1,203
38%
During the year ended December 31, 2018, we had interest expense, net, of $4,372,000 compared to $3,169,000, for the year
ended December 31, 2017. The increase of $1,203,000, or approximately 38%, resulted primarily from the additional interest expense in
2018, which was computed on a higher term loan balance compared to 2017 due to the drawdown of the remaining $10,000,000
available under the credit facility in December 2017 and the interest in-kind which was added to the total outstanding principal loan
amount, partially offset by the additional interest expense in 2017 in connection with the May 2017 payoff of the previous term loan.
Loss from minority interest in limited liability company
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Loss from minority interest in limited liability
company
$
657 $
- $
657
-
The Company uses the equity method to account for its investment in InControl Medical, LLC (“ICM”). For the year ended
December 31, 2018, the allocated net loss from ICM’s operations was $657,000. There was no income or loss recognized for the year
ended December 31, 2017 as the investment in ICM was made late in the year and accounted for on a one quarter lag.
Other income (expense), net
Year Ended
December 31,
Change
2018
2017
$
%
(in thousands, except percentages)
Other income (expense), net
$
13 $
(60) $
73
(122)%
During the year ended December 31, 2018 we had other income, net, of $13,000 as compared to other expense, net, of $60,000
for the year ended December 31, 2017.
Liquidity and Capital Resources
Comparison of the Year Ended December 31, 2018 and 2017
At December 31, 2018, we had $29.5 million in cash and cash equivalents. During 2018, we raised $53.8 million from the sale
of common stock. At the date our financial statements for the year ended December 31, 2018 are issued, we did not have sufficient cash
to fund our operation through March 31, 2020, without additional financing and, therefore, we concluded there was substantial doubt
about our ability to continue as a going concern within one year after the date the financial statements are issued. Based on
management’s plans to reduce operating expenses, including the reduction in force in January 2019, and the availability of our
November 2017 ATM Facility, we believe that this substantial doubt has been alleviated.
Accordingly, we expect to satisfy our estimated liquidity needs for at least 12 months from the issuance of these consolidated
financial statements and have mitigated our going concern risk. However, we cannot predict, with certainty, the outcome of our future
actions to generate liquidity, including the availability of additional financing.
Management currently believes that it will be necessary for us to raise additional funding in the form of an equity financing of
common stock, but there can be no assurance that such funding will be available to us on favorable terms, if at all. The failure to raise
capital when needed could have a material adverse effect on our business and financial condition. We may not be able to obtain
additional financing as needed on acceptable terms, or at all, which may require us to reduce our operating costs and other expenditures,
including reductions of personnel, salaries and capital expenditures. Alternatively, or in addition to such potential measures, we may
elect to implement additional cost reduction actions as we may determine are necessary and in our best interests. Any such actions
undertaken might limit the Company’s ability to achieve its strategic objectives.
43
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,
2018
2017
$
$
(43,090) $
(2,142)
54,025
8,793 $
(34,853)
(3,405)
50,902
12,644
We have incurred, and expect to continue to incur, significant expenses in the areas of research and development, regulatory
and clinical study costs associated with the Viveve System.
Operating activities used $43,090,000 of cash for the year ended December 31, 2018 compared to $34,853,000 used for the
year ended December 31, 2017. 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, 2018 consisted of a net
loss of $49,981,000 adjusted for non-cash expenses including provision for doubtful accounts of $179,000, depreciation and
amortization of $786,000, stock-based compensation of $3,035,000, fair value of restricted common shares issued of $256,000, non-
cash interest expense of $1,580,000, loss from minority interest in limited liability company of $657,000, and cash inflows from changes
in operating assets and liabilities of $398,000. Net cash used during the year ended December 31, 2017 consisted of a net loss of
$36,959,000 adjusted for non-cash expenses including provision for doubtful accounts of $221,000, depreciation and amortization of
$449,000, stock-based compensation of $1,872,000, fair value of restricted common shares issued of $260,000, non-cash interest
expense of $1,049,000 and cash outflows from changes in operating assets and liabilities of $1,303,000.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2018 and 2017 was $2,142,000 and $3,405,000,
respectively. Net cash used in investing activities during 2018 was used for the purchase of property and equipment. Net cash used in
investing activities during 2017 was used for the $2,500,000 equity investment in ICM and 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, 2018 was $54,025,000, which was the result of the
gross proceeds of $22,093,000 from our December 2018 offering (partially offset by transaction costs of $1,708,000), gross proceeds of
$34,500,000 from our February 2018 offering (partially offset by transaction costs of $2,286,000), gross proceeds of $1,327,000 from
our November 2017 ATM Facility (partially offset by transaction cost of $134,000), and proceeds from shares purchased under the
Company’s employee stock purchase plan of $233,000.
Net cash provided by financing activities during year ended December 31, 2017 was $50,902,000, which was the result of the
gross proceeds of $34,500,000 from our March 2017 Offering (partially offset by transaction costs of $3,060,000), gross proceeds of
$304,000 from our November 2017 ATM Facility (partially offset by transaction cost of $179,000), the debt proceeds of $30,000,000
from the drawdown of funds under the 2017 Loan Agreement (partially offset by debt issuance costs of $790,000), proceeds from
shares purchased under the Company’s employee stock purchase plan of $76,000, and proceeds from the exercise of stock options and a
warrant of $51,000, partially offset by the repayment of the term loan under the 2016 Loan Agreement of $10,000,000.
As of December 31, 2018, there is a balance of $25,000,000 available for future issuance under the 2017 Shelf Registration
Statement, and approximately $23,369,000 available for future issuance under the 2017 ATM Facility.
Contractual Payment Obligations
We have obligations under a non-cancelable operating lease and a bank term loan. As of December 31, 2018, our contractual
obligations are as follows (in thousands):
Contractual Obligations:
Debt obligations (including interest)
Non-cancellable operating lease obligations
Total
Total
Less than
1 Year
1 - 3 Year 3 -5 Years
More than
5 Years
$
$
47,878 $
462
48,340 $
2,778 $
296
3,074 $
19,574 $
166
19,740 $
25,526 $
-
25,526 $
-
-
-
44
In January 2012, we entered into a lease agreement for office and laboratory facilities in Sunnyvale, California. The lease
agreement, as amended, commenced in March 2012 and terminated in April 2018.
On February 1, 2017, we entered into a Sublease for approximately 12,400 square feet of building space for the relocation of
the Company’s corporate headquarters to Englewood, Colorado. The lease term is 36 months and the monthly base rent for the first,
second and third years is $20.50, $21.12 and $21.75 per rentable square foot, respectively. In connection with the execution of the
Sublease, the Company paid a security deposit of approximately $22,000. The Company was also provided an allowance of
approximately $88,000 for certain tenant improvements relating to the engineering, design and construction of the Sublease Premises.
The lease term commenced on June 1, 2017 and will terminate in May 2020.
On May 22, 2017, the Company entered into the 2017 Loan Agreement with affiliates of CRG LP (“CRG”). The credit facility
consists of $20,000,000 that was drawn at closing and the ability to access additional funding of up to an aggregate of $10,000,000 for a
total of $30,000,000 under the credit facility. On December 29, 2017, the Company accessed the remaining $10,000,000 available under
the CRG credit facility. The term of the loan is six years with the first four years being interest only. The outstanding principal balance
under the 2017 Loan Agreement is $31,751,000 as of December 31, 2018.
In September 2018, the Company entered into a 36-month noncancelable operating lease agreement for office equipment. The
lease commenced on September 20, 2018. The monthly payment is approximately $2,600.
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 net realizable value. Cost is determined on an actual cost basis on a first-in, first-out
method. Inventory as of December 31, 2018 and 2017 is mainly finished goods but also includes a small quantity of raw materials.
Lower of cost or net realizable value 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, 2018 and
2017.
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
Revenue consists primarily of the sale of the Viveve System, single-use treatment tips and ancillary consumables. The
Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the
contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5)
recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders to be the contracts
with a customer. Revenues, net of expected discounts, are recognized when the performance obligations of the contract with the
customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have
been determined to be the only distinct performance obligations, are shipped to the customer. Expected costs of assurance warranties
and claims are recognized as expense. Revenue is recognized net of any sales taxes from the sale of the products.
45
Sales of our products are subject to regulatory requirements that vary from country to country. The Company has regulatory
clearance for differing indications, or can sell its products without a clearance, in many countries throughout the world, including
countries within the following regions: North America, Latin America, Europe, the Middle East and Asia Pacific. In North America, we
market and sell primarily through a direct sales force. Outside of North America, we market and sell primarily through distribution
partners.
The Company does not provide its customers with a right of return.
Allowance for Doubtful Accounts
We make ongoing assumptions relating to the collectibility of our accounts receivable in our calculation of the allowance for
doubtful accounts. In determining the amount of the allowance, we make judgements about the creditworthiness of customers based on
ongoing credit evaluations and assess current economic trends affecting our customers that might impact the level of credit losses in the
future and result in different rates of bad debts than previously seen. We also consider our historical level of credit losses. As of
December 31, 2018 and 2017, the allowance for doubtful accounts was $284,000 and $221,000, respectively.
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.
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, 2018 and 2017, the Company has recorded a full valuation allowance for our deferred tax assets based on our historical
losses 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.
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.
46
We determined that the Black-Scholes option pricing model is the most appropriate method for determining the estimated fair
value for stock options and purchase rights under the Company’s employee stock purchase plan. 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires an entity that is a lessee to record a
right of use asset and a corresponding lease liability on the balance sheet for all leases. This guidance also requires disclosures about the
amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after
December 15, 2018, and interim periods within those annual periods and early adoption is permitted. In July 2018, the FASB issued
updated guidance which allows an additional transition method to adopt the new leases standard at the adoption date, as compared to the
beginning of the earliest period presented, and allows entities to recognize a cumulative-effect adjustment to the beginning balance of
retained earnings in the period of adoption. The Company expects to elect to use this transition method at the adoption date of January
1, 2019, and, as a result, will record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms
longer than 12 months. The Company also plans to elect the practical expedient to not separate lease and non-lease components and to
use the package of practical expedients upon transition that will retain the lease classification and initial direct costs for any leases that
exist prior to adoption of the new guidance.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows, Classification of Certain Cash Receipts and
Cash Payments (Topic 230)”. This guidance addresses specific cash flow issues with the objective of reducing the diversity in practice
for the treatment of these issues. The areas identified include: debt prepayment or debt extinguishment costs; settlement of zero-coupon
debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance
claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees;
beneficial interests in securitization transactions and application of the predominance principle with respect to separately identifiable
cash flows. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period, with early adoption permitted. We adopted this guidance as of January 1, 2018 and the adoption of the guidance
did not have a significant impact on the condensed consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows, Restricted Cash (Topic 230)”. This guidance
requires that a statement of cash flows explain the total change during the period of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. Amounts described as restricted cash and restricted cash equivalents should
be included with cash and cash equivalents when reconciling the beginning of period and end of period to total amounts shown on the
statement of cash flows. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim
periods within that reporting period, with early adoption permitted. We adopted this guidance as of January 1, 2018 and the adoption of
the guidance did not have a significant impact on the condensed consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718), Scope of Modification
Accounting”. This pronouncement provides guidance about which changes to the terms or conditions of a share-based payment award
may require an entity to apply modification accounting under Topic 718. This guidance is effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted
this guidance as of January 1, 2018 and the adoption of the guidance did not have a significant impact on the condensed consolidated
financial statements.
