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, 2020
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
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
VIVE
The Nasdaq Capital Market
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 ☒
Securities registered pursuant to Section 12(g) of the Act: None.
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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
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 30, 2020, 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 $8,858,275.
Number of shares outstanding of the Registrant’s common stock, as of March 12, 2021: 10,341,716
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4 Mine Safety Disclosures
Properties
Legal Proceedings
VIVEVE MEDICAL, INC.
Table of Contents
Part I
Part II
Selected Financial Data
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosure about Market Risk
Financial Statements and Supplementary Data
Item 8
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A Controls and Procedures
Item 9B Other Information
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
Part III
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.
CAUTIONARY NOTE REGARDING 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:
our limited cash and our history of losses;
our ability to achieve profitability;
our limited operating history;
emerging competition and rapidly advancing technology;
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● 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 we can obtain regulatory approval in additional markets outside of the United States;
● whether demand develops for our medical device;
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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 ability to file and obtain additional patents;
our ability to broaden our customer base;
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;
the impact of the novel coronavirus on our clinical development and on the manufacturing, sales and patient utilization of our Viveve Systems and tips;
the impact of an economic recession, including as a result of the novel coronavirus, on our business, financial condition or results of operations;
our ability to maintain compliance with The Nasdaq Capital Market continued listing standards;
our success at managing the risks involved in the foregoing items; and
other factors discussed in this report.
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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.
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Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we
face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and
should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission, or
SEC, before making investment decisions regarding our common stock.
SUMMARY OF RISK FACTORS
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If we fail to maintain regulatory approvals and clearances, or if we are unable to obtain, or experience significant delays in obtaining, FDA clearances or approvals
for the Viveve System or any future products we may develop or acquire, including product enhancements, our business and results of operations could be
adversely affected.
● 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.
● 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.
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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.
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.
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The Viveve System may, in the future, be subject to product corrections, removals, or recalls that could harm our reputation, business and financial results.
● We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force
us to delay, limit or terminate our product development efforts or other operations.
● 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.
● 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.
● 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 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.
● Our business is not currently profitable, and we may not be able to achieve profitability even if we are able to generate significant revenue.
● Our success depends on growing physician adoption of the Viveve System and continued use of treatment tips.
● Our revenue may suffer due to our transition of U.S. sales from a capital equipment sales model to a recurring revenue rental model.
● 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.
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The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm our research and development,
manufacturing and commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of
operations.
● We may not be entitled to forgiveness of our recently received Paycheck Protection Program, or PPP, Loan, and our application for the PPP Loan could in the
future be determined to have been impermissible or could result in damage to our reputation.
● 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.
● We outsource the manufacturing and repair of key elements of the Viveve System to a single manufacturing partner.
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● Our manufacturing operations and those of our key manufacturing subcontractors are dependent upon third-party suppliers, making us vulnerable to supply
shortages and price fluctuations, which could harm our business.
● 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 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.
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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.
● 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.
● 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 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.
● We have been involved in and may be involved in future costly intellectual property litigation, which could impact our future business and financial performance.
● 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.
● 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.
Item 1. Business
PART I
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. We believe the Viveve System and Viveve treatment provide a number of benefits for physicians and patients, including:
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a safe, minimally-invasive, non-ablative procedure;
requiring only a single treatment;
compelling physician economics; and
ease of use.
In the U.S., the Viveve System is sold through a direct sales force. In other regions, we market and sell primarily through a network of distribution partners.
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Currently, the Viveve System is cleared for marketing in 51 countries throughout the world under the following indications for use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and 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 as well as for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity and to improve mild urinary incontinence and sexual function
No. of
Countries:
4 (including the U.S.)
30
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As of December 31, 2020, we have a global installed base of 857 Viveve Systems and we have sold approximately 50,100 single-use treatment tips worldwide.
On December 1, 2020, the Company effected a 1-for-10 reverse stock split of all outstanding common stock and preferred stock of the Company. All share numbers,
exercise prices for options and warrants and other capitalization information in this Annual Report on Form 10-K is represented on a post-split basis, unless as otherwise
indicated.
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”). Viveve, Inc. is a Delaware
corporation that was incorporated in 2005 by Jonathan Parmer, MD, an OBGYN physician, and is a wholly-owned subsidiary of Viveve Medical, Inc. 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 well-being and quality of life of women suffering from urinary
incontinence and/or vaginal laxity, 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 consists of three main components: a radiofrequency (“RF”) 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. return pad, coupling fluid), as well as a cryogen canister that can be used for approximately two to
five procedures, and a foot pedal. 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. 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.
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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.
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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.
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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 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.
● 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:
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Reverse Thermal Gradient. With RF 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 Stress Urinary Incontinence
Urinary incontinence (UI) is the uncontrolled leakage of urine due to the loss of bladder control. Many people live in silence, either because they are embarrassed or
because they mistakenly believe that UI is a normal consequence of aging or having children. Only half of these individuals who consider their UI symptoms to be
problematic or bothersome will seek consultation or speak to their doctor. The reported prevalence for urinary incontinence in adult women is varied. Based on several
published studies, we estimate that approximately 40 million women in the U.S. alone suffer from some form of urinary incontinence. There are four main types of UI:
Continuous Incontinence (CI), Stress Urinary Incontinence (SUI), Urge Urinary Incontinence (UUI), and Mixed Incontinence, which is a combination of SUI and UUI.
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SUI is defined as the uncontrolled leakage of urine due to sudden or increased intraabdominal pressure caused by activities such as exercising, sneezing, laughing, or
coughing. There are two main causes of SUI; urethral hypermobility and intrinsic sphincter deficiency (ISD). Urethral hypermobility is the predominant cause of SUI and is
due to weakness in the pelvic floor musculature and soft tissues that cannot stabilize the urethra causing the sphincter muscles to open briefly and leak urine. Based on
certain published studies, we estimate that pure SUI is common in approximately 8 million women in the U.S. alone and that UUI or “Urge Urinary Incontinence,” is
common in approximately 5 million women in the U.S. and is defined as the sudden urge to urinate with a frequency greater than eight times per 24 hours. We believe
approximately 27 million women have a combination of SUI and UUI referred to as mixed incontinence.
Current Treatments for Stress Urinary Incontinence and Their Limitations
The first-line treatment options for SUI and UUI begin with lifestyle changes, continence pessaries, and behavioral and physical therapies. However, based on our
survey results, conservative treatment options result in low efficacy rates ranging from 40 to 50% in the United States. UUI patients currently have a wide range of
pharmacological options to manage the condition, as well as sacral nerve stimulation devices. SUI, however, lacks sufficient pharmacologic and non-invasive treatments
prior to patients seeking highly invasive procedures such as urethral bulking agents, pelvic floor sling surgery or colposuspension. Based on a 2017 patient insurance claims
data set for UI, 575,000 patients had documented conservative therapies and 205,000 patients progress to invasive procedures. We believe a large unmet need remains for
SUI patients seeking an effective, non-invasive treatment option. According to the published studies, approximately 80% of women with UI are “bothered” and receive no
treatment option, equating to approximately 11 million women with predominant SUI who could be candidates for the Viveve treatment.
Overview of Vaginal Laxity and Sexual Function
Vaginal laxity and tissue architecture have often been overlooked as contributing etiological factors to female sexual function. 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.
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.
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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.
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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, 84% 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.
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.
In a 2019 article in the Journal of Women’s Health, the authors concluded that the social stigma for women from Western culture regarding sexuality remains and
creates barriers of communication with their health care professionals. The women in the study were typically unaware or had misconceptions of conditions that could
adversely affect their sexual life. Additionally, these women lacked awareness of safe and effective treatments. Despite the lack of awareness and communication regarding
this issue, we believe there is a strong interest among patients and doctors to advance the conversation of women’s sexual wellness and evolving options a treatment that are
clinically proven and safe.
Current 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
pelvic floor muscle exercises, or 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.
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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”), 206,846 LVR surgeries were performed world-wide in 2017. 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.
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The Viveve Solution
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 our CMRF technology may offer an alternative to existing SUI treatment options. By regenerating collagen around the
urethra's bladder neck, our treatment may help stabilize the underlying hypermobility of the urethra. Our innovative and proprietary CRMF procedure may also offer
potential benefits and competitive advantages that do not currently exist in the non-invasive treatment market for SUI. Our endovaginal approach to regenerating collagen
does not require anesthesia or numbing creams. The cryogen cooling feature protects the vaginal mucosa (surface tissue) while allowing the radiofrequency to heat deeper
layers of the tissue (lamina propria) and stimulate collagen regrowth. The procedure typically takes approximately 45 minutes. 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, we estimate that physicians have treated over 25,000 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.
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Single Treatment. The Viveve treatment is normally performed in a medical office setting as a single treatment that takes approximately 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.
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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 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:
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Broadening the Conditions we Treat through Robust Clinical Trials and Regulatory Label Expansion. In addition to clearances/approvals in many international
countries for improvement of vaginal laxity and/or sexual function, we are conducting a pivotal U.S. clinical trial in SUI. If successful, we intend to submit for
regulatory clearance/approval in the U.S. and abroad for the improvement of stress urinary incontinence. (See discussion under the heading “Clinical Studies”)
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 new
business model, 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.
● 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. 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”)
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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, with a primary focus on OBGYNs, Urogynecologists, and Urologists with a secondary focus on aesthetic and functional medicine practices.
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
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. From
January 2017 through May 2019, the Company relied on a traditional capital sales model, including selling the Viveve Systems and disposable treatment tips. In June of
2019, the Company transitioned to a recurring revenue rental model, where we lease the Viveve System to customers instead of selling it to them. The Company believes
that the change in business model lowers the barrier to entry for physicians to adopt the procedures, shortens the sales cycle and improves the cost effectiveness of each sale.
At the end of 2020, we had 2 direct sales representatives and 2 contracted representatives covering the United States. In 2021, we plan to continue to expand our direct sales
efforts under the new business model to achieve broader reach throughout the United States.
International
We currently market and sell the Viveve System, including the single-use treatment tips, in several countries internationally. At the present time, trained direct sales
employees and distribution partners represent Viveve and its products mainly in Canada and the Asia Pacific region.
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.
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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.
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/female
sexual function (FSD) and SUI. These include an FSD trial under IDE in the U.S. (VIVEVE II) and, an international trial in Canada for SUI (LIBERATE-International).
Currently, we are conducting an IDE clinical study in the U.S. for SUI (PURSUIT). 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.
Clinical trials are time-consuming and expensive, and may produce results that do not result in FDA clearance or approval of our FDA marketing application in the
U.S. for SUI. In the event that we do not obtain FDA clearance or approval of the Viveve System for the treatment of SUI, we will be unable to promote it in the U.S. for that
indication, and the ability to grow our revenues may be adversely affected. 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.
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 hematoxylin 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.
In November 2019, we conducted a Good Laboratory Practice (GLP) study in six ewes to evaluate the in vivo temperature-time profile and histopathology of vaginal
and surrounding tissues in the ovine model after Viveve treatment. Five ewes were utilized for the in vivo energy application procedures while the remaining ewe was
utilized as a control. During anesthesia, eight fluoroptic temperature probes were placed at different locations near the vaginal wall, rectum and bladder. After probe
placement, five of the ewes received the Viveve SUI protocol (220 pulses of 90 J/cm2 of RF energy) and temperatures recorded. The control ewe did not receive energy
application, but temperatures were recorded. In February 2020, study results showed temperature increases only at tissue locations where expected. Histopathology results
showed normal histopathology of vaginal and surrounding tissues, and no adverse or other associated treatment-related responses, as evaluated histologically via H&E stain
(in formalin fixed, paraffin embedded samples) and LDH/NBT vital stain (in frozen, OCT embedded samples). There were no macroscopic findings in either fresh or
formalin-fixed tissues submitted for pathologic evaluation.
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In response to the inconclusive results reported in July 2019 from the Company’s LIBERATE-International SUI trial conducted in Canada (aimed at supporting SUI
indications in Canada, the European Union and several other international countries), Viveve conducted an in-vivo preclinical temperature and immunohistochemistry study
to evaluate a new inert sham treatment tip. The GLP study was initiated in June 2020 following several months of engineering, validation, and development work. The study
assessed both in-vivo tissue temperature changes during treatment, and histopathology at 30 days post-treatment compared to baseline, in three parous ewes using Viveve’s
CMRF treatment tip (Active), cryogen-cooling only tip (“Old” sham treatment used in previous LIBERATE-International SUI study), and a new inert sham treatment tip.
Histopathology of vaginal biopsies were performed and included use of α-smooth muscle actin, or α-SMA, staining for fibroblast activation and formation. All tissue
samples were evaluated by an independent and blinded pathologist.
The positive preclinical findings demonstrated, as reported in August 2020, that both temperature and immunohistochemistry results support the validity of the new
inert sham tip to provide a true inert or placebo treatment. Only minor tissue temperature change (less than 2 degrees centigrade) was generated by the new inert sham tip
and no fibroblast activation was shown through elevated a-SMA staining. In contrast, both the Active and cryogen-cooling sham tips demonstrated meaningful tissue
temperature changes during treatment and increased fibroblast activation 30 days post-treatment. We believe that the positive in-vivo preclinical study validates our new inert
sham tip for use in the U.S. pivotal PURSUIT trial.
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, a randomized, double-blind, sham-controlled study in 99 patients with mild-to-
moderate SUI was conducted at nine sites in Canada. Patients were randomized in a 2:1 ratio to either Active treatment (90 J/cm2 RF with cryogen cooling) or Sham
treatment (sub-treatment dose of ≤1 J/cm2 with cryogen cooling). Patients were followed for six months post-treatment to assess the primary efficacy and safety of the
treatment with data being collected at one, three and six months.
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The primary efficacy endpoint was 6-month change from baseline in the one-hour pad weight test. Secondary endpoints included: 24-hour pad weight test, daily
incontinence episodes (3-day diary), UDI-6, ICIQ-UI-SF, and FSFI.
Across all endpoints, the efficacy of both the Active and Sham treatments were highly clinically relevant. For the primary endpoint, median percentage decrease from
baseline (CFB) to 6 months post-treatment in 1-hr pad weight for the Active group was 77.2% and 81.0% for the Sham group. However, the differences were no significant
between the Active and Sham groups. The sham response consistently exceeded the 30 – 55% placebo response rates in the literature for SUI studies, suggesting that
cryogen alone may have a therapeutic effect.
From a safety perspective, both Active and Sham treatments were safe and well tolerated. Only one adverse device event was noted, none of the 3 serious adverse
events were identified as related to treatment and the percentage of patients with adverse events were comparable with the Viveve I study.
Three-Arm SUI Feasibility Study
In December 2019, the Company received approval of an Investigational Testing Application (ITA) from the Canadian Ministry of Health and in January 2020
initiated a three-arm, three-month feasibility study to compare Viveve’s CMRF treatment and a cryogen-only sham to an inert sham treatment for the improvement of SUI in
women. Completion of subject enrollment in the study was reported in March 2020. Study subjects were randomized in a 1:1:1 ratio to the three arms and were assessed
using the 1-hour Pad Weight Test, 3-day Voiding Diary, the 24-hour Pad Weight Test and I-QOL at five months post treatment. Due to patient, provider and medical
facility health and safety concerns caused by the COVID-19 pandemic, the final subject follow-up visit was changed to 5 months from the initial 3-month design.
Final results were reported in August 2020, and showed the primary efficacy endpoint (i.e., change from baseline in the standardized 1-hour Pad Weight Test at five
months post treatment) was positively achieved. The median change from baseline in the active CMRF treatment group (N=13) and the cryogen-only sham treatment group
(N=12) was -9.5 grams and -6.8 grams respectively, as compared to -4.4 grams in the inert sham treatment group (N=11). The study also assessed several secondary
endpoints but showed no differentiation between groups. No device-related safety issues were reported. The meaningful separation demonstrated between the CMRF
treatment arm and the inert sham arm in the feasibility study is believed to help provide confidence in the potential to achieve positive separation between the two treatment
arms in the ongoing U.S. pivotal PURSUIT trial.
PURSUIT – U.S. SUI Trial
The Company received FDA approval of its investigational device exemption (IDE) application to conduct its U.S. pivotal, multicenter PURSUIT trial for
improvement of SUI in women in July 2020, as well as FDA approval of requested amendments to the IDE protocol in December 2020. Initiation of the PURSUIT trial was
announced by the Company on January 21, 2021 and subject enrollment is underway.