In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718) – Improvements to Nonemployee Share-
Based Payment Accounting”. The intent of this guidance is to simplify the accounting for nonemployee share-based payment
accounting. The amendments in this guidance expand the scope of Topic 718 to include share-based payment transactions for acquiring
goods and services from nonemployees. Consistent with the accounting requirement for employee share-based payment awards,
nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments
that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary
to earn the right to benefit from the instruments have been satisfied. Equity- classified nonemployee share-based payment awards are
measured at the grant date. Consistent with the accounting for employee share-based payment awards, an entity considers the
probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. This
guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within the reporting
period. We do not expect the adoption of this guidance to have a significant effect on our consolidated financial statements.
47
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no
material effect is expected on the consolidated financial statements as a result of future adoption.
Off-Balance Sheet Transactions
We do not have any off-balance sheet transactions.
Trends, Events and Uncertainties
Research, development and commercialization of new technologies and products is, by its nature, unpredictable. Although we
will undertake development efforts, including efforts, with commercially reasonable diligence, there can be no assurance that we will
have adequate capital to develop or commercialize 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, 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 on Form 10-K, 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.
48
Item 9A. Controls and Procedures
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, 2018, 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, 2018, 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.
Management’s Report on 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 U.S. 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, 2018. 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, 2018, our internal control over financial reporting was effective based on
those criteria.
Our independent registered public accounting firm, BPM LLP, which audited the consolidated financial statements in this
Annual Report on Form 10-K, independently assessed the effectiveness of the Company’s internal control over financial reporting.
BPM LLP has issued an attestation report, which appears as part of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Viveve Medical, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Viveve Medical, Inc. (a Delaware corporation) and its subsidiaries (the
“Company”) as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets as of December 31, 2018 and 2017 and the related consolidated statements of operations
and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2018,
and the related notes (collectively referred to as the “consolidated financial statements”) of the Company, and our report dated March
14, 2019, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Assessment of
Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
/s/ BPM LLP
San Jose, California
March 14, 2019
50
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item 10 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
51
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
Agreement and Plan of Merger dated May 9, 2014 by and among Viveve, Inc., PLC Systems, Inc. and PLC Systems
Acquisition Corporation (1)
2.1.1 Amendment to Agreement and Plan of Merger (1)
RenalGuard Reorganization Agreement (2)
2.2
Certificate of Conversion for Delaware(3)
3.1
Amended and Restated Certificate of Incorporation(4)
3.2
Articles of Amendment to the Articles of Continuance of Viveve Medical, Inc. (5)
3.3
Amended and Restated Bylaws(4)
3.4
Common Stock Purchase Warrant issued on February 17, 2015 to Scott Durbin (6)+
4.1
Common Stock Purchase Warrant issued on February 17, 2015 to Jim Robbins (6)+
4.2
Common Stock Purchase Warrant issued on February 17, 2015 to Patricia Scheller (6)+
4.3
Common Stock Purchase Warrant issued on May 12, 2015 to James Atkinson (6)+
4.4
Common Stock Purchase Warrant issued on December 16, 2015 to James Atkinson (6)+
4.5
4.6
Common Stock Purchase Warrant issued on December 16, 2015 to Jim Robbins (6)+
4.7 Warrant to Purchase Common Stock issued on April 1, 2016 to Dynamic Medical Technologies (Hong Kong) Limited (3)
4.8 Warrant to Purchase Common Stock issued on May 11, 2016 to Theresa Stern (7)
4.9 Warrant to Purchase Common Stock issued on May 11, 2016 to Chris Rowan (7)
4.10 Warrant to Purchase Common Stock issued on June 20, 2016 to Western Alliance Bank (8)
4.11 Warrant to Purchase Shares of Common Stock of Viveve Medical, Inc., dated May 25, 2017, by and between Viveve
Medical, Inc. and CRG Partners III - Parallel Fund "A" L.P. (9)
4.12 Warrant to Purchase Shares of Common Stock of Viveve Medical, Inc., dated May 25, 2017, by and between Viveve
4.13
10.1
10.2
10.3
Medical, Inc. and CRG Partners III L.P. (9)
Specimen Common Stock Certificate (10)
Form of Securities Purchase Agreement dated May 9, 2014 (11)
Securities Purchase Agreement, dated May 9, 2014, by and among the Registrant and GBS Venture Partners as trustee for
GBS BioVentures III Trust (11)
Escrow Deposit Agreement, dated May 9, 2014 by and among the Registrant, Palladium Capital Advisors LLC, Middlebury
Securities and Signature Bank, as escrow agent (11)
Registration Rights Agreement, dated May 9, 2014 (11)
First Amendment to Registration Rights Agreement, dated February 19, 2015 (12)
Right to Shares Letter Agreement dated May 9, 2014 between the Registrant and GCP IV LLC (11)
10.4
10.5
10.6
10.7 Amendment dated September 10, 2014 to Securities Purchase Agreement dated February 22, 2013 (13)
10.8 Amendment dated September 11, 2014 to Securities Purchase Agreement dated February 22, 2013 (13)
10.9
10.10 Loan and Security Agreement dated September 30, 2014 between Viveve, Inc. and Square 1 Bank (16)
PLC Systems Inc. 2013 Stock Option and Incentive Plan, as amended (14) +
52
First Amendment to Loan and Security Agreement dated February 19, 2015 between Viveve, Inc. and Square 1 Bank (12)
Intellectual Property Security Agreement dated September 30, 2014 between Viveve, Inc. and Square 1 Bank (16)
10.11
10.12
10.13 Unconditional Guaranty issued by the Registrant in favor of Square 1 Bank (16)
10.14
Intellectual Property Assignment and License Agreement dated February 10, 2006, as amended, between Dr. Edward
Knowlton and TivaMed, Inc (14)
10.15 Development and Manufacturing Agreement dated June 12, 2006 between TivaMed, Inc. and Stellartech Research
Corporation (14)
10.16 Amended and Restated Development and Manufacturing Agreement dated October 4, 2007 between TivaMed, Inc. and
Stellartech Research Corporation (14)
10.17 Right to Shares Letter Agreement, dated as of September 23, 2014 by and between the Registrant and GCP IV LLC (14)
10.18 Right to Shares Letter Agreement, dated as of September 23, 2014 by and between the Registrant and G-Ten Partners LLC
(14)
10.19 Convertible Note Termination Agreement, dated May 9, 2014 by and between Viveve, Inc. and 5AM Ventures II, LP (17)
10.20 Convertible Note Termination Agreement, dated May 9, 2014 by and between Viveve, Inc. and 5AM Co-Investors II, LP
(17)
10.21 Convertible Note Exchange Agreement, dated May 9, 2014 by and between Viveve, Inc. and GBS Venture Partners Limited,
trustee for GBS BioVentures III (17)
10.22 Warrant Termination Agreement, dated as of May 9, 2014, by and between Viveve, Inc. and 5AM Ventures II, LP (17)
10.23 Warrant Termination Agreement, dated as of May 9, 2014, by and between Viveve, Inc. and 5AM Co-Investors II, LP (17)
10.24 Warrant Termination Agreement, dated as of May 9, 2014, by and between Viveve, Inc. and GBS Venture Partners Limited,
trustee for GBS BioVentures III (17)
10.25 Employment Agreement by and between the Registrant and James G. Atkinson, dated February 27, 2018 (15)+
First Amendment to Lease dated January 15, 2015 between The Castine Group and Viveve, Inc. (18)
10.26
Second Amendment to Loan and Security Agreement dated May 14, 2015 between Viveve, Inc. and Square 1 Bank (18)
10.27
Form of Securities Purchase Agreement dated May 12, 2015 (18)
10.28
10.29
Form of Registration Rights Agreement dated May 12, 2015 (18)
10.30 Letter Agreement with Stonepine Capital dated May 12, 2015 (18)
10.31
10.32
10.33 Third Amendment to Loan and Security Agreement dated November 30, 2015 between Pacific Western Bank, as successor
Form of Securities Purchase Agreement dated November 20, 2015 (19)
Form of Registration Rights Agreement dated November 20, 2015 (19)
10.34
in interest by merger to Square 1 Bank, and Viveve, Inc. (20)
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. (6)
10.35 Viveve Medical, Inc. Amended and Restated Independent Director Compensation Policy (20)
10.36 Viveve Medical, Inc. Amended and Restated 2013 Stock Option and Incentive Plan (21)
10.37
Second Amendment to Standard Industrial/Commercial Multi-Tenant Lease- Gross, dated September 12, 2016 between
Viveve, Inc. and Commercial Street Properties, LLC. (22)
10.38 Loan and Security Agreement dated as of June 20, 2016 by and among Viveve Medical, Inc., Viveve, Inc. and Western
10.39
10.40
Alliance Bank (8)
Intellectual Property Security Agreement dated as of June 20, 2016 between Viveve Medical, Inc. and Western Alliance
Bank (8)
Sublease Agreement, entered into on February 1, 2017 and effective as of January 26, 2017, between Viveve Medical, Inc.
and Ingredion Incorporated (23)
10.41 Waiver and First Amendment to Loan and Security Agreement, dated January 13, 2017, between Viveve Medical, Inc.,
Viveve, Inc. and Western Alliance Bank (24)
Security Agreement, dated May 25, 2017, by and between Viveve Medical, Inc., Viveve, Inc. and CRG Servicing LLC (9)
10.42
53
10.43
Patent and Trademark Security Agreement, dated May 25, 2017, by and between Viveve Medical, Inc., Viveve, Inc. and
CRG Servicing LLC (9)
10.44 Term Loan Agreement, dated May 22, 2017, among Viveve Medical, Inc., Viveve, Inc., CRG Servicing LLC, as
administrative agent, and certain lenders (25)
10.45 Exclusive Distributorship Agreement, dated August 8. 2017, by and between Viveve Medical, Inc. and InControl Medical,
LLC (26)
10.46 Membership Subscription Agreement, dated August 1, 2017, by and between Viveve Medical, Inc. and InControl Medical,
LLC (26)
10.47 Waiver No. 2 to Loan Agreement, dated December 12, 2017, among Viveve Medical, Inc., CRG Servicing LLC and the
lenders party thereto (27)
10.48 Amendment to the Amended and Restated 2013 Stock Option and Incentive Plan (28)
10.49
10.50
10.51
2017 Employee Stock Purchase Plan (28)
Forms of Indemnification Agreement (34)
Separation Agreement and Release by and between the Registrant and Patricia K. Scheller, dated May 30, 2018, effective
May 11, 2018 (29) +
10.52 Consulting Agreement by and between the Registrant and Patricia K. Scheller, dated May 30, 2018, effective May 11, 2018
(29) +
10.53 Amended and Restated Employment Agreement by and between the Registrant and Scott C. Durbin, dated May 11, 2018.
(30) +
10.54 Amended and Restated Employment Agreement by and between the Registrant and Jim Robbins, dated May 11, 2018. (30) +
Settlement and License Agreement by and among the Registrant, ThermiGen LLC and ThermiAesthetics LLC, dated June 3,
10.55
2018. (31)†
10.56 Consulting Agreement by and between the Registrant and Debora Jorn, dated May 11, 2018 (31) +
10.57 Amendment No. 2 to Loan Agreement, dated November 29, 2018, among Viveve Medical, Inc., CRG Servicing LLC, as
administrative agent and collateral agent, the lenders from time to time party thereto and Viveve, Inc., as subsidiary
guarantor (32)
Code of Conduct, adopted September 23, 2014 (33)
List of the Registrant’s Subsidiaries (34)
Consent of BPM LLP, independent registered public accounting firm*
Power of Attorney* (included on signature page hereto)
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 Accounting and Financial Officer pursuant to 15d-15(e), under the Securities and
Exchange Act of 1934*
Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002**
14.1
21
23.1
24.1
31.1
31.2
32.1
32.2 Certification of the Company’s Principal Accounting and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*
Filed herewith.
These exhibits are furnished, not filed.
*
**
+ Management contract or compensation plan, contract or arrangement.
† Certain provisions of this exhibit have been omitted pursuant to a request for confidential treatment.
(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.
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.
Incorporated by reference from the Form 10-Q filed with the Securities and Exchange Commission on May 13, 2016.
Incorporated by reference from the Form 8-K filed with the Securities and Exchange Commission on August 17, 2017.
Incorporated by reference from the Form 8-K filed with the Securities and Exchange Commission on April 14, 2016.
Incorporated by reference from the Form 10-K filed with the Securities and Exchange Commission on March 24, 2016.
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
(2)
(3)
(4)
(5)
(6)
(7)
August 11, 2016.
(8)
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
June 21, 2016.
(9)
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
June 1, 2017.
54
(10) Incorporated by reference to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on October 5, 2017.
(11) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 14, 2014.
(12) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
February 25, 2015.
(13) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
September 16, 2014.
(14) Incorporated by reference to the Registrant’s on Form S-1 filed with the Securities and Exchange Commission on November 21,
2014.
(15) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
March 1, 2018.
(16) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 3, 2014.
(17) Incorporated by reference to the Amendment No. 1 Registrant’s Form S-1 filed with the Securities and Exchange Commission on
January 26, 2015.
(18) 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.
(19) Incorporated by reference to the registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on
November 25, 2015.
(20) Incorporated by reference to the registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 16, 2017.
(21) Incorporated by reference to Appendix A to the Registrant’s Proxy Statement on Schedule 14A filed with the Securities and
Exchange Commission on July 7, 2017.
(22) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2016.
(23) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on February 3, 2017.
(24) Incorporated by reference from the Form 8-K filed with the Securities and Exchange Commission on January 13, 2017.
(25) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 24, 2017.
(26) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2017.
(27) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
December 14, 2017.
(28) Incorporated by reference to the Registrant’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission
on July 7, 2017.
(29) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
June 5, 2018.
(30) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 17, 2018.
(31) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission
on August 9, 2018.
(32) Incorporated by reference to the Registrant’s Quarterly Report on Form 8-K filed with the Securities and Exchange Commission
on December 4, 2018.
(33) Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 16, 2015.
(34) Incorporated by reference to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on
February 16, 2017.
55
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 duly authorized.
SIGNATURES
March 14, 2019
VIVEVE MEDICAL, INC.
(Registrant)
By: /s/ Scott Durbin
Scott Durbin
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Viveve Medical, Inc., hereby severally constitute and appoint Patricia Scheller
and Scott Durbin, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution in each of them for him or her and, place and stead, and in any and all
capacities, to sign conformed for us and in our names in the capacities indicated below any and all signatures and amendments to this
report, and to file the same, with all exhibits thereto filing date and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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
/s/Scott Durbin
Scott Durbin
/s/Jim Robbins
Jim Robbins
/s/Steven Basta
Steven Basta
/s/Debora Jorn
Debora Jorn
/s/Arlene Morris
Arlene Morris
/s/Patricia Scheller
Patricia Scheller
/s/Karen Zaderej
Karen Zaderej
Chief Executive Officer and Director
(Principal Executive Officer)
Vice President of Finance and Administration
(Principal Accounting and Financial Officer)
March 14, 2019
March 14, 2019
Chairman of the Board of Directors
March 14, 2019
Director
Director
Director
Director
56
March 14, 2019
March 14, 2019
March 14, 2019
March 14, 2019
VIVEVE MEDICAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2018 and 2017
Consolidated Statements of Operations and Comprehensive Loss - Years Ended December 31, 2018 and 2017
Consolidated Statements of Stockholders’ Equity (Deficit) - Years Ended December 31, 2018 and 2017
Consolidated Statements of Cash Flows - Years Ended December 31, 2018 and 2017
Page
F-2
F-3
F-4
F-5
F-6
Notes to Consolidated Financial Statements
F-7 – F-27
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Viveve Medical, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viveve Medical, Inc. (a Delaware corporation) and its subsidiaries
(the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations and comprehensive loss,
stockholders’equity(deficit), and cash flows for each of the two years in the period ended December 31, 2018, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 14, 2019, expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BPM LLP
We have served as the Company’s auditor since 2013.
San Jose, California
March 14, 2019
F-2
VIVEVE MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
December 31,
2018
2017
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $284 and $221 as of
$
29,523 $
December 31, 2018 and 2017, respectively
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Investment in limited liability company
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued liabilities
Total current liabilities
Note payable, noncurrent portion
Other noncurrent liabilities
Total liabilities
Commitments and contingences (Note 7)
Stockholders’ equity (deficit):
5,704
4,119
2,558
41,904
2,916
1,843
171
46,834 $
3,994 $
6,766
10,760
30,528
634
41,922
$
$
20,730
6,213
2,390
2,741
32,074
1,303
2,500
202
36,079
4,799
4,605
9,404
28,948
327
38,679
Common stock, $0.0001 par value; 75,000,000 shares authorized as of December 31, 2018
and 2017; 46,363,945 and 19,503,558 shares issued and outstanding as of December 31,
2018 and 2017, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
5
160,292
(155,385)
4,912
$
46,834 $
2
102,979
(105,581)
(2,600)
36,079
The accompanying notes are an integral part of these consolidated financial statements.
F-3
VIVEVE MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(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, net
Other income (expense), net
Net loss from consolidated companies
Loss from minority interest in limited liability company
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,
2018
2017
18,517 $
11,197
7,320
13,716
38,569
52,285
(44,965)
(4,372)
13
(49,324)
(657)
(49,981) $
15,288
7,844
7,444
12,343
28,831
41,174
(33,730)
(3,169)
(60)
(36,959)
-
(36,959)
(1.61) $
(2.11)
31,059,483
17,496,942
$
$
$
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, 2018
(in thousands, except share data)
Common Stock,
$0.0001 par value
Shares
Amount
Balances as of January 31, 2017
March 2017 Offering, net of issuance costs
Stock-based compensation expense
Issuance of warrant in connection with note
payable
Issuance of restricted common shares
Issuance of restricted stock awards to directors,
employees and consultants
November 2017 ATM Facility, net of issuance
cost
Issuance of common shares from employee stock
purchase plan
Exercise of stock options
Exercise of warrants
Cashless exercise of warrant
Net loss
Balances as of December 31, 2017
December 2018 Offering, net of issuance costs
February 2018 Offering, net of issuance costs
November 2017 ATM Facility, net of issuance
cost
Stock-based compensation expense
Issuance of restricted stock awards to directors,
employees and consultants
Issuance of restricted common shares
Issuance of common shares from employee stock
purchase plan
Cumulative effect adjustment from adoption of
new accounting standard – ASC 606
Net loss
Balances as of December 31, 2018
-
10,661,201
8,625,000
-
-
35,000
77,783
59,249
17,894
7,730
4,701
15,000
-
19,503,558 $
14,728,504
11,500,000
277,249
-
128,847
100,000
125,787
-
-
46,363,945 $
-
-
-
-
-
-
-
-
-
2 $
2
1
-
-
-
-
-
-
-
5 $
Additional
Paid-In
Accumulated Stockholders’
Capital
-
1
1
-
-
68,216
31,439
1,646
Deficit
-
(68,622)
-
-
Total
Equity
(Deficit)
-
(405)
31,440
1,646
940
260
226
125
76
31
20
-
(36,959)
(2,600)
20,385
32,214
1,193
2,699
336
256
233
940
260
226
125
-
-
-
-
76
31
20
-
-
102,979 $
20,383
32,213
-
-
-
-
(36,959)
(105,581) $
-
-
1,193
2,699
336
256
233
-
-
-
-
-
-
-
160,292 $
177
(49,981)
(155,385) $
177
(49,981)
4,912
The accompanying notes are an integral part of these consolidated financial statements.