PURSUIT is a randomized, double-blinded, sham-controlled trial with an intended enrollment of approximately 390 female subjects with moderate SUI at up to 30
study sites in the U.S. Randomized in a 2:1 ratio for active and sham treatments, subjects in the active treatment arm (260 subjects) will receive CMRF treatment, while
subjects in the control arm (130 subjects) will receive the Company’s new inert sham treatment.
The primary efficacy endpoint of the PURSUIT trial is a comparison of the proportion of patients who experience greater than 50% reduction in urine leakage
compared to baseline on the standardized 1-hour Pad Weight Test at 12 months post-treatment versus the new sham procedure. The study also includes several secondary
endpoints, including: proportion of patients who experience greater than 50% reduction in urine leakage on the standardized 1-hour Pad Weight Test at three and six months
post-treatment, percentage change from baseline in the 1-hour Pad Weight Test at three, six and 12 months, percent of subjects with no incontinence episodes at three, six
and 12 months post treatment as assessed with the three-day bladder voiding diary, and change from baseline in the MESA Questionnaire (Medical, Epidemiologic and
Social Aspects of Aging), Incontinence Quality of Life (I-QOL), Patient Global Impression of Improvement (PGI-1) Questionnaire, and International Consultation on
Incontinence Modular Questionnaire-Urinary Incontinence Short Form (ICIQ-UI-SF). Subject safety will be monitored throughout the study.
Clinical Studies – Vaginal Laxity and Female Sexual Function
United States Pilot Study
We conducted our first human study beginning in November 2008. The study was a single-arm study 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, 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.
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Within one month after the Viveve treatment, patients reported a statistically significant improvement in vaginal laxity scores, sexual function and sexual satisfaction
scores compared to baseline. 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 and experiencing vaginal laxity. 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, 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 compared to baseline. 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 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.
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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.
VIVEVE II U.S. Sexual Function Trial
In 2020, we completed the VIVEVE II (VIveve treatment of the Vaginal Introitus to EValuate Effectiveness) clinical study, which was a multicenter, randomized,
double-blinded, sham-controlled study to evaluate the safety and efficacy of the Company’s cryogen-cooled monopolar radiofrequency (CMRF) technology for the
improvement of sexual function in women following vaginal childbirth. Topline results indicated that the study did not meet its primary endpoint of demonstrating a
statistically significant improvement in the mean change from baseline in the total Female Sexual Function Index (FSFI) at 12 months. Although there was substantial
improvement in the total FSFI score from baseline to the final 12-month follow-up in the active and sham groups indicating a significant treatment effect, there was not
sufficient separation from the sham treatment group to achieve statistical significance.
The study included 220 subjects that successfully completed 12-month follow-up. Subjects were randomized in a 1:1 ratio for the active (N=114) and the sham
(N=106) treatments at 17 clinical sites in the United States. Mean change in the total FSFI score at 12 months for the active group was 10.0 (12-month score of 27.9) and the
mean change for the sham group was 9 (12-month score of 27.3), a difference of 0.6 (p=0.5). A total of 65.8% active and 63.2% sham achieved an FSFI > 26.5 at 12
months. There were no serious device-related adverse events reported. The treatment groups were well balanced, and the number of subjects lost to follow-up was as
expected. No subjects dropped out due to an adverse event.
The Company has completed its final study report in December 2020, and due to the trial’s outcome, we do not currently intend to pursue a female sexual function or
vaginal laxity label in the U.S. at this time.
Research and Development
We intend to focus on various research and development efforts, including but not limited to:
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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, 2020 and 2019 were $5,125,000
and $8,590,000, 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 or from our contract manufacturer’s
location in Fredrick, Colorado, which is expected to move to Watertown, South Dakota during the second quarter of 2021.
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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 generation 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 Spartronics Corporation (“Spartronics” formerly known as
“Sparton”), and a disposable treatment tip designed and manufactured by Cirtec Corporation (“Cirtec”). Both Spartronics and Cirtec are sole source suppliers for their
respective components. We have a Professional Services Agreement with Spartronics 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. As of December 2020, Cirtec was cleared to serve as a second source supplier for the first generation treatment tips.
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. Our suppliers periodically complete reviews of
electronic components for any that are near end of life. If any are found to be near end of life, we initiate a last time buy to purchase enough of the components to complete
the anticipated builds that require the component. 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 9001:2015 and CAN/CSA ISO 13485:2016. 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, 2020 and
2019.
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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 issued U.S. patent and own 5 issued U.S. patents directed to our technology and the Viveve System. Additionally, as of March
12, 2021, we have 8 pending U.S. patent applications, 75 issued foreign patents, including patents that may have lapsed, and 12 pending foreign patent applications, some of
which foreign applications preserve an opportunity to pursue patent rights in multiple countries.
Issued
5
U.S. Patents
Pending
8
Foreign Patents
Issued Pending
75
12
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.
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 20,000 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, 2020, the Company has purchased
855 units. In conjunction with the Agreement, Stellartech purchased 38 shares of Viveve, Inc.’s common stock Under the Stellartech Agreement, we paid Stellartech
$1,051,000 and $4,889,000 for goods and services during the years ended December 31, 2020 and 2019, respectively. In addition, Stellartech granted to us a non-exclusive,
nontransferable, worldwide, royalty-free license in the Field (defined above in the discussions titled “Edward Knowlton Licensed Patents”) to use Stellartech’s technology
incorporated into deliverables or products developed, manufactured or sold by Stellartech to us pursuant to the Stellartech Agreement (the “Stellartech Products”) to use,
sell, offer for sale, import and distribute the Stellartech Products within the Field, including the use of software object code incorporated into the Stellartech Products. The
Stellartech technology consists of know-how applicable to the manufacturing and repair of the Viveve System, including any other intellectual property which Stellartech
developed or acquired separate and apart from the Stellartech Agreement and all related derivative works. In addition, once we purchase a minimum commitment of 300
units of the RF generator component (the “Minimum Commitment”) and the Stellartech Agreement expires, Stellartech is to grant us a nonexclusive, nontransferable,
worldwide, royalty-free, fully-paid license to use the Stellartech technology incorporated into the Stellartech Products to make and have made Stellartech Products in the
Field.
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Stellartech also granted (i) an exclusive (even as to Stellartech), nontransferable, worldwide, royalty-free license within the Field under those certain intellectual
property rights licensed to Stellartech pursuant to a development and supply agreement between Stellartech and Thermage, dated October 1, 1997 (the “Thermage
Technology”), to use any elements of the Thermage Technology incorporated into the Stellartech Products, solely for the use, sale, offer for sale, importation and distribution
within the Field; (ii) upon our satisfaction of the Minimum Commitment and the expiration of the Stellartech Agreement, an exclusive, nontransferable, worldwide, royalty-
free, fully-paid license within the Field under Stellartech’s license rights in the Thermage Technology to use any elements of the Thermage Technology which are
incorporated into the Stellartech Products to make and have made Stellartech Products in the Field; and (iii) the exclusive right within the Field to prosecute infringers of the
portion of Stellartech’s Thermage Technology rights exclusively licensed to us. Our license rights in Thermage Technology also include the use of software object code for
Thermage Technology used in the Stellartech Products. As of the date of this report, the Stellartech Agreement has expired by its terms, however, the parties still continue to
operate under the terms of the agreement. In addition, we have 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.
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:
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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.
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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.
Currently, the Viveve System is cleared for marketing in 51 countries throughout the world under the following indications for use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and 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 as well as for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity and to improve mild urinary incontinence and sexual function
No. of
Countries:
4 (including the U.S.)
30
5
9
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.
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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. The second generation Viveve 2.0 System was cleared by FDA under 510(k) on June 12, 2019 with no change to the
intended use or indication from the original first generation Viveve System.
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 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.
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The Company received FDA approval of its investigational device exemption (IDE) application to conduct its U.S. pivotal, multicenter PURSUIT trial for
improvement of SUI in women in July 2020, as well as FDA approval of requested amendments to the IDE protocol in December 2020. Initiation of the PURSUIT trial was
announced by the Company on January 21, 2021 and subject enrollment is underway. PURSUIT is a randomized, double-blinded, sham-controlled trial with an intended
enrollment of approximately 390 female subjects with moderate SUI at up to 30 study sites in the U.S. Randomized in a 2:1 ratio for active and sham treatments, subjects in
the active treatment arm (260 subjects) will receive CMRF treatment, while subjects in the control arm (130 subjects) will receive the Company’s new inert sham treatment.
The primary efficacy endpoint of the PURSUIT trial is a comparison of the proportion of patients who experience greater than 50% reduction in urine leakage
compared to baseline on the standardized 1-hour Pad Weight Test at 12 months post-treatment versus the new sham procedure.
In 2020, we completed the VIVEVE II (VIveve treatment of the Vaginal Introitus to EValuate Effectiveness) clinical study, which was a multicenter, randomized,
double-blinded, sham-controlled study to evaluate the safety and efficacy of the company’s cryogen-cooled monopolar radiofrequency (CMRF) technology for the
improvement of sexual function in women following vaginal childbirth. Topline results indicated that the study did not meet its primary endpoint of demonstrating a
statistically significant improvement in the mean change from baseline in the total Female Sexual Function Index (FSFI) at 12 months.
The Company has completed its final study report in December 2020, and due to the trial’s outcome, we do not currently intend to pursue a female sexual dysfunction
or vaginal laxity label in the U.S. at this time.
Continuing Regulation
After a device is placed on the market, numerous regulatory requirements continue to apply. These include:
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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;
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labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses to both physician and consumers;
regulations governing our interactions with healthcare practitioners;
● U.S. export control and sanctions regulations associated with the export and reexport of the products;
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●
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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.
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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;
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repair, replacement, refunds, recall, market withdrawal 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 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 SUI remains a tremendous, under-developed opportunity.
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 SUI. 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, Innova, Inmode, BTL, Cynosure, Yarlap, Fotona,
Syneron, Thermi Aesthetics, Cutera, and others, some of whom have more established products and customer relationships than we have.
Human Capital Resources
As of March 12, 2021, we had 42 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.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees,
advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and
cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their
abilities and achieve our objectives.
21
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 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.
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If the 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 its 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 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, which will be extremely costly and very time-consuming, often taking as long as
several years. 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. The Viveve System is currently 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 SUI, vaginal laxity, to improve sexual function, or for vaginal rejuvenation in
the United States. Therefore, we may not provide information to physicians or patients that promote the Viveve System for SUI, vaginal laxity, to improve sexual function,
or for vaginal rejuvenation. Note, however, that 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. We are also permitted to engage in non-promotional scientific exchange in response to unsolicited questions by physicians about our
products. 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 other products in our pipeline such as clearance or approval to treat SUI, 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.
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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.
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.
Finally, even if our clinical trials receive IDE approval from FDA, this does not guarantee that FDA will find our clinical trial data sufficient to support an application
for FDA clearance or approval. For example, after submitting an application to FDA, the agency may raise questions during the review process regarding the clinical trial
data, including those related to clinical trial design considerations. If FDA has questions regarding the clinical study design or clinical trial results, FDA may issue an
Additional Information (“AI”) request to Viveve as part of the review process. If FDA issues an AI request, FDA’s review clock is stopped until Viveve provides
information responsive to FDA’s requests. An AI request may delay the process for obtaining FDA clearance or approval. Further, if FDA ultimately does not find Viveve’s
clinical trial design or clinical data to be sufficient to support the safety and efficacy of the Viveve System for proposed indication, there is a risk that FDA may not grant
clearance or approval of our application.
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.
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For example, in April 2020, we reported the topline results of our VIVEVE II clinical trial consisting of a multicenter, randomized, double-blinded, sham-controlled
study to evaluate the safety and efficacy of the company's proprietary, CMRF technology for the improvement of sexual function in women following vaginal childbirth. The
data showed that the VIVEVE II study did not meet its primary endpoint of demonstrating a statistically significant improvement in the mean change from baseline in total
Female Sexual Function Index (FSFI) score at 12 months.
We continue to advance our clinical development program in stress urinary incontinence (SUI) and conducted a short-term feasibility study under an Investigational
Testing Application approved by the Canadian Ministry of Health. The feasibility study is a single-blind, three-arm, five-month study to compare Viveve's CMRF treatment
and a cryogen-only sham to an inert sham treatment in order to capture short-term safety and effectiveness data on use of the Viveve System for the improvement of SUI in
women. In August 2020, we reported results from the study in which the primary efficacy endpoint, change from baseline in the standardized 1-hour Pad Weight Test at five
months post treatment, was positively achieved.
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:
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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.
25
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.
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.
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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.
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.
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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.
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.
We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to
delay, limit or terminate our product development efforts or other operations.
Developing our products is expensive, and we expect our research and development expenses to increase substantially in connection with our ongoing activities. 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.
As of December 31, 2020, our cash and cash equivalents were $6.5 million. We expect that our cash and cash equivalents, including the Company’s January 2021
Offering for net proceeds of $25.2 million and the remaining equity financing commitment of $9.7 million from LPC, will be sufficient to fund our current operations
through at least March 31, 2022. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds
sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other
collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to obtain regulatory
approval for, and to commercialize, our product candidates. Raising funds in the current economic environment may present additional challenges. Even if we believe we
have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic
considerations.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize
our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the
terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the
possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders.
The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on
our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact
our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise
would be desirable and we may be required to relinquish rights to some of our technologies or product candidate or otherwise agree to terms unfavorable to us, any of which
may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development
programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which
could materially affect our business, financial condition and results of operations.
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Our historical operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern.
Our financial statements have been prepared assuming that our Company will continue as a going concern. We have incurred net losses and used significant cash in
operating activities since inception. We have an accumulated deficit of approximately $219.8 million, cash and cash equivalents of $6.5 million and working capital of $8.6
million as of December 31, 2020. Additionally, the Company used $15.2 million in cash for operations in the year ended December 31, 2020. These factors raise substantial
doubts about our ability to continue as a going concern and satisfy our estimated liquidity needs 12 months from the issuance of the financial statements.
If we continue to experience operating losses, and we are not able to generate additional liquidity through a capital raise or other cash infusion, we might need to
secure additional sources of funds, which may or may not be available to us. Additionally, a failure to generate additional liquidity could negatively impact our ability to
operate our business.
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 51 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.
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:
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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 general surgical procedures for electrocoagulation and hemostasis, laser
vaginal rejuvenation, or 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.
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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.
Current reported studies of Viveve’s CMRF technology have investigated improvement in vaginal laxity, sexual function and SUI, 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.
Since 2014, we conducted several randomized, blinded and sham-controlled clinical trials 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. In 2019, we reported clinical results for a randomized, double-blind,
sham-controlled study conducted in Canada evaluating patients suffering from mild-to-moderate SUI. Statistical significance was not achieved on the primary endpoint of
mean change from baseline on the one-hour Pad Weight Test at six months post-treatment compared to the control group, nor was statistical significance achieved for the
exploratory endpoints. In April 2020, we reported the topline results of our VIVEVE II clinical trial consisting of a multicenter, randomized, double-blinded, sham-
controlled study to evaluate the safety and efficacy of the company's proprietary, CMRF technology for the improvement of sexual function in women following vaginal
childbirth. The data showed that the VIVEVE II study did not meet its primary endpoint of demonstrating a statistically significant improvement in the mean change from
baseline in total Female Sexual Function Index (FSFI) score at 12 months. In July 2020, the Company received FDA approval of its IDE application to conduct its U.S.
pivotal, multicenter PURSUIT trial for improvement of SUI in women, as well as FDA approval of requested amendments to the IDE protocol in December 2020. PURSUIT
is a randomized, double-blinded, sham-controlled trial with an intended enrollment of approximately 390 subjects at up to 30 study sites in the U.S.
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.
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 for stress urinary incontinence from the FDA to expand our marketing efforts and have engaged with the FDA to help
improve our likelihood of success. However, because the topline results from our VIVEVE II clinical trial did not meet the primary endpoint of demonstrating a statistically
significant improvement in the mean change from baseline in total Female Sexual Function Index (FSFI) at 12 months, we no longer intend to pursue a sexual function or
vaginal laxity label in the U.S. We cannot predict whether we will receive clearance or approval for SUI. The FDA has required us to conduct clinical trials to support
regulatory clearance or approval, which trials are 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 stress urinary incontinence, we will be unable to
promote it in the U.S. for that indication, 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, 2020, we have incurred losses since inception of approximately $219.8 million. In 2020 and 2019, we incurred losses of $21.9 million and $42.5
million, respectively. 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.
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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:
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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 or lease prices for the Viveve System and the single-use treatment tips.
Establishing appropriate pricing for our capital equipment and components has been challenging because there have not existed directly comparable competitive products.
We may experience similar pricing challenges in the future as we enter new markets or introduce new products, which could have an unanticipated negative impact on our
financial performance.
If there is not sufficient patient demand for our treatments, practitioner demand for the Viveve System could drop, resulting in lower revenue and 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.
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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.
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Our success depends on growing physician adoption of the Viveve System and continued use of treatment tips.
Some of our target physician customers already own self-pay device products. Our ability to grow our business and convince physicians to purchase or rent a Viveve
System depends on the success of our sales and marketing efforts. Our business model involves both an equipment rental or 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.
Our revenue may suffer due to our transition of U.S. sales from a capital equipment sales model to a recurring revenue rental model.
In June 2019, U.S. sales of the Viveve System transitioned from a capital equipment sales model to a recurring revenue rental model. The new U.S. commercial sales
model is intended to lower up-front costs for customers and thus lower hurdles to adoption, increase placement rates, and improve profitability by reducing selling time per
unit. The transition has resulted in reduced revenue in 2019 per unit placed, which is projected to be offset by higher unit placements and improved revenue performance in
the long term. While physician adoption rates have increased since this transition, the unit placements in the long term may not be sufficient to offset the reduced revenue per
unit placed.
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 54%, 44% and 27% of our revenue during the year ended December 31, 2020, 2019 and 2018, respectively. International sales
are subject to a number of risks, including:
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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.
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.
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The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm our research and development,
manufacturing and commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of
operations.
Broad-based business or economic disruptions caused by the COVID-19 pandemic could adversely affect our ongoing or planned research and development
activities, our manufacturing operations and our commercialization efforts. COVID-19 originated in Wuhan, China, and has since spread globally. To date, the COVID-19
pandemic has caused significant disruptions to the U.S. and global economies and has contributed to significant volatility and negative pressure in financial markets. The
global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the U.S., have reacted by instituting
quarantines, restrictions on travel and mandatory closures of businesses. Certain states and cities, including where we or the third parties with whom we engage operate, have
also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the
types of projects that may continue. However, these government policies and directives are subject to change and many companies, including ours, maintain a work-from-
home policy for office employees and sales representatives, and have implemented policies for our researchers and manufacturing workers designed to provide for a safe
environment while maintaining progress on important laboratory research and commercial product supply.
The extent to which the COVID-19 pandemic, or the future outbreak of any other highly infectious or contagious diseases, impacts our product development,
manufacturing capabilities, sales and marketing operations, future nonclinical studies and clinical trials and commercialization efforts will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic
or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this
situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic may adversely affect our business,
financial condition and results of operations, and it may have the effect of heightening many of the risks described herein, including the below.
● As announced on March 30, 2020, to help slow the spread of COVID-19, most of our employees have been operating under a work from home policy in
accordance with guidance issued by the Centers for Disease Control and Prevention, or CDC, the World Health Organization, or WHO, and state and local authorities. As
such, our sales representatives are not visiting provider offices, which we believe is a necessary step to help protect patient health and facilitate providers’ attention to direct
patient care during this challenging situation. As a result, our commercial operations have been adversely impacted and will continue to be impacted for the duration that our
sales representatives are unable to continue their normal operations.
● Effective March 30, 2020, our organization, with the exception of a limited number of essential roles, operated under a reduction in hours or, in certain cases,
furlough for approximately six weeks. Although much of the organization has since been brought back to full hours, in the future, it may be necessary to return to work-
from-home arrangements for our employees because of restrictions related to COVID-19 and, as a result, we may again determine to reduce hours or, in certain cases,
furlough employees. In such a case, our employees could find alternative employment and leave the Company, and we cannot assure that our staff, when it returns from any
such reduction in hours, operates at the same level of effectiveness as before the reduction of hours. In addition, adoption of work-from-home requirements could increase
our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business
operations.
● Given the economic downturn and increased unemployment in the U.S. related to COVID-19, millions of individuals have lost or will be losing their employer-
based insurance coverage, which may adversely affect our ability to commercialize our products. In addition, market disruption and rising unemployment caused by the
COVID-19 pandemic may lead to delays in obtaining insurance coverage and reimbursement of products as well as an increase in the numbers of uninsured patients and
patients who may no longer be able to afford their co-insurance or co-pay obligations.
● We are currently evaluating the Viveve System and Viveve treatment in clinical trials. However, the COVID-19 pandemic may have an impact on the timing of
conducting these trials, including initiation, opening of clinical trial sites and enrollment of patients. We are aware that some trial sponsors have encountered challenges in
conducting clinical activities during the ongoing COVID-19 pandemic, including site closures and restrictions on site visits, and we may similarly experience such
challenges in our planned clinical trials.
● We currently rely on third parties to, among other things, manufacture and repair of key elements of the Viveve System. If any such third parties in our supply
chain for materials are adversely impacted by restrictions resulting from the COVID-19 pandemic, including staffing shortages, production slowdowns and disruptions in
delivery systems, our supply chain may be disrupted.
● Health regulatory agencies globally may experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA and comparable foreign
regulatory agencies may have slower response times or be under-resourced to continue to monitor our clinical trials and, as a result, review, inspection, and other timelines
may be materially delayed. For example, in April 2020, the FDA stated that its New Drug Program was continuing to meet program user fee performance goals, but due to
many agency staff working on COVID-19 activities, it was possible that the FDA would not be able to sustain that level of performance indefinitely. It is unknown how long
these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions
could materially affect the development and study of the Viveve System.
● The trading prices for our common stock and other medical device companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may
face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse
market event resulting from the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.
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As a result of the COVID-19 pandemic, our commercial activities, manufacturing operations and clinical development progress, data and timelines, and general
business operations, could be delayed or materially harmed, and our business, prospects, financial condition, and results of operations would suffer as a result.
We may not be entitled to forgiveness of our recently received Paycheck Protection Program, or PPP Loan, and our application for the PPP Loan could in the future be
determined to have been impermissible or could result in damage to our reputation.
In April 2020, we received proceeds of approximately $1.343 million from a loan under the CARES Act PPP, a portion of which may be forgiven, which we intend
to use to retain employees, maintain payroll and make lease and utility payments. In October 2020, the Company was notified that the terms of its PPP Loan have been
modified. The amount of time that the Company has to spend the proceeds of the PPP Loan, or the covered period, has been extended from 8 weeks to 24 weeks. The date to
begin repaying unforgiven portions of the PPP Loan has also been extended from six months after the funding date to up to 10 months after the end of the covered period
(approximately 16 months from the funding date) depending on when the Company applies for forgiveness. The SBA will also cover interest on the forgiveness portion of
the loan during this period. There has been no change to the maturity date of the loan. All PPP Loans must be repaid or forgiven within two years after the funding date. A
portion of the PPP Loan may be forgiven by the Small Business Administration, or SBA, upon our application beginning 60 days but not later than 120 days after loan
approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act and pursuant to the Note Agreement, loan forgiveness is
available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight-week period beginning on the date
of loan approval. Not more than 25% of the forgiven amount may be for non-payroll costs. The amount of the PPP Loan eligible to be forgiven is reduced if our full-time
headcount declines or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. Under the CARES Act, we will be
required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for
loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven by the SBA.
In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to
support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital
and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan was consistent with the broad objectives of the CARES Act PPP.
At the time that we had made such certification, we had missed more than one payroll payment for our employees and entered into the Funding Agreement in order to assist
us with making such payroll payments, and could not predict with any certainty whether we would be able to raise the necessary financing to support continued operations,
including, but not limited to, making such payroll payments. Our situation has subsequently improved, as a result of, among other things, our closing of two registered direct
offerings in June 2020, and as a result of the funds that we received from the PPP Loan. The certification described above that we were required to provide in connection
with our application for the PPP Loan did not contain any objective criteria and was subject to interpretation. However, on April 23, 2020, the SBA issued guidance stating
that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of
clarity regarding loan eligibility under the CARES Act PPP has resulted in significant media coverage and controversy with respect to public companies applying for and
receiving loans. If, despite our good-faith belief that we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or
governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the
PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties, and could be required to repay the PPP Loan in its entirety. In
addition, our receipt of the PPP Loan may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims
under the False Claims Act could consume significant financial and management resources.
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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. Additionally, in response to the COVID-19 crisis, the Company implemented a series
of significant cost-cutting actions in the second quarter of 2020, including the furlough of 31 full-time employees throughout the entire organization, designed to reduce
expenses and reposition resources to support the Company’s current customers and its pivotal clinical development program for our CMRF technology in the treatment of
SUI. These corporate actions included an approximate two-thirds reduction of the direct sales organization. We believe our reorganization in 2019 and the operational
changes implemented in 2020 related to the COVID-19 crisis will help reduce our operating expenses. We do not currently anticipate making any significant changes to our
international distribution network.
Our reorganization and other operational changes 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:
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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, 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 function, 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.
We outsource the manufacturing and repair of key elements of the Viveve System to manufacturing partners.
We outsource the manufacture and repair of our first generation 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. 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. Viveve and Stellartech are working towards
entering into a new Terms and Conditions of Supply and Service Agreement, however our manufacturing operations could be adversely impacted if we are unable to enforce
Stellartech’s performance under any agreement, or enter into a new agreement with Stellartech, or a potential new manufacturer, if necessary, upon favorable terms or at all.
We outsource the manufacture and repair of our second generation Viveve System to a single contract manufacturer, Spartronics. If Spartronics’s operations are
interrupted or if Spartronics 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. Spartronics 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, Spartronics is a medical device manufacturer and is required to demonstrate and maintain compliance with the FDA’s Quality System Regulation, or
QSR. If Spartronics 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. Viveve and Spartronics operate under a manufacturing and supply agreement, however our manufacturing operations could be adversely impacted if we are unable
to enforce Spartronics’s performance under this agreement, or enter into a new agreement with Spartronics, or a potential new manufacturer, if necessary, upon favorable
terms or at all.
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We outsource the manufacture and repair of our single-use treatment tips to Cirtec. If Cirtec’s operations are interrupted or if Cirtect 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. Cirtec has limited manufacturing capacity, is itself dependent upon third-party suppliers and is
dependent on trained technical labor to effectively repair the single-use treatment tips. In addition, Cirtec is a medical device manufacturer and is required to demonstrate
and maintain compliance with the FDA’s Quality System Regulation, or QSR. If Cirtec 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. Viveve and Cirtec operate under long term forecasts and purchase orders, however our single-
use treatment tip manufacturing operations could be adversely impacted if we are unable to enforce Cirtec’s performance or enter into a new agreement with 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 each generation of the Viveve System from Stellartech and Spartronics 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:
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interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;
delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s variation in a component;
a lack of long-term supply arrangements for key components with our suppliers;
inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
difficulty locating and qualifying alternative suppliers for our components in a timely manner;
production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;
delay in delivery due to suppliers prioritizing other customer orders over our orders;
damage to our brand reputation caused by defective components produced by our suppliers;
increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and
fluctuation in delivery by our suppliers due to changes in demand from us or from their other customers.
Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in
a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business.
If, in the future, we decide to perform additional manufacturing functions internally that we currently outsource, our business could be harmed by our limited
manufacturing experience and related capabilities.
In the future, for financial or operational purposes, we may elect to perform component or system manufacturing functions internally. Our limited experience with
manufacturing processes could lead to difficulties in producing sufficient quantities of manufactured items that meet our quality standards and that comply with applicable
regulatory requirements in a timely and cost-effective manner. In addition, if we experience these types of manufacturing difficulties, it may be expensive and time
consuming to engage a new or previous subcontractor or supplier to fulfill our replacement manufacturing needs. The occurrence of any of these events could harm our
business.
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If the Viveve System malfunctions or if we discover a manufacturing defect that could lead to a malfunction, we may have to initiate a product recall or replace
components, which could adversely impact our business.
Problems in our manufacturing processes, or those of our manufacturers or subcontractors, which lead to an actual or possible malfunction in any of the components
of 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.
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. 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. However, 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 and 1234ZE,
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.
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.
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.
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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.
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.
Third parties may also try to sell the Viveve System and its consumable products on a secondary market, which would remove Viveve’s ability to track the products.
If prior to or after being sold on the secondary market, the Viveve System or its consumable products are misused or modified by a third party, Viveve could be subject to
liability. If this happens, we could be subject to reduced sales, product liability claims, inability to obtain sufficient insurance coverage in the future 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, dramatically reducing the risk of a cyberattack. 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.
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 Senior Vice President of Finance and Administration (Principal Accounting and 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.
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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.
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, 2020, we had federal and state net
operating loss carryforwards, or “NOLs”, of approximately $95.4 million and $20.2 million, respectively, due to prior period losses. In general, under Section 382 of the
Internal Revenue Code of 1986, as amended, or 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 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 issued U.S. patent and own 5 issued U.S. patents. Additionally, as of March 12, 2021, we have 8 pending U.S. patent
applications; 75 issued foreign patents, including patents that may have lapsed; and 12 pending foreign patent applications. 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.
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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.
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 12, 2021, our officers, directors and principal stockholders, i.e., stockholders who beneficially own greater than 10% of our outstanding common stock,
collectively beneficially own approximately 1.8% 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.
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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:
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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.
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 SEC.
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, except the cumulative dividend payable on our Series
B Preferred Stock, 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. The terms of our Series B
Preferred Stock also provide that we may not pay dividends on our common stock without concurrently declaring dividends on each. If we do not pay dividends, our stock
may be less valuable because a return on your investment will only occur if you sell our common stock after our stock price appreciates.
41
CRG has the right to acquire a significant percentage of our stock upon conversion of its Series B Preferred Stock and exercise of its warrants and is able to exert
significant control over matters pursuant to the protective provisions therein as well as the covenants and other restrictions in the Loan Agreement.
Affiliates of CRG LP, or collectively CRG, has the right to acquire approximately 46% of our outstanding common stock on a fully-diluted basis, subject to
stockholder approval to authorize a sufficient number of common stock, Nasdaq stockholder approval requirements and beneficial ownership restrictions contained in the
Series B Certificate of Designation and warrants held by CRG. Even though Series B Preferred Stock is non-voting stock, and has beneficial ownership restrictions, the
Series B Certificate of Designation has protective provisions that will require CRG’s consent to perform certain significant company events. For example, CRG's consent
would be necessary to amend our organizational documents, or approve any merger, sale of assets, or other major corporate transaction. This consent requirement could
delay or prevent any acquisition of our company on terms that other stockholders may desire and may adversely affect the market price of our common stock. CRG may
have interests different than yours. For example, CRG may want us to pursue strategies that deviate from the interests of other stockholders.
The Series B Preferred Stock has a liquidation preference to our common stock.
Series B Preferred Stock has a liquidation preference that gets paid prior to any payment on our common stock (including shares issuable upon the exercise of the
warrants). As a result, if we were to dissolve, liquidate, merge with another company or sell our assets, the holders of our Series B Preferred Stock would have the right to
receive up to approximately $35.82 million plus any unpaid dividend from any such transaction before any amount is paid to the holders of our common stock or pursuant to
the redemption rights in the warrants for fundamental transactions. The payment of the liquidation preferences could result in common stockholders and warrant holders not
receiving any consideration if we were to liquidate, dissolve or wind up, either voluntarily or involuntarily.
The existence of the liquidation preferences may reduce the value of our common stock, make it harder for us to sell shares of common stock in offerings in the
future, or prevent or delay a change of control. Furthermore, any conversion of Series B Preferred Stock into common stock will cause substantial dilution to our common
stockholders.
If we fail to comply with ongoing Nasdaq listing standards and corporate governance requirements, we could be subject to delisting. Nasdaq delisting could materially
adversely affect the market for our shares.