F-5
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:
Provision for (recovery from) doubtful accounts
Depreciation and amortization
Stock-based compensation
Fair value of common stock issued
Non-cash interest expense
Loss from minority interest in limited liability company
Changes in assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other noncurrent assets
Accounts payable
Accrued and other liabilities
Other noncurrent liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Investment in limited liability company
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance costs
Proceeds from note payable
Repayments of note payable
Proceeds from issuance of common shares from employee stock purchase plan
Proceeds from exercise of stock options
Proceeds from exercise of warrant
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:
Issuance of warrants in connection with note payable
Issuance of note payable in settlement of accrued interest
Net transfer of equipment between inventory and property and equipment
Year Ended
December 31,
2018
2017
$
(49,981) $
(36,959)
179
786
3,035
256
1,580
657
330
(1,986)
183
31
(805)
2,143
502
(43,090)
(2,142)
-
(2,142)
53,792
-
-
233
-
-
54,025
8,793
20,730
29,523 $
(221)
449
1,872
260
1,049
-
(3,901)
(67)
(1,675)
(66)
1,713
2,419
274
(34,853)
(905)
(2,500)
(3,405)
31,565
29,210
(10,000)
76
31
20
50,902
12,644
8,086
20,730
2,673 $
2 $
2,066
-
- $
1,256 $
257 $
940
495
364
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
VIVEVE MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
The Company and Basis of Presentation
Viveve Medical, Inc. (“Viveve Medical”, the “Company”, “we”, “our”, or “us”) competes in the women’s intimate health
industry in some countries by marketing the Viveve System as a way to improve the overall well-being and quality of life
of women suffering from vaginal introital laxity, for improved sexual function, or stress urinary incontinence, depending
on the relevant country-specific clearance or approval. In the United States, the Viveve System is currently indicated for
use in general surgical procedures for electrocoagulation and hemostasis.
Public Offerings
In December 2018, in connection with the closing of a public offering (the “December 2018 Offering”), the Company
issued an aggregate of 14,728,504 shares of common stock, including the shares issued in connection with the exercise of
the underwriters’ overallotment option, at a public offering price of $1.50 per share for gross proceeds of approximately
$22,093,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other
offering expenses, were approximately $20,385,000.
In February 2018, in connection with the closing of a public offering (the “February 2018 Offering”), the Company issued
an aggregate of 11,500,000 shares of common stock, including the shares issued in connection with the exercise of the
underwriters’ overallotment option, at a public offering price of $3.00 per share for gross proceeds of approximately
$34,500,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other
offering expenses, were approximately $32,214,000.
The Company established an “at-the-market” equity offering program through the filing of a prospectus supplement to its
shelf registration statement on Form S-3, which was filed on November 8, 2017, under which the Company may offer and
sell, from time-to-time, up to $25,000,000 aggregate offering price of shares of its common stock (the “November 2017
ATM Facility”). During the years ended 2018 and 2017, the Company sold 277,249 shares for net proceeds of
approximately $1,193,000 and 59,249 shares for net proceeds of approximately $125,000, respectively. As of December
31, 2018, the Company has sold an aggregate of 336,498 shares of common stock under the November 2017 ATM Facility
for net proceeds of approximately $1,318,000.
In March 2017, in connection with the closing of a public offering (the “March 2017 Offering”), the Company issued an
aggregate of 8,625,000 shares of common stock, including the shares issued in connection with the exercise of the
underwriters’ overallotment option, at a public offering price of $4.00 per share for gross proceeds of approximately
$34,500,000. The net proceeds to the Company, after the deduction of underwriting discounts, commissions and other
offering expenses, were approximately $31,440,000.
Liquidity and Management Plans
The Company has adopted FASB Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial
Statements – Going Concern, which requires that management evaluate whether there are relevant conditions and events
that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its
obligations as they become due within one year after the date that the financial statements are issued.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
However, since inception, the Company has sustained significant operating losses and such losses are expected to continue
for the foreseeable future. As of December 31, 2018, the Company had accumulated deficit of $155,385,000, cash and
cash equivalents of $29,523,000 and working capital of $31,144,000. Additionally, the Company used $43,090,000 in cash
for operations in the year ended December 31, 2018. The Company will require additional cash funding to fund operations
through March 31, 2020. Accordingly, management has concluded that the Company does not have sufficient funds to
support operations within one year after the date the financial statements are issued and, therefore, the Company
concluded there was substantial doubt about the Company’s ability to continue as a going concern. Based on
management’s plans to reduce operating expenses, including the reduction in force in January 2019, and the availability of
our November 2017 ATM Facility, the Company believes that this substantial doubt has been alleviated.
To fund further operations, the Company will need to raise additional capital. The Company may obtain additional
financing in the future through the issuance of its common stock, or through other equity or debt financings. The
Company’s ability to continue as a going concern or meet the minimum liquidity requirements in the future is dependent
on its ability to raise significant additional capital, of which there can be no assurance. If the necessary financing is not
obtained or achieved, the Company will likely be required to reduce its planned expenditures, which could have an adverse
impact on the results of operations, financial condition and the Company’s ability to achieve its strategic objective. There
can be no assurance that financing will be available on acceptable terms, or at all.
F-7
2.
Summary of Significant Accounting Policies
Financial Statement Presentation
The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, Viveve,
Inc. and Viveve BV. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. 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.
Changes in Accounting Policies
Except for the changes for the adoption of the new revenue recognition accounting standard, the Company has
consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.
Adoption of New Accounting Standard
On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606), which created
Accounting Standards Codification Topic 606 (“ASC 606”), using the modified retrospective method applied to those
contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018
are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with
our historic accounting under Accounting Standards Codification Topic 605 (“ASC 605”).
Previously under ASC 605, revenue from extended assurance warranties was deferred and recognized over the period of
the warranty. Under ASC 606, these warranties are not considered a separate performance obligation. Accordingly, on the
transition date, the Company recorded a net cumulative adjustment in accumulated deficit of $177,000, resulting from the
release of $195,000 for the amount of extended warranties previously recorded in noncurrent liabilities, offset by $18,000
recorded in accrued liabilities for future costs associated with the assurance-type extended warranties.
The details for the impact of the adoption of ASC 606 are provided below:
Consolidated Balance Sheet:
Liabilities
Accrued liabilities
Other noncurrent liabilities
Equity
Accumulated deficit
Balance as of
December 31,
2017
Adjustment
Due to
Adoption of
ASC 606
Balance as of
January 1,
2018
$
$
$
4,605 $
327 $
18(1) $
(195)(2) $
4,623
132
(105,581) $
177(3) $
(105,404)
(1) Change relates to future costs associated with extended warranties required to be recorded on adoption of ASC 606.
(2) Change relates to long-term deferred revenue related to the extended warranties not required to be recorded under
ASC 606.
(3) Change relates to cumulative effect adjustment upon adoption of ASC 606.
F-8
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.
Most of the Company’s products to date require clearance or approvals from the FDA or other international regulatory
agencies prior to commencing commercial sales. There can be no assurance that the Company’s products will receive any
of these required clearances or approvals or for the indications requested. If the Company was denied such clearances or
approvals or if such clearances or approvals were delayed, it would have a material adverse effect on the Company’s
financial results, financial position and future cash flows.
The Company is subject to risks common to companies in the medical device industry including, but not limited to, new
technological innovations, dependence on key personnel, protection of proprietary technology, compliance with
government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional
financing. The Company’s ultimate success is dependent upon its ability to raise additional capital and to successfully
develop and market its products.
The Company designs, develops, manufactures and markets a medical device that it refers to as the Viveve System, which
is intended for the non-invasive treatment of vaginal introital laxity, for improved sexual function, for vaginal rejuvenation,
for use in general surgical procedures for electrocoagulation and hemostasis, and stress urinary incontinence, depending on
the relevant country-specific clearance or approval. The Viveve System consists of three main components: a RF, or radio
frequency, generator housed in a table-top console, a reusable handpiece and a single-use treatment tip. Included with the
system are single-use accessories (e.g. RF return pad, coupling fluid), as well as a cryogen canister that can be used for
approximately four to five procedures, and a foot pedal. 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 device
are currently manufactured by a single supplier or a limited number of suppliers. A significant supply interruption or
disruption in the operations of the contract manufacturer or these third-party suppliers would adversely impact the
production of our products for a substantial period of time, which could have a material adverse effect on our business,
financial condition, operating results and cash flows.
In North America, the Company sells its products primarily through a direct sales force to health care practitioners. Outside
North America, the Company sells through an extensive network of distribution partners. During the year ended December
31, 2018, one distributor accounted for 21% of the Company’s revenue. During the year ended December 31, 2017, two
distributors together accounted for 35% of the Company’s revenue.
There are no direct sales to customers that accounted for more than 10% of the Company’s revenue during the years ended
December 31, 2018 and 2017.
As of December 31, 2018, three distributors, collectively, accounted for 54% of total accounts receivable, net. As of
December 31, 2017, two distributors, collectively, accounted for 57% of total accounts receivable, net.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and are not interest bearing. Our typical payment terms vary by
region and type of customer (distributor or physician). Occasionally, payment terms of up to six months may be granted to
customers with an established history of collections without concessions. Should we grant payment terms greater than six
months or terms that are not in accordance with established history for similar arrangements, revenue would be recognized
as payments become due and payable assuming all other criteria for revenue recognition have been met. 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 collectability 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. The allowance for doubtful
accounts was $284,000 and $221,000 as of December 31, 2018 and 2017, respectively.
F-9
Inventory
Inventory is stated at the lower of cost or net realizable value. Inventory as of December 31, 2018 consisted of $3,232,000
of finished goods and $887,000 of raw materials. Inventory as of December 31, 2017 consisted of $1,990,000 of finished
goods and $40,000 of raw materials. Cost is determined on an actual cost basis on a first-in, first-out method. Lower of cost
or net realizable value 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, 2018 and 2017.
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
Revenue consists primarily of the sale of the Viveve System, single-use treatment tips and ancillary consumables. The
Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance
obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers
customer purchase orders to be the contracts with a customer. Revenues, net of expected discounts, are recognized when
the performance obligations of the contract with the customer are satisfied and when control of the promised goods are
transferred to the customer, typically when products, which have been determined to be the only distinct performance
obligations, are shipped to the customer. Expected costs of assurance warranties and claims are recognized as expense.
Revenue is recognized net of any sales taxes from the sale of the products.
Sales of our products are subject to regulatory requirements that vary from country to country. The Company has
regulatory clearance for differing indications, or can sell its products without a clearance, in many countries throughout the
world, including countries within the following regions: North America, Latin America, Europe, the Middle East and Asia
Pacific. In North America, we market and sell primarily through a direct sales force. Outside of North America, we market
and sell primarily through distribution partners.
The Company does not provide its customers with a right of return.
F-10
Customer Advance Payments
From time to time, customers will pay for a portion of the products ordered in advance. Upon receipt of such payments,
the Company records the customer advance payment as a component of accrued liabilities. The Company will remove the
customer advance payment from accrued liabilities when revenue is recognized upon shipment of the products.
Contract Assets and Liabilities
The Company continually evaluates whether the revenue generating activities and advanced payment arrangements with
customers result in the recognition of contract assets or liabilities. No such assets existed as of December 31, 2018 or
2017. The Company had customer contract liabilities in the amount of $686,000, primarily related to marketing programs
that performance had not yet been delivered to its customers as of December 31,2018. No such contract liabilities existed
as of December 31, 2017. Separately, accounts receivable, net represents receivables from contracts with customers.