Our common stock is currently listed on The Nasdaq Capital Market. In order to maintain this listing, we are required to comply with various continued listing
standards, including corporate governance requirements, set forth in the Nasdaq Listing Rules. These standards and requirements include, among other things, (1) an
obligation to maintain a Board of Directors, a majority of whom are deemed to be independent and that we maintain an Audit Committee consisting of at least three
independent Board Members and (2) an obligation that our listed securities maintain a minimum bid price of $1.00 per share.
On April 21, 2020, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC, or Nasdaq, notifying us that we are not
in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market and granting us
time until December 28, 2020 to regain compliance. On December 1, 2020, we effected a 1-for-10 reverse stock split of our issued and outstanding common stock. The
reverse stock split became effective at 5:00 p.m. Eastern Time on December 1, 2020 and our common stock began trading on a split-adjusted basis on The Nasdaq Capital
Market on December 2, 2020. Following our reverse stock split described above, on December 16, 2020, we were notified by Nasdaq that as of December 15, 2020, it had
maintained a closing bid above $1.00 for a period of 10 consecutive trading days and therefore had regained compliance with the minimum bid price requirement.
On May 4, 2020, Karen Zaderej resigned from our board of directors. Ms. Zaderej was an independent director and a member of the audit committee of the board of
directors, and as a result of her resignation, we no longer complied with Nasdaq’s majority independent board requirements because a majority of the board of directors was
not comprised of independent directors, and Nasdaq's audit committee requirements because our audit committee was not comprised of at least three independent directors.
In accordance with Nasdaq Listing Rules, we notified Nasdaq of Ms. Zaderej's resignation and the resulting non-compliance. On May 6, 2020, we received a notice from
Nasdaq acknowledging the fact that we do not meet the requirements of such rules and granting us time until November 2, 2020 to regain compliance. On October 28, 2020,
our board of directors appointed Sharon Collins Presnell, Ph.D., to serve as a member of the board of directors and its audit committee. On October 29, 2020, the Company
received a letter from Nasdaq noting that, as a result of the appointment of Dr. Presnell to our board of directors and its audit committee, we evidenced compliance with
requirements for continued listing on Nasdaq.
There can be no assurance that we will continue to be in compliance with the minimum bid price requirement, majority director independence requirements, or
comply with Nasdaq’s other continued listing standards in the future.
42
In the event that our common stock is not eligible for continued listing on Nasdaq or another national securities exchange, trading of our common stock could be
conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such
event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by
security analysts and the news media, which could cause the price of our common stock to decline further. Also, it may be difficult for us to raise additional capital if we are
not listed on a major exchange.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
On February 1, 2017, we entered into a Sublease for approximately 12,400 square feet of building space for 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. In March
2021, we amended our lease extending the lease term 34 months. The term of the lease agreement, as amended, will terminate on March 31, 2024. We believe that this
facility is adequate for our current business operations.
The office operating lease expense for the years ended December 31, 2020 and 2019 was $268,000 and $268,000, respectively. Future minimum payments under the
office operating lease are approximately as follows:
Year Ending December 31,
–
–
2021
2022
2023
2024
$241,000
$257,000
$264,000
$ 67,000
Item 3. Legal Proceedings
The Company currently has no pending or open legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
43
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
As of March 12, 2021, our common stock is trading on The Nasdaq Capital Market under the symbol “VIVE”.
Holders of Common Stock
As of March 12, 2021, there were approximately 117 holders of record of our common stock.
Dividends
Our Series B Preferred Stock carries a cumulative dividend at a rate of 12.5% of $1,000 per annum, compounded annually. This cumulative dividend is payable in
arrears on quarterly basis, commencing with December 31, 2020, and at our option is payable in additional shares of Series B Preferred Stock. Additionally, the terms of our
Series A Preferred Stock and Series B Preferred Stock provide that we may not declare dividends on the common stock without concurrently declaring dividends on such
series of preferred stock in an amount equal to that payable had they been converted to common stock prior to the dividend. We have paid $10,288 in cash and issued a total
of 4,519 shares of Series B Preferred Stock as preferred dividend to the holders of Series B Preferred Stock through December 31, 2020.
Other than the preferred dividend on Series B Preferred Stock, 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
In consideration for consulting services rendered to our company, we made the following issuances of securities to Acorn Management Partners LLC, exempt from
registration pursuant to Section 4(a)(2) of the Securities Act: 2,832 shares of common stock issued on March 11, 2020; 3,453 shares of common stock issued on June 01,
2020; and 4,709 shares of common stock issued on September 10, 2020.
Pursuant to the Certificate of Designation of Series B Preferred Stock, we issued 989 shares of Series B Preferred Stock in lieu of $989,000 in cash dividend to
holders of Series B Preferred Stock, exempt from registration pursuant to Section 4(a)(2) of the Securities Act, on March 31, 2020.
Pursuant to the Certificate of Designation of Series B Preferred Stock, we issued 1,084 shares of Series B Preferred Stock in lieu of $1,084,000 in cash dividend to
holders of Series B Preferred Stock, exempt from registration pursuant to Section 4(a)(2) of the Securities Act, on December 31, 2020.
The shares of Series B Preferred Stock and warrants to purchase shares of common stock issued to affiliates of CRG will only be convertible or exercisable into
common stock, as applicable, following such time as we have filed an amendment to the certificate of incorporation that authorizes at least 125,000,000 shares of common
stock. The conversion or exercise of securities issued to affiliates of CRG are also further subject to certain beneficial ownership restrictions and Nasdaq stockholder
approval requirements. If the Series B Preferred Stock becomes convertible into common stock, it will be convertible into that number of shares of common stock
determined by dividing $1,000 by the conversion price of $15.30.
Item 6. Selected Financial Data
Reserved.
44
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 51 countries throughout the world under the following indications for use:
Indication for Use:
General surgical procedures for electrocoagulation and hemostasis
General surgical procedures for electrocoagulation and hemostasis of vaginal tissue and 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 as well as for the treatment of vaginal laxity
For vaginal rejuvenation
For treatment of vaginal laxity and to improve mild urinary incontinence and sexual function
No. of
Countries:
4 (including the U.S.)
30
5
9
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, 2020, we have a global installed base of 857 Viveve
Systems and we have sold approximately 50,100 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.
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 the U.S. Food and Drug Administration (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.
45
Recent Events
2021 Public Offering
On January 19, 2021, the Company closed an upsized underwritten public offering of units (the “January 2021 Offering”) for gross proceeds of approximately
$27,600,000, which included the exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts
and commissions and offering expenses payable by Viveve.
In connection with the closing of the public offering, on January 19, 2021, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of
Series C Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series C Certificate of Designation
provides for the issuance of shares of Series C convertible preferred stock. The shares of Series C convertible preferred stock rank on par with the shares of the common
stock. With certain exceptions, as described in the Series C Certificate of Designation, the shares of Series C convertible preferred stock have no voting rights. Each share of
Series C convertible preferred stock is convertible at any time at the holder’s option into one share of common stock.
The offering comprised of: (1) 4,607,940 Class A Units, priced at a public offering price of $3.40 per Class A Unit, with each unit consisting of one share of common
stock and one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth anniversary of the date of issuance; and
(2) 2,450,880 Class B Units, priced at a public offering price of $3.40 per Class B Unit, with each unit consisting of one share of Series C convertible preferred stock and
one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth anniversary of the date of issuance. The underwriter
exercised an over-allotment option to purchase an additional 1,058,820 shares of common stock and warrants to purchase 1,058,820 shares of common stock in the offering.
The net proceeds to the Company, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, are expected to be
approximately $25,223,000.
A total of 2,450,880 shares of Series C convertible preferred stock were issued in the January 2021 Offering. In January 2021, all Series C convertible preferred stock
were converted into common stock and there are no remaining shares of Series C convertible preferred stock outstanding.
Elimination of Series A Convertible Preferred Stock
On December 16, 2020, the Company filed a Certificate of Elimination (the “Certificate of Elimination”) with the Delaware Secretary of State with respect to
547,345 authorized shares of Series A convertible preferred stock, par value $0.0001 per share. The Series A convertible preferred stock had been designated pursuant to the
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed with the Delaware Secretary of State on November 25, 2019.
As of the date of the filing of the Certificate of Elimination, no shares of Series A convertible preferred stock were outstanding. Upon filing the Certificate of Elimination,
the 547,345 authorized shares of Series A convertible preferred stock were returned to the status of authorized but unissued shares of preferred stock of the Company,
without designation as to series or rights, preferences, privileges or limitations.
Reverse Stock Split
The Company effected a 1-for-10 reverse stock split of its common stock that became effective after market close on December 1, 2020. The reverse stock split
uniformly affected all issued and outstanding shares of the Company’s common stock. The reverse stock split provided that every ten shares of the Company’s issued and
outstanding common stock was automatically combined into one issued and outstanding share of common stock, without any change in par value per share. The number of
authorized shares of common stock remained at 75,000,000 shares.
As a result of the reverse stock split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or
vesting of all then outstanding stock options, deferred restricted stock awards and warrants, which will result in a proportional decrease in the number of shares of the
Company’s common stock reserved for issuance upon exercise or vesting of such stock options, deferred restricted stock awards and warrants, and, in the case of stock
options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under the
Company’s equity compensation plans immediately prior to the effective date will be reduced proportionately.
No fractional shares were issued as a result of the reverse stock split. Stockholders of record who would otherwise have been entitled to receive a fractional share
were rounded up to the nearest whole number.
46
All of the share numbers, share prices, and exercise prices have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split.
Purchase Agreement with Lincoln Park Capital, LLC
On June 8, 2020, the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the
Company has the right to sell to LPC, and LPC has committed to purchase from us, from time to time, up to $10,000,000 of our common stock, subject to certain limitations,
during the 30 months term of the Purchase Agreement.
On June 9, 2020, LPC purchased 52,500 shares of common stock at a price per share of $6.50 (the “Initial Purchase Shares”) under the Purchase Agreement.
Thereafter, under the Purchase Agreement, on any business day selected by us, the Company may direct LPC to purchase up to 25,000 shares (and in certain circumstances
up to 50,000 shares) of our common stock. (See Note 12 – Common Stock.) LPC has no right to require the Company to sell any shares of common stock to LPC, but LPC
is obligated to make purchases as the Company directs, subject to certain conditions. The purchase price per share for each such Regular Purchase will be based off of
prevailing market prices of our common stock immediately preceding the time of sale without any fixed discount.
Other than certain exceptions as described above and the Purchase Agreement, there are no trading volume requirements or restrictions under the Purchase
Agreement, and the Company will control the timing and amount of any sales of our common stock to LPC.
Paycheck Protection Program Loan
The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by
the U.S. Small Business Administration. On April 24, 2020, Viveve, Inc. (“Viveve”), a wholly-owned subsidiary of the Company, entered into a promissory note evidencing
an unsecured loan in the aggregate amount of approximately $1,343,000 made to Viveve under the PPP (the “PPP Loan”). The PPP Loan to Viveve is being made through
Western Alliance Bank. The interest rate on the PPP Loan is 1.00% and the term is two years. Beginning seven months from the date of the PPP Loan, Viveve is required to
make monthly payments of principal and interest. The promissory note evidencing the PPP Loan contains customary events of default relating to, among other things,
payment defaults or breaching the terms of the PPP Loan documents. The occurrence of an event of default may result in the repayment of all amounts outstanding,
collection of all amounts owing from Viveve, or filing suit and obtaining judgment against Viveve. Under the terms of the CARES Act, PPP Loan recipients can apply for
and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan
proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. No assurance is provided that Viveve will obtain forgiveness of the PPP
Loan in whole or in part.
In October 2020, the Company was notified that the terms of its PPP Loan with Western Alliance Bank have been modified. The amount of time that the Company
has to spend the proceeds of the PPP Loan (the “covered period”) has been extended from 8 weeks to 24 weeks. The date to begin repaying unforgiven portions of the PPP
Loan has also been extended from six months after the funding date to up to 10 months after the end of the covered period (approximately 16 months) depending on when
the Company applies for forgiveness. The SBA will also cover interest on the forgiveness portion of the loan during this period. There has been no change to the maturity
date of the loan. All PPP Loans much be repaid or forgiven within two years after the funding date. We submitted our PPP Loan forgiveness application to the SBA in
October 2020. However, no assurance can be given that the PPP Loan will be forgiven.
Nasdaq Delisting Notice and Compliance Determination
On April 21, 2020, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC, or Nasdaq, notifying us that we are not
in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market and granting us
time until December 28, 2020 to regain compliance. On December 1, 2020, we effected a 1-for-10 reverse stock split of our issued and outstanding common stock. The
reverse stock split became effective at 5:00 p.m. Eastern Time on December 1, 2020 and our common stock began trading on a split-adjusted basis on The Nasdaq Capital
Market on December 2, 2020. Following our reverse stock split described above, on December 16, 2020, we were notified by Nasdaq that as of December 15, 2020, it had
maintained a closing bid above $1.00 for a period of 10 consecutive trading days and therefore had regained compliance with the minimum bid price requirement.
On May 4, 2020, Karen Zaderej resigned from our board of directors. Ms. Zaderej was an independent director and a member of the audit committee of the board of
directors, and as a result of her resignation, we no longer complied with Nasdaq’s majority independent board requirements because a majority of the board of directors was
not comprised of independent directors, and Nasdaq’s audit committee requirements because our audit committee was not comprised of at least three independent directors.
In accordance with Nasdaq Listing Rules, we notified Nasdaq of Ms. Zaderej's resignation and the resulting non-compliance. On May 6, 2020, we received a notice from
Nasdaq acknowledging the fact that we do not meet the requirements of such rules and granting us time until November 2, 2020 to regain compliance. On October 28, 2020,
our board of directors appointed Sharon Collins Presnell, Ph.D., to serve as a member of the board of directors and its audit committee. On October 29, 2020, the Company
received a letter from Nasdaq noting that, as a result of the appointment of Dr. Presnell to our board of directors and its audit committee, we evidenced compliance with
requirements for continued listing on Nasdaq.
47
2020 Warrant Offering
On April 15, 2020, the Company reduced the exercise price of the outstanding Series A warrants and Series B warrants from $15.50 per share to $6.10 per share. On
April 16, 2020, the Company entered into inducement letter agreements with certain institutional and accredited holders of Series A warrants and Series B warrants pursuant
to which such holders agreed to exercise Series A warrants to purchase 482,059 shares of common stock and Series B warrants to purchase 24,279 shares of common stock
for aggregate exercise proceeds to the Company of approximately $3,089,000. In conjunction, the Company also agreed to issue new Series A-2 warrants to purchase up to
482,059 shares of common stock as an inducement for the exercise of Series A warrants, and new Series B-2 warrants to purchase up to 24,279 shares of common stock as
an inducement for the exercise of Series B warrants, in each case at an exercise price of $6.371 per share and for a term of five years. The transaction closed on April 20,
2020. Transaction costs in connection with the 2020 Warrant Offering totaled approximately $334,000. As of December 31, 2020, there were Series A-2 warrants to
purchase a total of 392,830 shares of common stock and Series B-2 warrants to purchase a total of 20,380 shares of common stock still remaining and outstanding.
510(k) Clearance from the U.S. Food and Drug Administration
On November 18, 2020, we received clearance from the U.S. Food and Drug Administration, or FDA, under Section 510(k), to expand manufacturing capacity for
consumable treatment tips used with our CMRF technology. The expansion of our manufacturing capabilities offers a significant reduction in tip manufacturing costs,
strengthens our supply chain, reduces manufacturing risk, and positions us to support increases in treatment tip demand and utilization.
Clinical Advisory Board in Urinary Incontinence
In October 2020, the Company announced that it had formed a Clinical Advisory Board of six preeminent medical specialists in the field of urinary incontinence.
Comprised of renowned researchers and clinicians in urology and urogynecology subspecialties, the group will advise the Company as it advances its stress urinary
incontinence clinical develop program and the pivotal U.S. PURSUIT trial.
Issuance of SUI Methods Patent in the U.S.
In September 2020, the Company announced that the United States Patent and Trademark Office (USPTO) had issued U.S. Patent No. 10,779,874 covering Viveve’s
unique method of treatment to address SUI in women. The newly granted, first SUI specific patent for Viveve, strengthens the Company’s already robust intellectual property
portfolio as it advances the U.S. pivotal PURSUIT clinical trial for SUI in women.
PURSUIT – U.S. Pivotal SUI Trial
The Company received FDA approval of its investigational device exemption (IDE) application to conduct its U.S. pivotal, multicenter PURSUIT trial for
improvement of Stress Urinary Incontinence (SUI) in women in July 2020, as well as FDA approval of requested amendments to the IDE protocol in December 2020.
Initiation of the PURSUIT trial was announced by the Company on January 21, 2021 and subject enrollment is underway.
PURSUIT is a randomized, double-blinded, sham-controlled trial with an intended enrollment of approximately 390 subjects with moderate SUI (≥ 10ml – 50ml
urine leakage on the 1-hour Pad Weight Test) at up to 30 study sites in the U.S. Randomized in a 2:1 ratio for active and sham treatments, subjects in the active treatment arm
(260 subjects) will receive CMRF treatment (90J/cm2 RF and cryogen-cooling), while subjects in the control arm (130 subjects) will receive an inert sham treatment.
The primary efficacy endpoint of the PURSUIT trial is a comparison of the proportion of patients who experience greater than 50% reduction in urine leakage
compared to baseline on the standardized 1-hour Pad Weight Test at 12 months post-treatment versus the new sham procedure. The study also includes several secondary
endpoints, including: proportion of patients who experience greater than 50% reduction in urine leakage on the standardized 1-hour Pad Weight Test at three and six months
post-treatment, percentage change from baseline in the 1-hour Pad Weight Test at three, six and 12 months, percent of subjects with no incontinence episodes at three, six
and 12 months post treatment as assessed with the three-day bladder voiding diary, and change from baseline in the MESA Questionnaire (Medical, Epidemiologic and
Social Aspects of Aging), Incontinence Quality of Life (I-QOL), Patient Global Impression of Improvement (PGI-1) Questionnaire, and International Consultation on
Incontinence Modular Questionnaire-Urinary Incontinence Short Form (ICIQ-UI-SF). Subject safety will be monitored throughout the study.
48
Three-Arm SUI Feasibility Study
In December 2019, the Company received approval of an Investigational Testing Application (ITA) from the Canadian Ministry of Health and in January 2020
initiated a three-arm, three-month feasibility study to compare Viveve’s CMRF treatment and a cryogen-only sham to an inert sham treatment for the improvement of SUI in
women. Completion of subject enrollment in the study was reported in March 2020. Study subjects were randomized in a 1:1:1 ratio to the three arms and were assessed
using the 1-hour Pad Weight Test, 3-day Voiding Diary, the 24-hour Pad Weight Test and I-QOL at five months post treatment. Due to patient, provider and medical
facility health and safety concerns caused by the COVID-19 pandemic, the final subject follow-up visit was changed to 5 months versus 3 months.
Final results were reported in August 2020, indicating the primary efficacy endpoint (i.e., change from baseline in the standardized 1-hour Pad Weight Test at five
months post treatment) was positively achieved. The median change from baseline in the active CMRF treatment group (N=13) and the cryogen-only sham treatment group
(N=12) was -9.5 grams and -6.8 grams respectively, as compared to -4.4 grams in the inert sham treatment group (N=11). The study also assessed several secondary
endpoints but showed no differentiation between groups. No device-related safety issues were reported. The meaningful separation demonstrated between the CMRF
treatment arm and the inert sham arm in the feasibility study is believed to help provide confidence in the potential to achieve positive separation between the two treatment
arms in the underway U.S. pivotal PURSUIT trial.
In-vivo Preclinical Study and Results for New Sham Treatment Tip
In response to the inconclusive results reported in July 2019 from the Company’s LIBERATE-International SUI trial conducted in Canada (aimed at supporting SUI
indications in Canada, the European Union and several other international countries), Viveve conducted an in-vivo preclinical temperature and immunohistochemistry study
to evaluate a new inert sham treatment tip. The Good Laboratory Practices study was initiated in June of this year following several months of engineering, validation, and
development work. The study assessed both in-vivo tissue temperature changes during treatment, and histopathology at 30 days post-treatment compared to baseline, in three
parous ewes using Viveve’s CMRF treatment tip (Active), cryogen-cooling only tip (“Old” sham treatment used in previous LIBERATE-International SUI study), and a new
inert sham treatment tip. Histopathology of vaginal biopsies were performed and included use of α-smooth muscle actin, or α-SMA, staining for fibroblast activation and
formation. All tissue samples were evaluated by an independent and blinded pathologist.
The positive preclinical findings demonstrated, as reported in August 2020, that both temperature and immunohistochemistry results support the validity of the new
inert sham tip to provide a true inert or placebo treatment. Only minor tissue temperature change (less than 2 degrees centigrade) was generated by the new inert sham tip
and no fibroblast activation was shown through elevated a-SMA staining. In contrast, both the Active and cryogen-cooling sham tips demonstrated meaningful tissue
temperature changes during treatment and increased fibroblast activation 30 days post-treatment. We believe that the positive in-vivo preclinical study validates our new inert
sham tip for use in the U.S. pivotal PURSUIT trial.
VIVEVE II - U.S. Sexual Function Trial
In 2020, we completed the VIVEVE II (VIveve treatment of the Vaginal Introitus to EValuate Effectiveness) clinical study, which was a multicenter, randomized,
double-blinded, sham-controlled study to evaluate the safety and efficacy of the company’s cryogen-cooled monopolar radiofrequency (CMRF) technology for the
improvement of sexual function in women following vaginal childbirth. Topline results indicated that the study did not meet its primary endpoint of demonstrating a
statistically significant improvement in the mean change from baseline in the total Female Sexual Function Index (FSFI) at 12 months. Although there was substantial
improvement in the total FSFI score from baseline to the final 12-month follow-up in the active group indicating a significant treatment effect, there was not sufficient
separation from the sham treatment group to achieve statistical significance.
The study included 220 subjects that successfully completed 12-month follow-up. Subjects were randomized in a 1:1 ratio for the active (N=114) and the sham
(N=106) treatments at 17 clinical sites in the United States. Adjusted mean change in the total FSFI score at 12 months for the active group was 9.8 and the adjusted mean
change for the sham group was 9.0, a difference of 0.8 (p=0.3942). There were no serious device-related adverse events reported. The treatment groups were well balanced,
and the number of subjects lost to follow-up was as expected.
The Company has completed its final study report in December 2020, and due to the trial’s outcome, we do not currently intend to pursue a sexual function or vaginal
laxity label in the U.S. at this time.
Issuance of South Korean Patent
The Company announced in February 2021 that the Korean Intellectual Property Office (KIPO) recently issued Korean Patent No. 10-2197234 titled, Vaginal
Remodeling Device and Method. The awarded patent further expands and strengthens Viveve's intellectual property portfolio in one of Asia's largest commercial markets.
49
U.S. Commercial Sales Transition to Recurring Revenue Rental Model
In June 2019, U.S. sales of the Viveve System transitioned from a capital equipment sales model to a recurring revenue rental model. The new U.S. commercial sales
model is intended to lower up-front costs for customers and thus lower hurdles to adoption, increase placement rates, and improve profitability by significantly reducing
selling time per unit. The new commercial sales model successfully increased physician adoption rates in the months following its implementation and continued to gain
traction in the U.S. market well into the first quarter of 2020. In December 2019, Viveve Systems placed with new customers represented higher monthly productivity rates
and lower costs per system placed per sales representative. Sale of Viveve products outside of the U.S. continue to be supported by the Company’s current distributors
without significant change to the international business model. Late in the first quarter of 2020, the negative impact of the COVID-19 pandemic on medical facilities and
practitioners was in full effect in the United States. Federal, regional, and local government and public health agencies issued directives halting performance of non-essential
medical treatments and elective procedures in an effort to combat the spread of the coronavirus and protect public health and safety. As a result, an estimated 70-80% of
Viveve’s U.S. customers either temporarily closed their medical practices or dramatically reduced services and staff. The consequence has been both a public health and
economic crisis that is continuing for existing and prospective Viveve customers. In a supportive partnership response, Viveve contacted all of its subscription customers
and provided them with a three-month deferral of the rental payment. Although clinics in various regions have re-opened and provide limited services, we anticipate that
until the COVID-19 pandemic abates, more practices re-open and elective patient’s safety concerns are reduced that we will continue to experience reduced revenue from
existing subscription customers, as well as a greatly reduced number of new and prospective customers.
Under the recurring revenue rental model, customers may lease the Viveve System for a set initial term. After the initial term, the customer may purchase the Viveve
System, continue to pay a monthly rental amount or terminate the contract.
The rental program is accounted for under the Financial Standards Board’s (‘FASB”) Accounting Standards Codification (“ASC”) No. 2016-02, Leases (Topic 842)
and meets the classification criteria for an operating lease. Revenue from the rental program is included in total revenue. For the year ended December 31, 2020 and 2019,
rental revenue recognized during the period was $1,337,000 and $530,000, respectively. The Viveve Systems that are being leased are included in property and equipment,
net and depreciated over their expected useful lives of five years. When other products (“non-lease components”), such as single-use treatment tips or ancillary consumables,
are included in the offering, the Company follows the relevant guidance in ASC Topic 606, Revenue from Contracts with Customers, to determine how to allocate
contractual consideration between the lease and non-lease components.
Impact of the Novel Coronavirus
As of the filing of this Annual Report on Form 10-K, the United States and many other countries continue to face outbreaks or resurgences of the novel highly
transmissible pathogenic coronavirus and its variants, which has resulted in an increasingly widespread global health crisis, adversely affected general commercial activity
and the economies and financial markets of many countries, and is likely to continue to adversely affect our business, financial condition and results of operations. The
extent to which the novel coronavirus impacts us will depend on future developments, which are highly uncertain and cannot be accurately predicted, including new
information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
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 June 2019, we transitioned from a capital equipment sales model to a recurring revenue rental model in the U.S. market. The new U.S. commercial sales model is
intended to lower up-front costs for customers and thus lower hurdles to adoption, increase placement rates, and improve profitability by significantly reducing selling time
per unit. Sale of Viveve products outside of the U.S. will continue to be supported by our international distributors.
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 and the Company’s January 2021 Offering for net proceeds of approximately $25,223,000 as well as the committed equity financing commitment of $9,700,000 from
LPC will be sufficient to fund our activities for at least the next 12 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 $1,000,000 annually.
50
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, 2020 and 2019
Revenue
Revenue
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
$
5,479 $
6,567 $
(1,088)
(17)%
We recorded revenue of $5,479,000 for the year ended December 31, 2020, compared to revenue of $6,567,000 for the year ended December 31, 2019 a decrease of
$1,088,000, or approximately 17%. The decrease in revenue was primarily due to lower sales volume of Viveve Systems sold as the Company transitioned its U.S.
commercial sales model to a recurring revenue rental model versus selling systems under a capital equipment sales model as well as the negative impact of the COVID-19
crisis on our sales activity in the period. Revenue for the year ended December 31, 2020 included sales of 31 Viveve Systems and approximately 8,900 disposable treatment
tips sold globally. Revenue for the year ended December 31, 2019 included sales of 55 Viveve Systems and approximately 7,850 disposable treatment tips sold globally.
Under the subscription offering program, we placed 29 Viveve Systems in the U.S. market in 2020; however, these new placements were offset by the negative
impact of the COVID-19 crisis on our sales activity in the period which resulted in the non-renewal of subscriptions for 42 Viveve Systems during the period. Under the
subscription offering program, which was launched in June 2019, we placed 84 Viveve Systems in the U.S. market in 2019 while these new subscriptions were offset by the
non-renewal of subscriptions for only two Viveve Systems during the period. Rental revenue on these leases is recognized on a straight-line basis over the term of the lease.
For the years ended December 31, 2020 and 2019, rental revenue recognized during the period was $1,337,000 and $530,000, respectively. As of December 31, 2020 and
2019, the Company had deferred revenue in the amount of $345,000 and $662,000 related to its rental program.
Additionally, late in the first quarter of 2020 and through the end of the year 2020, the negative impact of the COVID-19 pandemic was in full effect in the United
States and most other countries. Government and public health agencies issued directives halting performance of non-essential medical treatments and elective procedures in
an effort to combat the spread of the coronavirus and protect public health and safety. As a result, Viveve’s customers either temporarily closed their medical practices or
dramatically reduced services and staff. The consequence has been both a public health and economic crisis that continues for existing and prospective Viveve customers. In
a supportive partnership response, Viveve contacted all of its subscription customers and provided them with a three-month deferral of the rental payment. Although clinics
in various regions are beginning to re-open and provide limited services, we anticipate that until the COVID-19 pandemic abates, more practices begin to re-open and
elective patient’s safety concerns are reduced that we will continue to experience reduced revenue from existing subscription customers, as well as a greatly reduced number
of new and prospective customers.
51
Gross Profit
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Gross profit
$
296 $
1,016 $
(720)
(71)%
Gross profit was $296,000, or 5% of revenue, for the year ended December 31, 2020 compared to gross profit of $1,016,000, or 15% of revenue, for the year ended
December 31, 2019, a decrease of $720,000, or approximately 71%. The decrease in gross profit was primarily due to the lower sales volume of Viveve Systems sold as the
Company transitioned its U.S. business model to a recurring revenue rental model versus selling systems under a capital equipment sales model that was launched in June of
2019 as well as the negative impact of the COVID-19 crisis on our sales activity in the period. Additionally, fixed manufacturing costs in the year ended December 31, 2020
were spread over a lower sales volume thus lowering gross margins.
Research and development expenses
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Research and development
$
5,125 $
8,590 $
(3,465)
(40)%
Research and development expenses totaled $5,125,000 for the year ended December 31, 2020, compared to research and development expenses of $8,590,000 for
the year ended December 31, 2019, a decrease of $3,465,000, or approximately 40%. Spending on research and development decreased primarily due to reduced engineering
and development work related to our products as a result of our overall strategic organizational realignment in 2019 and current economic conditions associated with
COVID-19. Research and development expenses during 2020 also included lower clinical study costs primarily due to the completion and readout of our LIBERATE-
International SUI clinical trial in July 2019 and VIVEVE II – U.S. Sexual Function Trial in April 2020.
Additionally, in response to the COVID-19 crisis, the Company implemented a series of significant cost-cutting actions, including the furlough of 31 full-time
employees throughout the entire organization, designed to reduce expenses and reposition resources to support the Company’s current customers and its pivotal clinical
development program for our CMRF technology in the treatment of SUI.
Selling, general and administrative expenses
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Selling, general and administrative
$
13,666 $
22,363 $
(8,697)
(39)%
Selling, general and administrative expenses totaled $13,666,000 for the year ended December 31, 2020, compared to $22,363,000 for the year ended December 31,
2019, a decrease of $8,697,000, or approximately 39%. The decrease in selling, general and administrative expenses was primarily due to reduced spending as a result of our
overall strategic organizational realignment in 2019 and current economic conditions related to COVID-19.
Additionally, in response to the COVID-19 crisis, the Company implemented a series of significant cost-cutting actions, including the furlough of 31 full-time
employees throughout the entire organization, designed to reduce expenses and reposition resources to support the Company’s current customers and its pivotal clinical
development program for our CMRF technology in the treatment of SUI. These corporate actions included an approximate two-thirds reduction of the direct sales
organization and remain in effect as a reduction in sales force due to the continuing health, market and economic challenges caused by the COVID-19 crisis.
52
Restructuring costs
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Restructuring costs
$
- $
742 $
(742)
NM
In January 2019, the Company implemented the Strategic Organizational Realignment to reduce operating expenses. The restructuring included a reduction in
headcount of approximately 40 full-time employees. The total restructuring costs recorded in 2019 were approximately $742,000.
Loss on debt restructuring
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Loss on debt restructuring
$
- $
6,705 $
(6,705)
NM
In connection with the November 2019 Offering, the Company’s secured lender, CRG, converted approximately $31.3 million of debt obligations into the newly
authorized Series B convertible preferred stock and warrants to purchase common stock, which had a fair value in excess of the debt exchanged. As a result, the Company
recorded a loss on debt restructuring of approximately $6,705,000 on the CRG debt conversion.
Modification of Series A and B Warrants
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Modification of Series A and B warrants
$
1,838 $
- $
1,838
NM
In April 2020, the Company reduced the exercise price of the outstanding Series A warrants and Series B warrants from $15.50 per share to $6.10 per share (as
adjusted for the 1-for-10 reverse stock split on December 1, 2020). The Series A and B warrant exercise price adjustment to $6.10 per share from $15.50 per share resulted
in the recognition of a modification expense of $1,838,000.