Significant Financing Component
The Company applies the practical expedient to not make any adjustment for a significant financing component if, at
contract inception, the Company does not expect the period between customer payment and transfer of control of the
promised goods or services to the customer to exceed one year. During the year ended December 31, 2018, the Company
did not have any contracts for the sale of its products with its customers with a significant financing component.
Contract Costs
The Company has elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense
when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or
less. During the year ended December 31, 2018, the Company expensed the incremental costs of obtaining the contract as
an expense when incurred as the amortization period was one year or less.
Shipping and Handling
Shipping costs billed to customers are recorded as revenue. Shipping and handling expense related to costs incurred to
deliver product are recognized within cost of goods sold. The Company accounts for shipping and handling activities that
occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of
shipping and handling are recognized concurrently with the related revenue.
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated
statement of operations for the year ended December 31, 2018 and consolidated balance sheet as of December 31, 2018
was as follows (in thousands):
For the year ended December 31, 2018
Balances
Without
Adoption of
ASC 606
Effect of Change
Higher/(Lower)
As Reported
Consolidated Statement of Operations
Revenue
Cost of revenue
Gross profit
Loss from operations
Comprehensive and net loss
Net loss per share:
Basic and diluted
$
$
$
$
$
$
18,517 $
11,197 $
7,320 $
(44,965) $
(49,981) $
17,780 $
11,209 $
6,571 $
(45,714) $
(50,730) $
737 (1)
(12) (2)
749 (3)
749 (3)
749 (3)
(1.61) $
(1.63) $
0.02
Weighted average shares
31,059,483
31,059,483
(1) Change relates to revenue from extended assurance warranties for which no deferral is required on the adoption of
ASC 606.
(2) Change relates to the future costs associated with extended assurance warranties required to be recorded on the
adoption of ASC 606.
(3) Change relates to the net gain adjustment on the adoption of ASC 606.
F-11
As Reported
As of December 31, 2018
Balances
Without
Adoption of
ASC 606
Effect of Change
Higher/(Lower)
Consolidated Balance Sheets
Liabilities
Accrued liabilities
Other noncurrent liabilities
Equity
Accumulated deficit
$
$
$
6,766 $
634 $
7,014 $
1,313 $
(155,385) $
(156,311) $
(248) (1)
(679) (2)
926 (3)
(1) Change relates to the current portion of deferred revenue in connection with the extended warranties not required
to be recorded under ASC 606, partially offset by future costs associated with extended warranties required to be
recorded on the adoption of ASC 606.
(2) Change relates to noncurrent portion of deferred revenue in connection with the extended warranties not required
to be recorded under ASC 606.
(3) Change relates to $177,000 cumulative effect adjustment on the adoption of ASC 606 and the net gain adjustment
of $749,000 for the year ended December 31, 2018.
Revenue by Geographic Area:
Management has determined that the sales by geography is a key indicator for understanding the Company’s financials
because of the different sales and business models that are required in the various regions of the world (including
regulatory, selling channels, pricing, customers and marketing efforts).
United States
Asia Pacific
Europe and Middle East
Canada
Latin America
Other
Total
Year Ended
December 31,
2018
2017
$
$
13,606
2,891
1,369
563
51
37
18,517 $
11,004
3,178
667
79
360
-
15,288
The Company determines geographic location of its revenue based upon the destination of the shipments of its products.
Investments in Unconsolidated Affiliates
The Company uses the equity method to account for its investments in entities that it does not control but have the ability
to exercise significant influence over the investee. Equity method investments are recorded at original cost and adjusted
periodically to recognize (1) the proportionate share of the investees’ net income or losses after the date of investment, (2)
additional contributions made and dividends or distributions received, and (3) impairment losses resulting from
adjustments to net realizable value. The Company eliminates all intercompany transactions in accounting for equity
method investments. The Company records the proportionate share of the investees’ net income or losses in equity in
earnings of unconsolidated affiliates on the consolidated statements of operations. The Company utilizes a three-month
lag in reporting equity income from its investments, adjusted for known amounts and events, when the investee’s financial
information is not available timely or when the investee’s reporting period differs from our reporting period.
F-12
The Company assesses the potential impairment of the equity method investments when indicators such as a history of
operating losses, a negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s
business segment might indicate a loss in value. The carrying value of the investments are reviewed annually for changes
in circumstances or the occurrence of events that suggest the investment may not be recoverable. During the years ended
December 31, 2018 and 2017, no impairment charges have been recorded.
Product Warranty
The Company’s products are generally subject to warranties between one and three years, which provides for the repair,
rework or replacement of products (at the Company’s option) that fail to perform within stated specifications. The
Company has assessed the historical claims and, to date, product warranty claims have not been significant.
Advertising Costs
Advertising costs are charged to selling, 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, 2018 and
2017.
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
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, 2018 and 2017. 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.
F-13
The Company determined that the Black-Scholes option pricing model is the most appropriate method for determining the
estimated fair value for stock options and purchase rights under the employee stock purchase plan. 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, 2018 and 2017, the Company’s comprehensive loss is the same as its net loss.
Net Loss per Share
The Company’s basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of
common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potentially
dilutive common stock equivalents outstanding during the period. For purposes of this calculation, stock options and
warrants to purchase common stock and restricted common stock awards are considered common stock equivalents. For
periods in which the Company has reported net losses, diluted net loss per share is the same as basic net loss per share,
since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
The following securities were excluded from the calculation of net loss per share because the inclusion would be anti-
dilutive.
Stock options to purchase common stock
Warrants to purchase common stock
Restricted common stock awards
Recently Issued and Adopted Accounting Standards
Year Ended
December 31,
2018
2017
4,014,475
642,622
57,500
2,694,224
642,622
10,000
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires an entity that is a lessee to
record a right of use asset and a corresponding lease liability on the balance sheet for all leases. This guidance also requires
disclosures about the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for
annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods and early
adoption is permitted. In July 2018, the FASB issued updated guidance which allows an additional transition method to
adopt the new leases standard at the adoption date, as compared to the beginning of the earliest period presented, and
allows entities to recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of
adoption. The Company expects to elect to use this transition method at the adoption date of January 1, 2019, and, as a
result, will record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms
longer than 12 months. The Company also plans to elect the practical expedient to not separate lease and non-lease
components and to use the package of practical expedients upon transition that will retain the lease classification and initial
direct costs for any leases that exist prior to adoption of the new guidance.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows, Classification of Certain Cash Receipts
and Cash Payments (Topic 230)”. This guidance addresses specific cash flow issues with the objective of reducing the
diversity in practice for the treatment of these issues. The areas identified include: debt prepayment or debt
extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a
business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned
life insurance policies; distributions received from equity method investees; beneficial interests in securitization
transactions and application of the predominance principle with respect to separately identifiable cash flows. This guidance
is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting
period, with early adoption permitted. We adopted this guidance as of January 1, 2018 and the adoption of the guidance did
not have a significant impact on the condensed consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows, Restricted Cash (Topic 230)”. This
guidance requires that a statement of cash flows explain the total change during the period of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents. Amounts described as restricted cash and
restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and
end of period to total amounts shown on the statement of cash flows. This guidance is effective for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption
permitted. We adopted this guidance as of January 1, 2018 and the adoption of the guidance did not have a significant
impact on the condensed consolidated financial statements.
F-14
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718), Scope of
Modification Accounting”. This pronouncement provides guidance about which changes to the terms or conditions of a
share-based payment award may require an entity to apply modification accounting under Topic 718. This guidance is
effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting
period, with early adoption permitted. We adopted this guidance as of January 1, 2018 and the adoption of the guidance did
not have a significant impact on the condensed consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718) – Improvements to Nonemployee Share-
Based Payment Accounting”. The intent of this guidance is to simplify the accounting for nonemployee share-based
payment accounting. The amendments in this guidance expand the scope of Topic 718 to include share-based payment
transactions for acquiring goods and services from nonemployees. Consistent with the accounting requirement for
employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are
measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been
delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the
instruments have been satisfied. Equity- classified nonemployee share-based payment awards are measured at the grant
date. Consistent with the accounting for employee share-based payment awards, an entity considers the probability of
satisfying performance conditions when nonemployee share-based payment awards contain such conditions. This guidance
is effective for annual reporting periods beginning after December 15, 2018, including interim periods within the reporting
period. We do not expect the adoption of this guidance to have a significant effect on our consolidated financial
statements.
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or
no material effect is expected on the consolidated financial statements as a result of future adoption.
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
Level 2
Level 3
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.
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.
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, 2018 and
2017.
F-15
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, 2018 and 2017 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 note payable approximates fair value.
There were no changes in valuation techniques from prior periods.
4.
Property and Equipment, Net
Property and equipment, net, consisted of the following as of December 31, 2018 and 2017 (in thousands):
Medical equipment
Computer equipment
Leasehold Improvements
Furniture and fixtures
Software
Less: Accumulated depreciation and
amortization
Property and equipment, net
Life
(in years)
December 31,
2018
2017
5
3
3
7
3
$
$
3,571 $
309
121
403
25
4,429
(1,513)
2,916 $
1,299
193
200
340
-
2,032
(729)
1,303
Depreciation and amortization expense for the years ended December 31, 2018 and 2017 was $786,000 and $449,000,
respectively.
5.
Investment in Limited Liability Company
On August 8, 2017, the Company entered into an exclusive Distributorship Agreement (the “Distributorship Agreement”)
with InControl Medical, LLC (“ICM”), a Wisconsin limited liability company focused on women's health, pursuant to
which the Company will directly market, promote, distribute and sell ICM’s products to licensed medical professional
offices and hospitals in North America.
Under the terms of the Distributorship Agreement, ICM agreed to not directly or indirectly appoint or authorize any third
party to market, promote, distribute or sell any of the licensed products to any licensed medical professional offices and
hospitals in the United States. In exchange, the Company agreed to not market, promote, distribute or sell (or contract to
do so) any product which substantially replicates all or almost all of the key features of the licensed products. The
Company has a minimum purchase requirement to purchase a certain quantity of ICM products per month during the term
of this Distributorship Agreement. In addition, the parties agreed to certain mutual marketing obligations to promote sales
of the licensed products. During the years ended December 31, 2018 and 2017, the Company has purchased 3,300 and
1,200 units of ICM products for approximately $327,000 and $89,000, respectively. As of December 31, 2018, the
Company has purchased approximately 4,500 units of ICM products for approximately $416,000. The Company paid ICM
approximately $337,000 and $94,000 for product related costs during the years ended December 31, 2018 and 2017,
respectively.