Interest expense
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Interest expense, net
$
910 $
4,354 $
(3,444)
(79)%
During the year ended December 31, 2020, we had interest expense, net, of $910,000 compared to $4,354,000, for the year ended December 31, 2019, a decrease of
$3,444,000. The decrease in interest expense was primarily due to CRG’s conversion of approximately $28,981,000 in outstanding principal into Series B convertible
preferred stock in connection with our November 2019 Offering.
Other expense, net
Other expense, net
$
289 $
161 $
128
80%
53
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
During the year ended December 31, 2020, we had other expense, net, of $289,000 as compared to $161,000 for the year ended December 31, 2019.
Loss from minority interest in limited liability company
Year Ended
December 31,
Change
2020
2019
$
%
(in thousands, except percentages)
Loss from minority interest in limited liability company
$
383 $
627 $
(244)
(39)%
The Company uses the equity method to account for its investment in InControl Medical, LLC (“ICM”). For the years ended December 31, 2020 and 2019, the
allocated net loss from ICM’s operations was $383,000 and $627,000, respectively.
Liquidity and Capital Resources
Comparison of the Year Ended December 31, 2020 and 2019
At December 31, 2020, we had accumulated deficit of $219,826,000, $6,523,000 in cash and cash equivalents and working capital of $8,628,000. The Company's
financing activities provided cash of $9,230,000 during the year ended December 31, 2020, which was primarily due to the exercise of common warrants. However, we used
$15,234,000 in cash for operations during the year ended December 31, 2020. As of the date our financial statements for the year ended December 31, 2020 are issued, we
did not have sufficient cash to fund our operation through March 31, 2022, 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. However, due to the Company’s January 2021 Offering for net
proceeds of approximately $25,223,000 and the remaining equity financing commitment of $9,700,000 from LPC, management believes that this substantial doubt has been
alleviated as of the date of this filing.
Management currently believes that it will be necessary for us to raise additional funding. We may obtain additional funding in the future through the issuance of our
common stock, or through other equity or debt financing. The failure to raise additional funding 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.
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 decrease in cash and cash equivalents
Operating Activities
Year Ended
December 31,
2020
2019
$
$
(15,234) $
(781)
9,230
(6,785) $
(31,236)
(1,087)
16,108
(16,215)
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 $15,234,000 of cash for the year ended December 31, 2020 compared to $31,236,000 used for the year ended December 31, 2019. 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, 2020 consisted of a net loss of $21,915,000 adjusted for noncash expenses including provision for doubtful accounts and the write-off of
accounts receivable of $454,000, depreciation and amortization of $1,295,000, stock-based compensation of $2,651,000, non-cash interest expense of $535,000, amortization
of operating lease right-of-use assets and accretion of operating lease liabilities of $2,000, a loss from minority interest in limited liability company of $383,000, a loss on
disposal of property and equipment of $20,000, a noncash charge for the modification of Series A and B warrants of $1,838,000, and cash outflows from changes in
operating assets and liabilities of $1,233,000. The change in operating assets and liabilities was primarily due to an increase in accounts receivable of $349,000, a decrease
in inventory of $1,360,000, a decrease in prepaid expenses and other current assets of $151,000, a decrease in other noncurrent assets of $461,000, a decrease in accounts
payable $727,000, a decrease in accrued and other liabilities of $2,422,000, and an increase of other noncurrent liabilities of $331,000.
54
Net cash used during the year ended December 31, 2019 consisted of a net loss of $42,526,000 adjusted for non-cash expenses including provision for doubtful
accounts and the write-off of distributor accounts receivable of $1,028,000, depreciation and amortization of $1,177,000, stock-based compensation of $2,400,000, non-cash
interest expense of $1,577,000, loss on debt restructuring of $6,705,000, loss from minority interest in limited liability company of $627,000, loss on disposal of property
and equipment of $108,000, and cash outflows from changes in operating assets and liabilities of $2,337,000.
Investing Activities
Net cash used in investing activities during the years ended December 31, 2020 and 2019 was $781,000 and $1,087,000, respectively. Net cash used in investing
activities during 2020 and 2019 was used for the purchase of property and equipment. The purchase of property and equipment primarily consisted of rental equipment in
connection with the new subscription offering program, which was launched in June 2019. 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, 2020 was $9,230,000, which was the result of net proceeds of $8,407,000 from exercises of
common warrants, proceeds of $1,343,000 from the PPP Loan and proceeds of $341,000 from the initial purchase of common shares under the Purchase agreement from
LPC, partially offset by transaction costs of $334,000 in connection with the 2020 Warrant Offering, transaction costs of $494,000 in connection with the Purchase
Agreement with LPC, and additional transaction costs of $33,000 in connection with our November 2019 Offering.
Net cash provided by financing activities during year ended December 31, 2019 was $16,108,000, which was the result of gross proceeds of $11,500,000 from our
November 2019 Offering (partially offset by transaction costs of $1,548,000), gross proceeds of $6,760,000 from our August 2019 ATM Facility (partially offset by
transaction costs of $438,000), and proceeds from shares purchased under the Company’s employee stock purchase plan of $56,000, partially offset by transaction costs of
$216,000 in connection with our note payable.
Contractual Payment Obligations
We have obligations under a non-cancelable operating lease and a bank term loan. As of December 31, 2020, our contractual obligations are as follows (in
thousands):
Contractual Obligations (including interest):
CRG note payable
Paycheck Protection Program loan
Non-cancellable operating lease obligations
Total
Total
Less than
1 Year
1 - 3 Year
3 -5 Years
More than
5 Years
$
$
5,992 $
1,364
137
7,493 $
- $
938
137
1,075 $
5,992 $
426
-
6,418 $
- $
-
-
- $
-
-
-
-
In February 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 “Sublease Premises”). 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 2021.
In March 2021, the Company amended the sublease for its office building space. The lease term was extended for a period of 34 months and will terminate on March
31, 2024. The monthly gross rent for the first, second and third years of the lease extension is $21,028, $21,643 and $22,258 per month, respectively. The Company was
also provided a rent abatement for the month of June 2021. Additionally, the sublandlord has agreed to perform certain construction, repair, maintenance or other tenant
improvements to the Subleased Premises with estimated costs of approximately $19,000.
In May 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. In December 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. In November 2019,
the Company and CRG amended the 2017 Loan Agreement concurrent with the conversion of approximately $29,000,000 of the principal amount under the term loan with
CRG (plus accrued interest, the prepayment premium and the back-end fee applicable thereto), for an aggregate amount of converted debt obligations of approximately
$31,300,000. The amounts converted into 31,300 shares of the newly authorized Series B convertible preferred stock and warrants to purchase up to 989,378 shares of
common stock were also issued. The outstanding principal balance under the 2017 Loan Agreement is $4,527,000 as of December 31, 2020.
55
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,
2020 and 2019 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 recurring revenue rental model, the Company utilizes Viveve Systems transferred from finished goods inventory. The Company is
amortizing these units over an estimated useful life of five years. The amortization of these Viveve Systems is charged to cost of sales and these units are included in the
property and equipment, net balance on the consolidated balance sheets as of December 31, 2020 and 2019.
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, 2020 and 2019.
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 from Contracts with Customers
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.
Rental revenue is generated through the lease of the Viveve System. The Company’s operating leases for the Viveve System have a rental period of six to nine
months and can be extended or terminated by the customer after that time or the Viveve System can be purchased by the customer. Rental revenue on those operating leases
is recognized on a straight-line basis over the terms of the underlying leases. The Company began this rental program in the quarter ended June 30, 2019. The Company
began this rental program in the quarter ended June 30, 2019. For the years ended December 31, 2020 and 2019, rental revenue recognized was $1,337,000 and $530,000.
As of December 31, 2020 and 2019, the Company had deferred revenue in the amount of $345,000 and $662,000 related to its rental program.
56
In connection with the lease of the Viveve System, the Company offers single-use treatment tips and ancillary consumables that are considered non-lease
components. In the contracts with lease and non-lease components, the Company follows the relevant guidance in ASC 606, Revenue from Contracts with Customers, to
determine how to allocate contractual consideration between the lease and non-lease components.
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 collectability 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, 2020, and 2019, the allowance for doubtful accounts was $124,000 and $407,000, 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, 2020, and 2019, 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.
57
Accounting for Stock-Based Compensation
Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee’s service period. The
Company recognizes compensation expense on a straight-line basis over the requisite service period of the award.
We determined that the Black-Scholes option pricing model is the most appropriate method for determining the estimated fair value for stock options 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 in the same manner as similar instruments issued to employees.
Recent Accounting Pronouncements
The Company adopted FASB’s ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. The modified retrospective
approach provides a method for recording existing leases at the beginning of the period of adoption. In addition, the Company elected the package of practical expedients
permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and we elected the
hindsight practical expedient to determine the lease term for existing leases. We determined that the renewal options for the facilities lease would be reasonably certain to be
renewed and as such, included that renewal period in determining the expected lease term of that lease. Adoption of the new standard resulted in the recording of operating
lease right-of-use assets of $629,000 and operating lease liabilities of $629,000, as of January 1, 2019. The standard did not have an impact on our consolidated results of
operations, cash flows or stockholders’ equity previously reported. The comparative information has not been restated and continues to be reported under the accounting
standards in effect for those periods.
In November 2019, the FASB issued ASU 2019-08, “Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The amendments in
this Update require measurement and classification of share-based payment awards granted to a customer by applying the guidance in Topic 718. This guidance is effective
for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. We adopted this
guidance as of January 1, 2020 and the adoption of the guidance did not have a significant impact on the consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740). The amendments in this Update provide further simplification of accounting
standards for the accounting for income taxes. Certain exceptions for are removed and requirements regarding the accounting for franchise taxes, tax basis of goodwill, and
tax law rate changes are made. This guidance is effective for annual reporting periods beginning after December 15, 2020, including interim periods within that reporting
period, with early adoption permitted. We will adopt this guidance as of January 1, 2021 and the adoption of the guidance is not expected to have a significant impact on the
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.
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.
58
Item 8. Financial Statements and Supplementary Data
See pages beginning with page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
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 accounting and financial 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 (principal executive officer) and
our Senior Vice President of Finance and Administration (principal accounting and financial officer), of the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2020, 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, 2020, our Chief Executive Officer (principal executive officer) and our Senior Vice President of Finance and Administration (principal
accounting and 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 accounting and 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, 2020. 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 Senior Vice President of
Finance and Administration (principal accounting and financial officer), has concluded that, as of December 31, 2020, our internal control over financial reporting was
effective based on those criteria.
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.
Item 9B. Other Information
On March 15, 2021, the Company entered into an amendment (the “Amendment”) to the Sublease Agreement, dated as of January 26, 2017, with Ingredion
Incorporated, a Delaware corporation, with respect to approximately 12,303 rentable square feet with a common address of 345 Inverness Drive South, Building B, Suite
250, Englewood, Colorado 80112. Pursuant to the Amendment, the term of the office lease will be extended for an additional 34-month term expiring on March 31, 2024.
The monthly base rent will be approximately $21,028 for the first 12 months of the extended lease term, subject to periodic increases thereafter.
The foregoing description of the Amendment is not complete and is qualified in its entirety by reference to the Amendment, which is filed as an exhibit to this Annual
Report on Form 10-K.
59
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Set forth below is certain information regarding our current executive officers and directors. Each of the directors was elected to serve until our next annual meeting
of stockholders or until his or her successor is elected and qualified. Our officers are appointed by, and serve at the pleasure of, the board of directors.
Name
Scott Durbin
Steven Basta
Debora Jorn
Arlene Morris
Karen Zaderej
Sharon Presnell
Jim Robbins
Sean Shapiro
Age
52
55
62
69
59
52
57
45
Position
Director and Chief Executive Officer
Chairman of the Board
Director
Director
Director
Director
Senior Vice President of Finance and Administration
Vice President of U.S. Sales
Biographical information with respect to our executive officers and directors is provided below. There are no family relationships between any of our executive
officers and directors.
Scott Durbin. Scott joined Viveve in early 2013 and became Chief Executive Officer and Director in May 2018. He previously served as the company’s Chief
Financial Officer and has been instrumental in the company’s growth. He is committed to leading the company and the clinical and commercial development of its
innovative CMRF technology to solidify its position as a global leader in women’s intimate health. Scott’s 25-year career in the life sciences industry covers corporate
finance, strategy, clinical, and operational experience. Prior to joining Viveve, he was Chief Financial Officer of Aastrom Biosciences, a publicly traded, cardiovascular cell
therapy company. Before Aastrom, he spent six years as Chief Operating and Financial Officer for Prescient Medical,Inc. (PMI), a privately held company that developed
diagnostic imaging catheters and coronary stents designed to reduce deaths from heart attacks. Prior to PMI, he spent several years as a financial consultant for two publicly
traded biotech companies, Scios, Inc. – a Johnson & Johnson company and Alteon, Inc. He began his career in corporate finance as an investment banker in the healthcare
and M&A groups at Lehman Brothers Inc., where he focused on mergers and acquisitions and financings for the life science industry. At Lehman, he successfully executed
over $5 billion in transactions for medical device and biotech companies. He began his career as a Director of Neurophysiology for Biotronic, Inc. Scott received a B.S. from
the University of Michigan and an M.P.H. in Health Management with Honors from the Yale University School of Medicine and School of Management.
Steven Basta. Steven Basta joined the Viveve board in September of 2018 and was appointed as Chairman in January 2019. He currently serves as chief executive
officer of Mahana Therapeutics, a privately-held digital therapeutics company. From September 2015 to March 2020, Mr. Basta served as president, chief executive officer,
and director of Menlo Therapeutics, Inc., a publicly listed biopharmaceutical company, and continues to serve as a director of Menlo following its March 2020 merger with
Foamix. From October 2011 until August 2015, Mr. Basta served as chief executive officer of AlterG, Inc., a privately held medical device company. From November 2002
to February 2010, Mr. Basta served as chief executive officer of BioForm Medical, Inc., a publicly listed medical aesthetics company acquired by Merz and from February
2010 to September 2011 served as chief executive officer of Merz Aesthetics, the successor to BioForm Medical, where he led multiple product launches managing the
global business to reach its position as a worldwide leader in the injectable aesthetics industry. He served on the board of Carbylan, Inc. from September 2009 to November
2016 and the board of RF Surgical, Inc. (acquired by Medtronic) from December 2013 to August 2015. Mr. Basta received a B.A. from The Johns Hopkins University and
an M.B.A. from the Kellogg Graduate School of Management at Northwestern University.
Debora Jorn. Ms. Jorn has served as a member of the Viveve board of directors since May 2016. She has 30 plus years of commercial experience building global
pharmaceutical, aesthetics and OTC businesses. Debora is a recognized leader in creating new markets and has successfully launched products in numerous therapeutic
areas. She has an extensive background in several areas of Women’s Healthcare including overactive bladder and incontinence, fertility, contraception, osteoporosis, and
aesthetics. Most recently, Deb was Executive Vice President of Corporate and Commercial Development at Eyepoint Pharmaceuticals. Prior to that, Ms. Jorn was Executive
Vice President and Group Company Chair at Valeant following the acquisition of Bausch & Lomb where she was the Chief Global Marketing Officer leading the
prescription and OTC eye health business. Before joining Bausch & Lomb, Debora was the Group Vice President of Women’s Healthcare and Fertility at Schering Plough
Corporation. Ms. Jorn began her career at Merck & Co., Inc and for more than 20 years held roles of increasing responsibility in R&D, Marketing and Sales. Ms. Jorn has a
strong scientific background and extensive experience in all facets of the clinical development process leading to product launch including market and competitive
assessments, clinical strategy, and trial design, labeling requirements for approval and competitive differentiation. PharmaVoice has recognized Ms. Jorn as “one of the top
100 most inspiring people in healthcare” in the “brand builders” category.