In connection with the Distributorship Agreement, the Company also entered into a Membership Unit Subscription
Agreement with ICM and the associated limited liability company operating agreement of ICM, pursuant to which the
Company invested $2,500,000 in, and acquired membership units of, ICM. This investment has been recorded in
investment in a limited liability company in the consolidated balance sheets. The Company used the equity method to
account for the investment in ICM because the Company does not control it but has the ability to exercise significant
influence over it. As of December 31, 2018, the Company owns approximately 9% ownership interest in ICM. The
Company recognizes its allocated portion of ICM’s results of operations on a three-month lag due to the timing of financial
information. For the year ended December 31, 2018, the allocated net loss from ICM’s operations was $657,000 that was
recorded as a loss from minority interest in limited liability company in the consolidated statements of operations. For the
year ended December 31, 2017, the allocated net loss from ICM’s operations was immaterial.
F-16
6.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2018 and 2017 (in thousands):
Accrued sales commission
Accrued professional fees
Accrued bonuses
Accrued interest
Customer contracts liabilities
Accrued payroll and other related expenses
Travel and entertainment
Accrued sales & use tax
Accrued clinical trial costs
Other accruals
Total accrued liabilities
7.
Note Payable
December 31,
December 31,
2018
2017
$
$
1,743 $
978
837
683
686
877
280
259
84
339
6,766 $
1,067
562
1,597
447
-
488
156
149
30
109
4,605
On June 20, 2016, the Company entered into a Loan and Security Agreement, as amended January 13, 2017 (the “2016
Loan Agreement”) with Western Alliance Bank (“WAB”), pursuant to which WAB agreed to loan the Company up to an
aggregate of $10,000,000 payable in two tranches of $7,500,000 and $2,500,000. The funding conditions for both tranches
were satisfied as of the closing date, and therefore, the aggregate principal amount of $10,000,000 was provided on June
20, 2016. The terms of the loan also required the Company to meet certain financial and other covenants in connection
with the 2016 Loan Agreement. In addition to all outstanding principal and accrued interest on the term loan, the terms of
the loan required the Company to pay a final payment fee equal to 4.00% of the original principal amount of the term loan.
All borrowings under the 2016 Loan Agreement were collateralized by substantially all of the Company’s assets, including
intellectual property. The outstanding principal balance and accrued interest related to this note payable were repaid in
May 2017.
In connection with the 2016 Loan Agreement, the Company issued a 10-year warrant to WAB to purchase a total of
100,402 shares of the Company’s common stock at an exercise price of $4.98 per share (See Note 8).
On May 22, 2017, the Company entered into a Term Loan Agreement (the “2017 Loan Agreement”) with affiliates of
CRG LP (“CRG”). The credit facility consists of $20,000,000 drawn at closing and access to additional funding of up to an
aggregate of $10,000,000 for a total of $30,000,000 available under the credit facility. On December 29, 2017, the
Company accessed the remaining $10,000,000 available under the credit facility.
A portion of the initial loan proceeds were used to repay all of the amounts owed by the Company under its 2016 Loan
Agreement with WAB. The remainder of the loan proceeds (after deducting loan origination costs and other fees and
expenses incurred in connection with the 2017 Loan Agreement), plus any additional amounts that may be borrowed in the
future, will be used for general corporate purposes and working capital.
The 2017 Loan Agreement has a six-year term with four years of interest-only payments after which quarterly principal
and interest payments will be due through the maturity date. Amounts borrowed under the 2017 Loan Agreement accrue
interest at an annual fixed rate of 12.5%, 4.0% of which may, at the election of the Company, be paid in-kind during the
interest-only period by adding such accrued amount to the principal loan amount each quarter. During the years ended
December 31, 2018 and 2017, the Company paid interest in-kind of $1,256,000 and $495,000, respectively, which was
added to the total outstanding principal loan in that period. The Company is also required to pay CRG a final payment fee
upon repayment of the loans in full equal to 5.0% of the sum of the aggregate principal amount plus the deferred interest
added to the principal loan amount during the interest-only period. The Company accounts for the final payment fee by
accruing the fee over the term of the loan using the effective interest rate method. As of December 31, 2018, interest
accrued related to the final payment fee in the amount of $484,000 was included in other noncurrent liabilities in the
consolidated balance sheets.
The Company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the 2017 Loan
Agreement at any time upon prior notice to CRG, subject to a prepayment fee during the first five years of the term (which
reduces each year) and no prepayment fee thereafter.
As security for its obligations under the 2017 Loan Agreement, the Company entered into security agreements with CRG
whereby the Company granted CRG a lien on substantially all of the Company’s assets, including intellectual property.
F-17
The terms of the 2017 Loan Agreement also require the Company to meet certain financial and other covenants. These
covenants require the Company to maintain cash and cash equivalents of $2.0 million and, each year through the end of
2022, to meet a minimum total annual revenue threshold. In the event that the Company does not meet the minimum total
annual revenue threshold for a particular year, then the Company can retroactively cure the shortfall by either issuing
additional equity in exchange for cash or incurring certain additional permitted indebtedness, in each case, in an amount
equal to 2.0 times the shortfall. Any such amounts shall be applied to prepay the loans. The 2017 Loan Agreement also
contains customary affirmative and negative covenants for a credit facility of this size and type, including covenants that
limit or restrict the Company’s ability to, among other things, incur indebtedness, grant liens, merge or consolidate,
dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends or make
distributions, license intellectual property rights on an exclusive basis or repurchase stock, in each case subject to
customary exceptions. As of December 31, 2018, the Company was in compliance with all covenants.
As of December 31, 2018 and 2017, $30,528,000 and $28,948,000 was recorded on the balance sheets under the 2017
Loan Agreement, which is net of the remaining unamortized debt discount.
In connection with the 2017 Loan Agreement, the Company issued two 10-year warrants to CRG to purchase a total of
222,049 shares of the Company’s common stock at an exercise price of $9.50 per share (See Note 8).
As of December 31, 2018, future minimum payments under the note payable are as follows (in thousands):
Year Ending December 31,
2019
2020
2021
2022
2023
Total payments
Less: Amount representing interest
Present value of obligations
Less: Unamortized debt discount
Note payable, noncurrent portion
8.
Commitments and Contingencies
Operating Lease
$
$
2,778
2,901
16,673
19,306
6,220
47,878
(16,127)
31,751
(1,223)
30,528
On February 1, 2017, the Company entered into a sublease agreement (the “Sublease”) for approximately 12,400 square
feet of building space for the relocation of the Company’s corporate headquarters to Englewood, Colorado (the “Sublease
Premises”), which was effective as of January 26, 2017. The lease term commenced on June 1, 2017 and will terminate in
May 2020. The Company relocated its corporate headquarters from Sunnyvale, California to Englewood, Colorado in June
2017.
The monthly base rent under the Sublease is equal to $20.50 per rentable square foot of the Sublease Premises during the
first year. The monthly base rent is equal to $21.12 and $21.75 per rentable square foot during the second and third years,
respectively. In connection with the execution of the Sublease, the Company also agreed to pay a security deposit of
approximately $22,000. The Company was also provided an allowance of approximately $88,000 for certain tenant
improvements relating to the engineering, design and construction of the Sublease Premises which has been reimbursed.
Rent expense for the years ended December 31, 2018 and 2017 was $358,000 and $442,000, respectively.
In September 2018, the Company entered into a 36-month noncancelable operating lease agreement for office equipment.
The lease commenced on September 20, 2018. The monthly payment is approximately $3,000.
As of December 31, 2018, future minimum principal and interest payments under the leases are as follows (in thousands):
Year Ending December 31,
2019
2020
2021
Total minimum lease payments
F-18
$
$
296
143
23
462
Indemnification Agreements
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 proceeding is 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. Management does not believe that the
outcome of any outstanding legal matters will have a material adverse effect on the Company's consolidated financial
position, results of operations and cash flows.
Legal Proceedings
In December 2018, the Company settled an arbitration matter with a former employee, and the arbitration has now been
dismissed with prejudice. The matter involved affirmative claims for negligence by the Company against the employee
arising out of her negligent performance of certain work duties, as well as various employment-related counterclaims by
the employee.
On June 4, 2018, the Company entered into a Settlement and License Agreement (the “Settlement Agreement”) with
ThermiGen LLC and ThermiAesthetics LLC (“ThermiGen,” collectively) as well as Red Alinsod, M.D. resolving the
Company’s patent litigation against ThermiGen and Dr. Alinsod. The Settlement Agreement also resolved ThermiGen’s
inter partes review proceedings against the Company. The litigation arose from the Company’s claim that ThermiGen and
Dr. Alinsod were improperly using the Company’s patented technology without consent. Pursuant to the Settlement
Agreement, the parties agreed to resolve all currently pending disputes between them.
Under the terms of the Settlement Agreement, the Company received an initial monetary payment to settle the litigation
and past claims and an on-going royalty for future sales. Viveve granted to ThermiGen a non-exclusive, non-transferable
license to use the Company’s U.S. patent for the current version of ThermiGen’s ThermiVa system (which includes RF
generators and consumables). The Company has recorded the monetary payment as a gain on litigation settlement in
selling, general and administrative expenses on the consolidated statements of operations during the year ended December
31, 2018.
9.
Common Stock
In December 2018, in connection with the closing of a public offering (the “December 2018 Offering”), the Company
issued an aggregate of 14,728,504 shares of common stock, including the shares issued in connection with the exercise of
the underwriters’ overallotment option, at a public offering price of $1.50 per share for gross proceeds of approximately
$22,093,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other
offering expenses, were approximately $20,385,000.
In June 2018, the Company issued 100,000 restricted shares of its common stock at a value of $2.56 a share, or an
aggregate value of approximately $256,000.
F-19
In February 2018, in connection with the closing of the February 2018 Offering, the Company issued an aggregate of
11,500,000 shares of common stock, including the shares issued in connection with the exercise of the underwriters’
overallotment option, at a public offering price of $3.00 per share for gross proceeds of approximately $34,500,000. The
net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses, were
approximately $32,214,000.
Through the November 2017 ATM Facility, the Company may offer and sell, from time-to-time, up to $25,000,000
aggregate offering price of shares of its common stock. During the years ended 2018 and 2017, the Company sold 277,249
shares for net proceeds of approximately $1,193,000 and 59,249 shares for net proceeds of approximately $125,000,
respectively. As of December 31, 2018, the company has sold an aggregate of 336,498 shares of common stock under the
November 2017 ATM Facility for net proceeds of approximately $1,318,000. As of December 31, 2018, the Company has
sold 59,249 shares of common stock under the November 2017 ATM Facility for net proceeds of approximately $125,000.
In May 2017, the Company issued 35,000 restricted shares of its common stock at a value of $7.42 a share, or an
aggregate value of approximately $260,000.