60
Arlene Morris. Arlene M. Morris joined the Viveve Board in May 2016. She is currently the CEO of Willow Advisors LLC. Ms. Morris was previously the chief
executive officer and president of Syndax Pharmaceuticals, Inc., a biopharmaceutical company focused on the development and commercialization of an epigenetic therapy
for treatment-resistant cancers from April 2012 to May 2015 and a member of the board of directors from May 2011 to June 2015. Prior to Syndax, Arlene served as the
president, chief executive officer and a member of the board of directors of Affymax, Inc. from 2003 to 2011, a publicly traded biotechnology company. She has held
various management and executive positions at Clearview Projects, Inc., a corporate advisory firm, Coulter Pharmaceutical, Inc., a publicly traded oncology pharmaceutical
company, Scios Inc., a publicly traded biopharmaceutical company, and Johnson & Johnson, a publicly traded healthcare company. Arlene is currently a member of the
board of directors of Unum, MiRagen and Palatin Technologies, Inc., all U.S. biopharmaceutical companies. She is also on the board of the Foundation for Research
Development of the Medical University of South Carolina and previously served on the Board of Neovacs SA, Biotechnology Innovation Organization (BIO), Dimension,
Biodel and the Humane Society of Silicon Valley. Ms. Morris received a B.A. in Biology from Carlow University.
Karen Zaderej. Karen Zaderej joined the Viveve board in September of 2018. She currently serves as chairman, chief executive officer and president of AxoGen,
Inc., a medical products company focused on the development and commercialization of technologies for peripheral nerve regeneration and surgical repair. Karen joined
Axogen Corporation in May 2006 and assumed the position of president, chief executive officer, and director in September 2011. She became chairman of the AxoGen, Inc.
board of directors in May 2018. Karen’s previous executive roles at AxoGen included chief operating officer from October 2007 to May 2010 and vice president of
marketing and sales from May 2006 to October 2007. In October 2004, Karen founded Zaderej Medical Consulting and assisted medical device companies build and
execute successful commercialization plans until 2007. From 1987 to 2004, Karen worked at ETHICON, Inc., a Johnson & Johnson company, where she held senior
positions in marketing, business development, research and development, and manufacturing. She also serves as a director of SEBio, a non-profit organization supporting
the life science industry in the southeastern United States. Karen has a M.B.A. from the Kellogg Graduate School of Business and a B.S. in Chemical Engineering from
Purdue University. Karen resigned from the Viveve board on May 4, 2020.
Sharon Presnell. Dr. Presnell was appointed to the Viveve Board of Directors in October of 2020. She has over 25 years of experience in the leadership of R&D and
the commercial translation of technology. Sharon currently serves as the president of the Amnion Foundation, a not-for-profit organization dedicated to the ethical
preservation and utilization of birth tissue-derived cells in regenerative medicine and drug development. Prior to joining Amnion in 2019, Dr. Presnell’s career path took her
from a faculty position at the University of North Carolina at Chapel Hill, where she developed multiple outlicensed and industry-supported technologies, to Director of
R&D at Becton Dickinson where her team contributed to product development for the Life Sciences business units. In 2007, Sharon transitioned from the Fortune 500
environment to the biotech industry where she led early-stage R&D for regenerative medicine products such as the Neo Kidney Augment™, a clinical stage cell-based
therapeutic for chronic kidney disease, and several marketed 3D-Bioprinted Tissue Model products for use in drug development, one of which (ExVive™ Liver) was the
subject of numerous awarded patents and peer-reviewed publications, including recognition as Paper of the Year by the Society of Toxicology in 2016. In 2015, she
launched Samsara Sciences, a wholly-owned subsidiary of Organovo, Inc., and led a small team in the rapid development and marketing of cell-based products to support
liver research, an effort which reached profitability in <2 years. In 2018, the Samsara assets were sold by the parent company to LifeNet Health where they continue to
provide unique solutions to pharma customers. Dr. Presnell provides life sciences consulting services broadly to start-up companies, Fortune-500 companies, not-for-profit
organizations, and investment firms throughout the US and EU through her firm, CytoStrategy™. She serves as the Chair-elect of the North Carolina State University
College of Life Sciences Board and is also an active board member of the Coulter Translational Partnership Fund at the University of Virginia in Charlottesville. She is an
avid mentor for women in science and dedicates significant time and resources to teaching and providing hands-on training to students of all ages. Dr. Presnell currently
resides in Winston-Salem, North Carolina.
Jim Robbins. Jim joined Viveve as Vice President of Finance in July 2014 and was promoted to Senior Vice President of Finance and Administration in January
2021 having served as Vice President of Finance and Administration since May 2017. In May 2018, Jim assumed expanded responsibilities and was appointed as the
Company’s Principal Accounting Officer, and in November 2018, Jim became the Principal Accounting and Financial Officer. He has over thirty years of accounting and
finance experience in both industry and public accounting. Prior to joining Viveve, Jim provided accounting, finance and business consulting services for various biotech
companies. From 2010 to 2012, he served as Vice President of Finance and Administration for Auxogyn, Inc., a privately held medical technology company focused on
advancing women’s reproductive health by translating scientific discoveries in early embryo development into clinical solutions that improve patient outcomes in vitro
fertilization (IVF) procedures. He served as Director of Finance and Vice President of Finance 2004 to 2010 for Micrus Endovascular, Inc., a company which develops,
manufactures, and markets both implantable and disposable medical devices used in the treatment of cerebral vascular diseases. Prior to Micrus Endovascular, Jim served at
Genitope Corporation as Corporate Controller, a biotechnology company focused on the research and development of novel immunotherapies for the treatment of cancer.
From 1995 to 2001, he served in management positions for high technology companies including Extricity, Inc., InVision Technologies, Inc., and Truevision, Inc. Jim was in
the audit practice of Price Waterhouse, LLP from 1987 to 1995. He received his Bachelor of Business Administration with a concentration in accounting from the University
of Texas at Austin and is a Certified Public Accountant
61
Sean Shapiro. Sean joined Viveve as Vice President of U.S. Sales in September 2016 and brings extensive experience in medical device and aesthetic industry sales,
commercial team organization, development, and management. Most recently, Sean served as Director of Sales, Merz North America, Aesthetic Device Division where he
was responsible for capital and consumable sales of $100M annually directing a team of 50 regional and direct sales professionals. He led the commercial launch of the
Cellfina™ System that in 12 months became the market leader generating over $15M in sales. A Regional Sales Director at Ulthera, Inc., Sean managed a team selling new
ultrasound tissue lifting technology and capital equipment to physicians in the aesthetic marketplace earning top sales awards personally and with the team he led. At Zeltiq,
Inc. he served as an Area Sales Manager and launched CoolSculpting®, again earning sales revenue and management awards. Prior to this, Sean had five years as a
successful Area Sales Manager at Lumenis, Inc. A known and respected sales leader in the aesthetic marketplace, Sean has consistently received annual awards and
recognition for top sales dollar volume, region and territory revenue, new technology and product launches in addition to sales management and business development
accomplishments. Sean earned his Bachelor of Science in Communications from the University of Arizona. Sean resigned from Viveve on December 31, 2020.
Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in
subparagraph (f) of Item 401 of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file
reports of ownership and changes in ownership (Forms 3, 4 and 5) with the SEC. Officers, directors and greater than 10% stockholders are required to furnish us with copies
of all such forms which they file.
We believe that, during the year ended December 31, 2020, our directors, executive officers and beneficial owners of more than 10% of the Company’s common
stock complied with all Section 16(a) filing requirements.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to every director, officer and employee of the Company. Such Code of Business
Conduct and Ethics includes written standards that are reasonably designed to deter wrongdoing and to promote:
●
●
●
●
●
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the Commission and in other
public communications made by the Company;
compliance with applicable governmental laws, rules and regulations;
the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
accountability for adherence to the code.
A current copy of the code is posted on the Corporate Governance section of our website, which is located at www.viveve.com. If we make any substantive
amendments to, or grant any waivers from, the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting
officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current
report on Form 8-K.
Director Nominations
The Company does not have any defined procedures by which stockholders may submit nominations for directors and there has been no change to that policy.
Audit Committee and Audit Committee Financial Expert
The board of directors of the Company has an audit committee to oversee the accounting and financial reporting processes of the Company and the audits of the
Company’s consolidated financial statements. The members of our audit committee are Steven Basta, Arlene Morris and Sharon Presnell. The board of directors has
determined that Steven Basta is an “audit committee financial expert” as defined by applicable SEC rules.
62
Item 11. Executive Compensation
2020 Summary Compensation Table
The following table provides information regarding the total compensation for services rendered in all capacities that was earned during the fiscal years indicated by
our named executive officers.
Name and
Principal Position
Scott Durbin,
Chief Executive Officer
Jim Robbins,
Senior Vice President of Finance and
Administration
(Principal Accounting
and Financial Officer)
Sean Shapiro,
Vice President of U.S. Sales
Year
2020
2019
2020
2019
2020
2019
Salary
($)
Bonus
($)(1)
435,750
415,000
175,000
207,500
273,000
62,000
Non-Equity
Incentive Plan
Compensation
($)(2)
Option
Awards
($)(3)
All Other
Compensation
($)
Total
($)
-
-
-
-
2,312,787
24,301(4)
48,282(4)
635,051
2,983,569
-
15,749(4)
350,749
260,000
62,400
-
255,461
19,998(4)
597,859
320,000
315,334
-
-
26,067
157,500
-
255,461
42,140(4,5)
9,600(5)
388,207
737,895
(1) The amounts reported represent cash bonuses awarded with respect to the years indicated based upon the achievement of corporate performance goals related to (i)
strengthening financial position; (ii) expanding market opportunities and ensuring competitiveness; (iii) providing clinically proven solutions; and (iv) ensuring reliable
quality supply of products for the years indicated. The bonuses for 2020 and 2019 performance were paid 100% in cash. For more information on these bonuses, see the
description of the annual performance bonuses under “Employment Agreements, Severance and Change in Control Arrangements” below.
(2) The amounts reported represent the commission earned with respect to the years indicated based upon the achievement of certain sales targets in accordance with Mr.
Shapiro’s Sales Compensation Plan.
(3) The amounts reported for 2019 represent the aggregate grant date fair value of option awards granted to our named executive officers computed in accordance with
FASB ASC Topic 718, excluding the impact of estimated forfeitures related to service-based vesting. See Note 13 of the notes to our consolidated financial statements in the
annual report on Form 10-K for the fiscal year ended December 31, 2020 filed for a discussion of our assumptions in determining the grant date fair values of equity awards.
These amounts do not correspond to the actual value that may be recognized by the named executive officers.
(4) The amount reported represents cash-out of accrued PTO hours in accordance with the Company’s PTO Policy.
(5) The amount reported represents cash paid out for car allowance in accordance with Mr. Shapiro’s Employment Agreement.
63
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding equity awards granted to our named executive officers that were outstanding as of
December 31, 2020. These awards were granted under our Amended and Restated 2006 Stock Plan and our Amended and Restated 2013 Stock Option and Incentive Plan.
Name
Scott Durbin
Jim Robbins
Sean Shapiro
Equity Awards
Number of Securities
Underlying
Unexercised (#)(1)
Exercisable
Unexercisable
Exercise Price
($)
Expiration
Date
89,321
-
403
174
88
125
51
98
48
11
8,938
-
61
16
44
20
25
15
8,938
61
24
61
240,479
63
227
126
33
8
—
—
—
—
24,062
28
35
17
15
—
—
—
—
—
—
—
8.69
-
1,240.00
1,970.00
4,480.00
4,460.00
5,220.00
6,000.00
4,800.00
9,920.00
8.69
-
1,240.00
1,970.00
4,480.00
5,220.00
6,000.00
4,800.00
8.69
1,240.00
4,480.00
7,580.00
11/26/2029
1/29/2029
1/15/2029
5/11/2028
1/23/2028
3/03/2027
12/23/2026
12/16/2025
9/26/2024
2/2/2023
11/26/2029
1/29/2029
1/15/2029
5/11/2028
1/23/2028
12/23/2026
12/16/2025
9/26/2024
11/26/2029
1/15/2029
1/23/2028
9/6/2026
Vesting
Start Date
11/26/2019
1/29/2019(2)
1/15/2019 (3)
5/11/2018 (4)
1/23/2018
3/03/2017
12/23/2016
12/16/2015 (4)
9/26/2014
1/23/2013 (5)
11/26/2019
1/29/2019(2)
1/15/2019 (3)
5/11/2018 (4)
1/23/2018
12/23/2016
12/16/2015
7/1/2014 (4)
11/26/2019
1/15/2019 (3)
1/23/2018
9/6/2016 (4)
(1) Except as otherwise set forth below, the shares of our common stock underlying each of the outstanding equity awards vest and become exercisable in equal monthly
installments over 48 months following the grant date.
(2) The shares of common stock underlying this restricted stock award vest and become exercisable in full upon FDA approval of the Viveve System for improvement of
sexual function or stress urinary incontinence in the United States.
(3) The shares of common stock underlying this stock option vest and become exercisable in equal monthly installment overs 36 months following the grant date.
(4) The shares of common stock underlying this stock option vest and become exercisable as follows: ¼ of the shares vested on the one-year anniversary of the grant date
and the remaining shares vest in equal monthly installments over the following 36 months.
(5) These stock options were fully vested upon the merger that took place on September 23, 2014 between PLC Systems Inc., Viveve, Inc. and PLC Systems Acquisition
Corp. Prior to merger, the Board 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.
Employment Agreements, Severance and Change in Control Arrangements
In May 2018, we entered into an amended and restated employment agreement with Mr. Durbin and an employment agreement with Mr. Robbins that provide for
specified payments and benefits in connection with a termination of employment by us without cause or a resignation by the executive officer for good reason (as each such
term is defined in the employment agreement). Our goal in providing these severances and change in control payments and benefits is to offer sufficient cash continuity
protection such that our named executive officers will focus their full time and attention on the requirements of the business rather than the potential implications for their
respective positions. We prefer to have certainty regarding the potential severance amounts payable to the named executive officers, rather than negotiating severance at the
time that a named executive officer’s employment terminates. We have also determined that accelerated vesting provisions with respect to outstanding equity awards in
connection with a qualifying termination of employment are appropriate because they encourage our named executive officers, to stay focused on the business in those
circumstances, rather than focusing on the potential implications for them personally. In addition, these employment agreements with our named executive officers contain
confidentiality provisions and require the named executive officers to execute a general release of claims to receive any payments and benefits.
Employment Agreement with Scott Durbin
Pursuant to our amended and restated agreement with Mr. Durbin, he serves as our Chief Executive Officer on an at-will basis and as a director. Mr. Durbin currently
receives a base salary of $449,000, which is subject to periodic review and adjustment. Mr. Durbin is also eligible for an annual performance bonus targeted at 50% of his
base salary and to participate in the employee benefit plans generally available to employees, subject to the terms of those plans.
64
The employment agreement further provides that if Mr. Durbin’s employment is terminated by us without cause or Mr. Durbin terminates his employment with us for
good reason, he will be entitled to receive: (i) base salary continuation for 12 months following termination, (ii) any earned but unpaid incentive compensation with respect
to any completed calendar year period, (iii) if Mr. Durbin was participating in the Company’s group health plan immediately prior to the date of termination, a monthly cash
payment in an amount equal to the employer portion of his monthly health insurance premium until the earliest of 12 months following the date of termination, the expiration
of his continuation coverage under COBRA or the date he becomes eligible for substantially equivalent health insurance coverage in connection with new employment or
self-employment, and (iv) accelerated vesting of all stock options and other stock-based awards held by Mr. Durbin that would have vested had he remained employed for
an additional six months following termination. In lieu of the severance payments and benefits set forth in the preceding sentence, in the event Mr. Durbin’s employment is
terminated by us without cause or he terminates his employment with us for good reason, in either case within 12 months following a change in control (as defined in his
employment agreement), he will be entitled to receive: (i) a lump sum cash amount equal to 1.5 times the sum of (A) his current base salary (prior to any reduction triggering
good reason, if applicable, or his base salary in effect prior to the change in control if higher) plus (B) Mr. Durbin’s target annual cash incentive compensation for the year of
termination, (ii) if Mr. Durbin was participating in the Company’s group health plan immediately prior to the date of termination, a monthly cash payment in an amount
equal to the employer portion of his monthly health insurance premium until the earliest of 18 months following the date of termination, the expiration of his continuation
coverage under COBRA or the date he becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment, and
(iii) except as otherwise provided in the applicable award agreement, accelerated vesting of all stock options and other stock-based awards subject to time-based vesting
held by Mr. Durbin as of the date of termination. Receipt of the severance payments and benefits described above is conditioned upon Mr. Durbin entering into an effective
separation agreement, containing, among other provisions, a general release of claims against the Company and our affiliates, confidentiality, return of property and non-
disparagement.