In March 2017, in connection with the closing of the March 2017 Offering, the Company issued an aggregate of 8,625,000
shares of common stock, including the exercise of the underwriters’ overallotment option, at a public offering price of
$4.00 per share for gross proceeds of approximately $34,500,000. The net proceeds to the Company, after the deduction of
underwriting discounts, commissions and other offering expenses, were approximately $31,440,000.
Warrants for Common Stock
As of December 31, 2018 and 2017, outstanding warrants to purchase shares of common stock were as follows:
Issuance Date
September 2014
October 2014
November 2014
February 2015
March 2015
May 2015
May 2015
December 2015
April 2016
May 2016
June 2016
May 2017
Exercisable
for
Expiration
Date
Number of
Shares
Outstanding
Under
Exercise
Price
Warrants
Common Shares September 23, 2019
Common Shares October 13, 2019
Common Shares November 12, 2019
Common Shares February 17, 2025
Common Shares March 26, 2025
Common Shares May 12, 2025
Common Shares May 17, 2020
Common Shares December 16, 2025
Common Shares April 1, 2026
Common Shares May 11, 2021
Common Shares June 20, 2026
Common Shares May 25, 2027
$
$
$
$
$
$
$
$
$
$
$
$
4.24
4.24
4.24
4.00
2.72
4.24
4.24
5.60
6.08
7.74
4.98
9.50
86,831
29,000
12,500
75,697
1,454
36,229
21,585
26,875
25,000
5,000
100,402
222,049
642,622
In connection with the 2016 Loan Agreement, the Company issued a warrant to purchase a total of 100,402 shares of
common stock at an exercise price of $4.98 per share. The Company determined the fair value of the warrant on the date
of issuance to be $350,000. The fair value along with legal fees totaling $90,000, was recorded as debt issuance costs and
was amortized to interest expense over the loan term. The debt issuance costs were presented in the consolidated balance
sheet as a deduction from the carrying amount of the note payable. The outstanding indebtedness was repaid in May 2017
from the proceeds of the new term loan in connection with the 2017 Loan Agreement and the remaining unamortized
balance of debt issuance costs was recorded to interest expense. During the year ended December 31, 2017, the Company
recorded $371,000 of interest expense relating to the debt issuance costs.
In connection with the 2017 Loan Agreement, the Company issued warrants to purchase a total of 222,049, shares of
common stock at an exercise price of $9.50 per share. The warrants have a contractual life of ten years and are exercisable
immediately in whole or in part. The Company determined the fair value of the warrants on the date of issuance to be
$940,000 using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 55.1%,
risk free interest rate of 2.25% and a contractual life of ten years. The fair value of the warrants along with financing and
legal fees totaling $790,000, are recorded as debt issuance costs and presented in the consolidated balance sheets as a
deduction from the carrying amount of the note payable. The debt issuance costs are amortized to interest expense over the
loan term. During the years ended December 31, 2018 and 2017, the Company recorded $325,000 and $183,000,
respectively, of interest expense relating to the debt issuance costs using the effective interest method. As of December 31,
2018, the unamortized debt discount was $1,223,000.
F-20
No shares, issuable pursuant to warrants issued in connection with a private offering on September 30, 2014, were issued in
connection with the exercise of warrants during the years ended December 31, 2018 and 2017, respectively.
No shares issuable pursuant to warrants have been cancelled during the year ended December 31, 2018 and 2017.
The stock-based compensation expense related to warrants issued was zero for the years ended December 31, 2018 and
2017, respectively.
10.
Summary of Stock Options
Stock Option Plans
The Company has issued equity awards in the form of stock options and restricted stock awards (“RSAs”) from two
employee benefit plans. The plans include the Viveve Amended and Restated 2006 Stock Plan (the “2006 Plan”) and the
Company’s Amended and Restated 2013 Stock Option and Incentive Plan (the “2013 Plan”).
The 2006 Plan was adopted by the board of directors of Viveve, Inc. and was terminated in conjunction with the merger
that took place on September 23, 2014 between PLC Systems Inc., Viveve, Inc. and PLC Systems Acquisition Corp. (the
“Merger”). Prior to the Merger, the board of directors voted to accelerate the vesting of all unvested options that were
outstanding as of the date of the Merger such that all options would be immediately vested and exercisable by the holders.
In conjunction with the Merger, the Company agreed to assume and administer the 2006 Plan and all outstanding options
to purchase shares of Viveve, Inc. common stock issued from the 2006 Plan were converted into options to purchase shares
of the Company’s common stock (rounded down to the nearest whole share). As of December 31, 2018, there are
outstanding stock option awards issued from the 2006 Plan covering a total of 38,145 shares of the Company’s common
stock and no shares are available for future awards. The weighted average exercise price of the outstanding stock options is
$9.96 per share and the weighted average remaining contractual term is 1.3 years.
The 2013 Plan was also adopted by the Company’s board of directors and approved by its stockholders. The 2013 Plan is
administered by the compensation committee of the Company’s board of directors (the “Administrator”). Under the 2013
Plan, the Company may grant equity awards to eligible participants which may take the form of stock options (both
incentive stock options and non-qualified stock options), stock appreciation rights, restricted, deferred or unrestricted stock
awards, performance-based awards or dividend equivalent rights. Awards may be granted to officers, employees,
nonemployee directors (as defined in the 2013 Plan) and other key persons (including consultants and prospective
employees). The term of any stock option award may not exceed 10 years and may be subject to vesting conditions, as
determined by the Administrator. Options granted generally vest over four years. Incentive stock options may be granted
only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section
424(f) of the Internal Revenue Code. The exercise price of any stock option award cannot be less than the fair market value
of the Company’s common stock, provided, however, that an incentive stock option granted to an employee who owns
more than 10% of the Company’s outstanding voting power must have an exercise price of no less than 110% of the fair
market value of the Company’s common stock and a term that does not exceed five years.
On August 22, 2016, the Company’s stockholders approved an amendment to the 2013 Plan to add an “evergreen”
provision which will automatically increase annually, on the first day of each January, the maximum number of shares of
common stock reserved and available under the 2013 plan (the “Stock Issuable”) by an amount equal to the lesser of (i) the
number of shares that will increase the Stock Issuable by 4% of the total number of shares of common stock outstanding
(on a fully diluted basis) or (ii) an amount determined by the board of directors. On December 23, 2016, the board of
directors approved the 2017 evergreen increasing the total stock reserved for issuance under the 2013 Plan by 523,209
shares from 2,000,000 shares to a total of 2,523,209 shares, which was effective January 1, 2017. On August 15, 2017, the
Company’s stockholders approved an amendment to the 2013 Plan increasing the number of shares of common stock
authorized for awards under the 2013 Plan from 2,523,209 shares to a total of 4,000,000 shares. On December 6, 2017, the
board of directors approved the 2018 evergreen increasing the total stock reserved for issuance under the 2013 Plan
from 4,000,000 shares to a total of 4,914,016 shares, which was effective January 1, 2018.
As of December 31, 2018, there are outstanding stock option awards issued from the 2013 Plan covering a total of
3,976,330 shares of the Company’s common stock and there remain reserved for future awards 603,712 shares of the
Company’s common stock. The weighted average exercise price of the outstanding stock options is $4.50 per share, and
the remaining contractual term is 7.5 years.
F-21
Activity under the 2006 Plan and the 2013 Plan is as follows:
Year Ended December 31, 2018
Weighted
Number
Weighted Average
Average
Exercise
Price
Remaining Aggregate
Contractual
Term (years)
Intrinsic
Value
Options outstanding, December 31, 2016
Options granted
Options exercised
Options canceled
Options outstanding, December 31, 2017
Options granted
Options exercised
Options canceled
Options outstanding, December 31, 2018
of
Shares
1,909,764 $
1,000,985 $
(7,730) $
(208,795) $
2,694,224 $
2,358,559 $
- $
(1,038,308) $
4,014,475 $
Vested and exercisable and expected to vest, end of
period
Vested and exercisable, end of period
3,825,887 $
1,637,474 $
6.19
5.68
4.02
8.88
5.80
3.52
-
5.43
4.56
4.98
5.44
9.1 $
211,396
8.6 $
249,154
7.4 $
7.3 $
5.0 $
-
-
-
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, 2018.
The options outstanding and exercisable as of December 31, 2018 are as follows:
Options
Outstanding
Number
Outstanding
as of
Dec 31, 2018
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Options
Exercisable
Number
Exercisable
as of
Dec 31, 2018
Weighted
Average
Exercise
Price
535,000 $
180,000 $
546,876 $
1,247,318 $
693,067 $
490,470 $
283,599 $
38,135 $
10 $
4,014,475 $
1.95
2.40
3.53
4.54
5.36
6.04
7.65
9.92
149.04
4.56
9.4
9.4
9.1
7.3
6.8
4.1
7.4
1.3
2.8
7.4
50,000 $
11,459 $
64,090 $
503,934 $
397,466 $
412,662 $
159,718 $
38,135 $
10 $
1,637,474 $
1.97
1.97
2.64
3.76
4.62
5.34
6.02
7.66
9.92
5.44
Range of
Exercise Prices
$1.75 - $1.97
$2.02 - $2.83
$3.03 - $3.82
$4.30 - $4.97
$5.01 - $5.67
$6.00 - $6.61
$7.00 - $7.92
$9.92
$59.60 - $149.04
Stock Option Modifications
On May 30, 2018, under approval by the Company’s Board of Directors, the Company entered in to a Separation and
Release Agreement with the former Chief Executive Officer. The provisions of the agreement specify that the stock
options previously granted to her will continue to vest through the earlier of the date she ends her consulting services to the
Company or December 31, 2018. As of May 30, 2018, these stock options are being accounted for as a non-employee
option through the consulting term and are being marked-to-market. Additionally, the former Chief Executive Officer will
receive six months of accelerated vesting of the stock options and the post-termination exercise period was extended from
three months to one year after the effective date of the agreement. The Company recognized stock-based compensation
expense of $97,000 for the incremental value of the accelerated vesting and the change in the exercise period upon the
signing of the agreement.
F-22
Restricted Stock Awards
As of December 31, 2018, there are 57,500 shares of unvested restricted stock outstanding that have been granted pursuant
to RSAs.
In December 2018, the Company granted RSAs for 40,775 of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $1.05 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 40,775 shares of
common stock were issued.
In October 2018, the Company granted RSAs for 17,985 of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $2.48 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 17,985 shares of
common stock were issued.
In July 2018, the Company granted RSAs for 18,278 of common stock under the 2013 Plan to board members as director
compensation with a weighted average grant date fair value of $2.63 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 18,278 shares of
common stock were issued.
In June 2018, the Company granted an RSA for 50,000 shares to a consultant with a weighted average grant date fair value
of $3.58 per share, based on the market price of the Company’s common stock on the award date. The RSA vests over two
years beginning as of the award date. As of December 31, 2018, zero shares were vested and issued.
In April 2018, the Company granted RSAs for 14,672 shares of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $3.44 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 14,672 shares of
common stock were issued.
In January 2018, the Company granted RSAs for 9,637 shares of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $5.19 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 9,637 shares of
common stock were issued.
In January 2018, the Company granted an RSA for 25,000 shares to a consultant with a weighted average grant date fair
value of $5.19 per share, based on the market price of the Company’s common stock on the award date. The RSA vests
over one year beginning as of the award date. As of December 31, 2018, 25,000 shares were vested and issued.
In December 2017, the Company granted an RSA for 10,000 shares to an employee with a weighted average grant date fair
value of $4.94 per share, based on the market price of the Company’s common stock on the award date. The RSA vests
over four years at a rate of 1/4th the first year beginning as of the award date and monthly thereafter. As of December 31,
2018, 2,500 shares were vested and issued.
In October 2017, the Company granted RSAs for 7,884 shares of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $5.55 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 7,884 shares of
common stock were issued.
In May 2017, the Company granted RSAs for 4,797 shares of common stock under the 2013 Plan to board members as
director compensation with a weighted average grant date fair value of $7.07 per share, based on the market price of the
Company’s common stock on the award date. The RSAs were fully vested on the date of grant and 4,797 shares of
common stock were issued. In September 2017, the Company granted RSAs for 6,947 shares of common stock under the
2013 Plan to board members as director compensation with a weighted average grant date fair value of $5.58 per share,
based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of
grant and 6,947 shares of common stock were issued.
2017 Employee Stock Purchase Plan
The second offering period under the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”) began on
January 1, 2018 and ended on March 31, 2018, and 20,744 shares were issued on March 29, 2018 at a purchase price of
$3.11. The third offering period under the Company’s 2017 ESPP began on April 1, 2018 and ended on June 30, 2018, and
25,618 shares were issued on June 29, 2018 at a purchase price of $2.31. The fourth offering period under the Company’s
2017 ESPP began on July 1, 2018 and ended on September 30, 2018, and 28,698 shares were issued on September 28,
2018 at a purchase price of $2.24. The fifth offering period under the Company’s 2017 ESPP began on October 1, 2018
and ended on December 31, 2018, and 50,727 shares were issued on December 31, 2018 at a purchase price of $0.89.
F-23
As of December 31, 2018, the remaining shares available for issuance under the 2017 ESPP were 256,319 shares.
The Company estimates the fair value of purchase rights under the ESPP using a Black-Scholes valuation model. The fair
value of each purchase right was estimated on the date of grant using the Black-Scholes option valuation model and the
straight-line attribution approach with the following weighted-average assumptions:
Expected term (in years)
Average volatility
Risk-free interest rate
Dividend yield
Year Ended
December 31,
2018
0.25
72%
1.92%
0%
2017
0.25
61%
1.06%
0%
The weighted average grant date fair value of the purchase rights issued under the 2017 ESPP during the year ended
December 31, 2018 and 2017 was $0.89 and $1.51 per share, respectively.
Stock-Based Compensation
During the years ended December 31, 2018 and 2017, the Company granted stock options to employees to purchase
2,146,171 and 981,110 shares of common stock with a weighted average grant date fair value of $2.24 and $2.88 per share,
respectively. There were no stock options exercised by employees during the year ended December 31, 2018. The
aggregate intrinsic value of options exercised during the year ended December 31, 2017 was $31,000.
The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of
employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair
value of employee stock options granted was estimated using the following weighted average assumptions:
Expected term (in years)
Average volatility
Risk-free interest rate
Dividend yield
Year Ended
December 31,
2018
5
73%
2.65%
0%
2017
5
59%
1.89%
0%
During the years ended December 31, 2018 and 2017, the Company granted stock options to nonemployees to purchase
212,388 and 19,875 shares of common stock, with a weighted average grant date fair value of $1.62 and $4.09 per share.
There were no stock options exercised by nonemployees during the years ended December 31, 2018 and 2017.
The fair value of nonemployee stock options granted was estimated using the following weighted average assumptions:
Expected term (in years)
Average volatility
Risk-free interest rate
Dividend yield
F-24
Year Ended
December 31,
2018
9
69%
2.69%
0%
2017
10
72%
2.38%
0%
Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the
price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock
price history over a period commensurate with the expected term of the options, trading volume of comparable companies’
stock, look-back volatilities and the Company specific events that affected volatility in a prior period. The expected term
of employee stock options represents the weighted average period the stock options are expected to remain outstanding and
is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term,
the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the
U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is
included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future.
The following table shows stock-based compensation expense included in the consolidated statements of operations for the
years ended December 31, 2018 and 2017 (in thousands):
Cost of revenue
Research and development
Selling, general and administrative
Total
Year Ended
December 31,
2018
2017
$
$
69 $
328
2,638
3,035 $
19
252
1,601
1,872
As of December 31, 2018, the total unrecognized compensation cost in connection with unvested stock options was
approximately $4,328,328. These costs are expected to be recognized over a period of approximately 2.72 years.
11.
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
Change in valuation allowance
Effect of tax legislation
Other
Effective tax rate
Year Ended
December 31,
2018
2017
(21)%
(4)%
23%
0%
2%
0%
(34)%
(4)%
4%
33%
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
Fixed assets and depreciation
Total deferred tax assets
Valuation allowance
Net deferred tax assets
December 31,
2018
2017
$
31,759 $
3,555
951
1,272
69
37,606
(37,606)
$
- $
19,699
3,963
835
1,403
39
25,939
(25,939)
-
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 $11,667,000
and $1,501,000 during the years ended December 31, 2018 and 2017, respectively.
F-25
As of December 31, 2018, the Company has net operating loss (“NOL”) carryforwards for federal and state income tax
purposes of approximately $126,893,000 and $97,677,000, respectively, which expire beginning in the year 2026.
The Company also has federal and California research and development tax credits of approximately $830,000 and
$668,000, respectively. The federal research credits will begin to expire in 2026 and the California research and
development credits have no expiration date.
Utilization of the NOL and research and development credit carryforwards may be subject to a substantial annual limitation
due to ownership changes that have occurred previously or that could occur in the future, as provided by Section 382 of
the Internal Revenue Code of 1986, as well as similar state provisions. Ownership changes may limit the amount of NOL
and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an
ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or
public groups in the stock of a corporation by more than 50 percentage points over a three-year period. If the Company has
experienced a change of control, utilization of its NOL or tax credits carryforwards would be subject to an annual
limitation under Section 382. Any limitation may result in expiration of a portion of the NOL or research and development
credit carryforwards before utilization. Subsequent ownership changes could further impact the limitation in future years.
Until a Section 382 study is completed and any limitation known, no amounts are being presented as an uncertain tax
position. A full valuation allowance has been provided against the Company’s NOL carryforwards and research and
development credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the
valuation allowance. Thus, there would be no net impact to the consolidated balance sheets or the consolidated statements
of operations if an adjustment were required.
As of December 31, 2018, 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,
2018
2017
Balance at the beginning of the year
Additions based upon tax positions related to the current year
Balance at the end of the year
$
$
397 $
53
450 $
268
129
397
If the ending balance of $450,000 of unrecognized tax benefits as of December 31, 2018 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.
On December 22, 2017, the United States enacted a law commonly known as the Tax Cuts and Jobs Act (“TCJA”) which
makes widespread changes to the Internal Revenue Code, including a reduction in the federal corporate tax rate to 21%,
and repatriation of accumulated foreign accumulated earnings and profits, effective January 1, 2018.
The Company is required to recognize the effect on deferred tax assets and liabilities due to a change in tax rates in the
period the tax rate change was enacted. The carrying value of the Company’s U.S. deferred taxes is determined by the
enacted U.S. corporate income tax rate. Consequently, the reduction in the U.S. corporate income tax rate impacts the
carrying value of our deferred tax assets. Under the new corporate income tax rate of 21%, the Company’s U.S. net
deferred tax asset position has decreased as has the related valuation allowance. The Company has also considered the
impact of the transition tax for which it has estimated it does not need to accrue a liability as the operations of Viveve BV
are immaterial. Uncertainty regarding the impact of tax reform remains, as a result of factors including future regulatory
and rulemaking processes, the prospects of additional corrective or supplemental legislation, potential trade or other
litigation, and other factors.
F-26
12.
Related Party Transactions
In June 2006, the Company entered into a Development and Manufacturing Agreement (the “Agreement”) with Stellartech
Research Corporation (“Stellartech”). 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, 2018, the Company has
purchased 809 units. The price per unit is variable and dependent on the volume and timing of units ordered. In
conjunction with the Agreement, Stellartech purchased 37,500 shares of Viveve, Inc.’s common stock. Under the
Agreement, the Company paid Stellartech $10,150,000 and $7,912,000 for goods and services during the years ended
December 31, 2018 and 2017, respectively.
The Company’s long-lived assets by geographic area were as follows (in thousands):
United States
Asia Pacific
Canada
Latin America
Europe
Total
Year Ended
December 31,
2018
2017
$
$
2,851 $
24
28
5
8
2,916 $
1,192
52
46
12
1
1,303
Long-lived assets, comprised of property and equipment, are reported based on the location of the assets at each balance
sheet date.
13.
Subsequent Events
In January 2019, the board of directors approved the 2019 evergreen provision increasing the total stock reserved for
issuance under the 2013 Plan by 2,043,142 shares from 4,914,016 shares to a total of 6,957,158 shares, which was effective
January 1, 2019.
In February 2019, the Company executed a mutual termination of the Distributorship Agreement with ICM. As a result,
the Company no longer has a minimum purchase requirement to purchase a certain quantity of ICM products per month.
F-27
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-3 (No. 333-221432) and Form S-8 (Nos.
333-226152, 333-220833, 333-213363, 333-206041, 333-201551, 333-153535 and 333-127770) of Viveve Medical, Inc. of our reports
dated March 14, 2019 relating to the consolidated financial statements and internal control over financial reporting, which appear in this
Annual Report on Form 10-K.
/s/ BPM LLP
San Jose, California
March 14, 2019
Exhibit 31.1
Certification of Principal Executive 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 14, 2019
/s/ Scott Durbin
Scott Durbin
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification of Principal Accounting and Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
I, Jim Robbins, 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 14, 2019
/s/ Jim Robbins
Jim Robbins
Vice President of Finance and Administration
(Principal Accounting and Financial 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, 2018 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 14, 2019
/s/ Scott Durbin
Scott Durbin
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, 2018 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 14, 2019
/s/ Jim Robbins
Jim Robbins
Vice President of Finance and Administration
(Principal Accounting and Financial Officer)