Employment Agreement with Jim Robbins
Pursuant to our employment agreement with Mr. Robbins, he serves as our Senior Vice President of Finance and Administration and Principal Accounting and
Financial Officer on an at-will basis. Mr. Robbins served as our Vice President of Finance and Administration through December 31, 2020 and received a base salary of
$273,000, which is subject to periodic review and adjustment. Starting January 1, 2021, Mr. Robbins currently receives a base salary of $285,000. Mr. Robbins is also
eligible for an annual performance bonus targeted at 30% of his base salary and to participate in the employee benefit plans generally available to employees, subject to the
terms of those plans.
The employment agreement further provides that if Mr. Robbins’ employment is terminated by us without cause or Mr. Robbins terminates his employment with us
for good reason, he will be entitled to receive: (i) base salary continuation for six months following termination, (ii) any earned but unpaid incentive compensation with
respect to any completed calendar year period, (iii) if Mr. Robbins was participating in the Company’s group health plan immediately prior to the date of termination, a
monthly cash payment in an amount equal to the employer portion of his monthly health insurance premium until the earliest of six months following the date of termination,
the expiration of his continuation coverage under COBRA or the date he becomes eligible for substantially equivalent health insurance coverage in connection with new
employment or self-employment, and (iv) accelerated vesting of all stock options and other stock-based awards held by Mr. Robbins that would have vested had he
remained employed for an additional six months following termination. In lieu of the severance payments and benefits set forth in the preceding sentence, in the event Mr.
Robbins’ employment is terminated by us without cause or he terminates his employment with us for good reason, in either case within 12 months following a change in
control (as defined in his employment agreement), he will be entitled to receive: (i) a lump sum cash amount equal to .75 times the sum of (A) his current base salary (prior to
any reduction triggering good reason, if applicable, or his base salary in effect prior to the change in control if higher) plus (B) Mr. Robbins’ target annual cash incentive
compensation for the year of termination, (ii) if Mr. Robbins was participating in the Company’s group health plan immediately prior to the date of termination, a monthly
cash payment in an amount equal to the employer portion of his monthly health insurance premium until the earliest of six months following the date of termination, the
expiration of his continuation coverage under COBRA or the date he becomes eligible for substantially equivalent health insurance coverage in connection with new
employment or self-employment, and (iii) except as otherwise provided in the applicable award agreement, accelerated vesting of all stock options and other stock-based
awards subject to time-based vesting held by Mr. Robbins as of the date of termination. Receipt of the severance payments and benefits described above is conditioned upon
Mr. Robbins entering into an effective separation agreement, containing, among other provisions, a general release of claims against the Company and our affiliates,
confidentiality, return of property and non-disparagement.
Employment Agreement with Sean Shapiro
Pursuant to our employment agreement with Mr. Shapiro, he served as our Vice President of Sales, North America on an at-will basis. Mr. Shapiro resigned from his
position as Vice President of Sales, North America in December 2020. Pursuant to the employment agreement in connection with his resignation, Mr. Shapiro is subject to
certain provisions in the employment agreement including, confidentiality, non-compete and non-disparagement. Mr. Shapiro is eligible for continuation of health insurance
under COBRA until the date he becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment. He has 90
days after his resignation date to exercise vested shares. Mr. Shapiro is not entitled to receive any additional compensation and has returned company property.
65
Employee Benefits
Our executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees, including the 401(k) plan.
The Company has not made any contributions to the 401(k) plan to date.
Director Compensation
On December 23, 2016, the Board of Directors adopted an independent director compensation policy designed to compensate non-employee directors of the
Company for their time, commitment and contributions to the Board. The Board amended and restated the independent director compensation policy effective July 17, 2018,
January 9, 2019, and November 26, 2020 (as amended and restated, the “Director Compensation Policy”). Under the Director Compensation Policy, during the year ended
December 31, 2020, all independent directors were eligible to receive cash compensation as set forth below, pro-rated to reflect the number of days served during any
calendar quarter:
Board of Directors:
All Independent Directors
Chairperson Additional Retainer
Audit Committee:
All Audit Committee Members
Chairperson
Compensation Committee:
All Compensation Committee Members
Chairperson
Governance and Nominating Committee:
All Governance and Nominating Committee Members
Chairperson
Annual
Retainer($)
35,000
35,000
10,000
20,000
5,000
10,000
3,750
7,500
Under the Director Compensation Policy, all independent directors eligible to receive cash compensation have the option to elect to receive all or any portion of such
cash compensation in the form of a restricted stock award, in lieu of a cash payment. Such election is to be made quarterly until the 2021 annual meeting and annually
thereafter. Such restricted stock awards have a fair market value equal to the value of the cash retainer to be paid during such period and are fully vested upon grant.
In addition, under the policy, each new non-employee director who is initially appointed or elected to the Board after effectiveness of the policy is granted an equity-
based award with a value at the time of issuance equal to two times the Subsequent Award (defined below) in effect at the time of election, which vests in three equal annual
installments on each of the first three anniversaries of the date of grant, subject to the director’s continued service on the Board (the “Initial Award”). In addition, on the date
of each annual meeting of the Company’s stockholders, each continuing non-employee director is eligible to receive an annual option grant to purchase 165,000 shares of
common stock, which vests in full on the first anniversary of the grant date, subject to the director’s continued service on the Board (each a “Subsequent Award”).
Furthermore, the Chairman of the Board is granted an equity-based initial retainer award in the form of a Stock Option to purchase 660,000 shares, which shall vest and
become exercisable on the first anniversary of the date of grant subject to the Independent Director continuing in service as the Chairman of the Board through such vesting
date. A non-employee director elected for the first time to the Board at an annual meeting of the Company’s stockholders shall only receive an Initial Award in connection
with such election, and shall not receive a Subsequent Award until the annual meeting for the next fiscal year. In the event a non-employee director’s service on the Board
terminates, the vesting and exercise of such director’s unvested stock options shall be subject to the terms of the applicable award agreement.
The Company has also agreed to reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending board of directors and committee
meetings.
66
2020 Director Compensation Table
The following table presents information regarding the compensation of our non-employee directors for the year ended December 31, 2020. Scott Durbin, our Chief
Executive Officer, serves on our Board of Directors but did not receive compensation for his service as a director and the compensation paid to Mr. Durbin as an employee
during the year ended December 31, 2020 is set forth in the “2020 Summary Compensation Table” below.
Name
Steven Basta
Debora Jorn
Arlene Morris
Karen Zaderej(6)
Sharon Presnell(7)
Fees
Earned or
Paid in
Cash
($)(1)(2)
98,750
35,000
58,750
19,746
7,948
Stock
Awards
($)(1)(3)
Option
Awards
($)(4)(5)
All Other
Compensation
($)
Total
($)
-
-
-
-
-
59,635
59,635
59,635
-
117,702
-
-
-
-
-
158,385
94,635
118,385
19,746
125,650
(1)
(2)
(3)
(4)
(5)
(6)
(7)
All members of the Board of Directors elected to receive their 2020 director fees in cash.
The amounts represent the non-employee director compensation paid in cash for the four quarters of 2020. The fourth quarter of 2020 compensation was paid in
January 2021.
No grants of fully vested common stock were made to non-employee directors with respect to services for the year ended December 31, 2020.
The amount reported represents the aggregate grant date fair value of stock options granted to our non-employee directors in 2020, computed in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), excluding the impact of estimated forfeitures
related to service-based vesting. See Note 12 of the notes to our consolidated financial statements in the annual report on Form 10-K for the fiscal year ended
December 31, 2019 filed for a discussion of our assumptions in determining the grant date fair values of equity awards. These amounts do not correspond to the
actual value that may be recognized by the directors.
As of December 31, 2020, each of our non-employee directors serving on that date held outstanding stock options to purchase the following shares of common
stock: Mr. Basta – 82,640 shares, Ms. Jorn – 49,776 shares, Ms. Morris – 49,626 shares, Ms. Zaderej – 0 shares and Ms. Presnell – 33,000 shares.
Ms. Zaderej resigned from the Board of Directors effective May 4, 2020.
Ms. Presnell joined the Board of Directors effective October 28, 2020.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The disclosure in Item 5 under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” is hereby incorporated by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 12, 2021 regarding the beneficial ownership of our common stock by the following persons:
●
●
●
●
each person or entity who, to our knowledge, owns more than 5% of our common stock;
our executive officers named in the Summary Compensation Table above;
each director; and
all of our executive officers and directors as a group.
67
Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power over the securities reported
and that person’s address is c/o Viveve Medical, Inc., 345 Inverness Drive South, Building B, Suite 250, Englewood, Colorado 80112. Shares of common stock subject to
options, warrants, or other rights currently exercisable or exercisable within 60 days of March 12, 2021 are deemed to be beneficially owned and outstanding for computing
the share ownership and percentage of the stockholder holding the options, warrants or other rights, but are not deemed outstanding for computing the percentage of any
other stockholder.
Name and Address of Beneficial Owner
Named Executive Officers and Directors
Scott Durbin
Jim Robbins
Sean Shapiro
Steven Basta
Debora Jorn
Arlene Morris
Karen Zaderej
Sharon Presnell
All executive officers and directors as a group (7 persons)
None.
Owners of More than 5% of Our Common Stock
Amount and
Nature of
Beneficial
Ownership
Percent of
Class (1)
117,957(2)
11,929(3)
9,096(4)
23,545(5)
12,005(6)
11,817(7)
64(8)
0(9)
186,413
1.14%
0.12%
0.09%
0.23%
0.12%
0.11%
0.00%
0.00%
1.80%
(1) Based on shares of 10,341,716 common stock issued and outstanding as of March 12, 2021.
(2)
Included in this amount are: (i) 12 shares of common stock; and (ii) warrants and options to purchase 117,945 shares of common stock exercisable within 60 days of
March 12, 2021.
Included in this amount are: (i) 32 shares of common stock; and (ii) warrants and options to purchase 11,897 shares of common stock exercisable within 60 days of
March 12, 2021.
Included in this amount are: (i) 12 shares of common stock; and (ii) options to purchase 9,084 shares of common stock exercisable within 60 days of March 12, 2021.
Included in this amount are: (i) 26 shares of common stock owned by Mr. Basta individually; (ii) 27 shares of common stock owned of record held by Steven Basta,
Trustee of the Basta Revocable Trust; and (iii) options to purchase 23,492 shares of common stock exercisable within 60 days of March 12, 2021.
Included in this amount are: (i) 41 shares of common stock; and (ii) options to purchase 11,964 shares of common stock exercisable within 60 days of March 12, 2021.
Included in this amount are: (i) 3 shares of common stock; and (ii) options to purchase 11,814 shares of common stock exercisable within 60 days of March 12, 2021.
Included in this amount are: (i) 0 shares of common stock; and (ii) options to purchase 0 shares of common stock exercisable within 60 days of March 12, 2021.
Included in this amount are: (i) 0 shares of common stock; and (ii) options to purchase 0 shares of common stock exercisable within 60 days of March 12, 2021.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Change in Control
As of the date of this report, we are not aware of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent
date result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Board of Directors reviews issues involving potential conflicts of interest, and reviews and approves all related party transactions, including those required to be
disclosed as a “related party” transaction under applicable federal securities laws. The Board has not adopted any specific procedures for conducting reviews of potential
conflicts of interest and considers each transaction in light of the specific facts and circumstances presented. However, to the extent a potential related party transaction is
presented to the Board, the Company expects that the Board would become fully informed regarding the potential transaction and the interests of the related party, and
would have the opportunity to deliberate outside of the presence of the related party. The Company expects that the Board would only approve a related party transaction
that was in the best interests of the Company, and further would seek to ensure that any completed related party transaction was on terms no less favorable to the Company
than could be obtained in a transaction with an unaffiliated third party. Other than as described below, no transaction requiring disclosure under applicable federal securities
laws occurred from January 1, 2019 through the date of this Annual Report on Form 10-K that was submitted to the Board of Directors for approval as a “related party”
transaction.
68
Related Party Transactions
Securities and Exchange Commission regulations define the related person transactions that require disclosure to include any transaction, arrangement or relationship,
or any proposed transaction, in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two
completed fiscal years in which we were or are to be a participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i)
an executive officer, director or director nominee, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family member of an executive officer,
director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned or controlled by any of the foregoing persons or in
which any of the foregoing persons has a substantial ownership interest or control.
For the period from January 1, 2020, through the date of this Annual Report on Form 10-K (the “Reporting Period”), described below are certain transactions or
series of transactions between us and certain related persons.
Employment and Consulting Agreements
Refer to the discussion under the heading “Employment Agreements, Severance and Change-in Control Arrangements” of this Annual Report on Form 10-K, which
is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The following table sets forth fees billed and to be billed to us by our independent registered public accounting firm, BPM LLP, for the years ended December 31,
2020 and 2019 for (i) services rendered for the audit of our annual consolidated financial statements and the review of our quarterly condensed consolidated financial
statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our consolidated financial statements that are not reported as Audit
Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.
Audit fees
Audit-related fees
Tax fees
All other fees
Total fees
Year Ended
December 31,
2020
2019
$
$
340,000 $
14,000
42,000
-
396,000 $
363,000
4,000
53,000
-
420,000
Audit Fees: Represents fees for professional services provided for the audit of our annual consolidated financial statements, review of our condensed consolidated
financial statements included in our quarterly reports and services in connection with statutory and regulatory filings.
Audit-Related Fees: Represents the fees for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated
financial statements. In the year ended December 31, 2020, these services included attestation services related to our 401(k) plan.
The audit committee of the Board approves all auditing services and the terms thereof and non-audit services (other than non-audit services published under Section
10A(g) of the Exchange Act or the applicable rules of the SEC or the Pubic Company Accounting Oversight Board) to be provided to us by the independent auditor;
provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the "de minimis" provisions of Section 10A(i)(1)(B)
of the Exchange Act are satisfied.
Tax Fees: Represents professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees: Our independent registered public accounting firm was not paid any other fees for professional services during the fiscal years ended December 31,
2020 and 2019.
69
Item 15. Exhibits, Financial Statement Schedules
Financial Statements
See Index to Consolidated Financial Statements at Item 8 herein.
PART IV
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
Agreement and Plan of Merger dated May 9, 2014 by and among Viveve, Inc., PLC Systems, Inc. and PLC Systems Acquisition Corporation (1)
Amendment to Agreement and Plan of Merger (1)
RenalGuard Reorganization Agreement (2)
Certificate of Conversion for Delaware (3)
Amended and Restated Certificate of Incorporation (4)
Articles of Amendment to the Articles of Continuance of Viveve Medical, Inc. (5)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation (6)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated November 30, 2020 (33)
Certificate of Elimination of Series A Preferred Stock (34)
Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock (7)
Form of Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock (35)
Amended and Restated Bylaws (4)
Common Stock Purchase Warrant issued on February 17, 2015 to Scott Durbin (8) +
Common Stock Purchase Warrant issued on February 17, 2015 to Jim Robbins (8) +
Common Stock Purchase Warrant issued on February 17, 2015 to Patricia Scheller (8) +
Common Stock Purchase Warrant issued on May 12, 2015 to James Atkinson (8) +
Common Stock Purchase Warrant issued on December 16, 2015 to James Atkinson (8) +
Common Stock Purchase Warrant issued on December 16, 2015 to Jim Robbins (8) +
Common Stock Purchase Warrant issued on April 1, 2016 to Dynamic Medical Technologies (Hong Kong) Limited (3)
Common Stock Purchase Warrant issued on May 11, 2016 to Theresa Stern (9)
Common Stock Purchase Warrant issued on May 11, 2016 to Chris Rowan (9)
Common Stock Purchase Warrant issued on June 20, 2016 to Western Alliance Bank (10)
Common Stock Purchase Warrant, dated May 25, 2017, by and between the Registrant and CRG Partners III - Parallel Fund "A" L.P. (11)
Common Stock Purchase Warrant, dated May 25, 2017, by and between the Registrant and CRG Partners III L.P. (11)
Form of Series A/B Common Stock Purchase Warrant issued on November 26, 2019 (7)
Form of Series A-2/B-2 Common Stock Purchase Warrant issued on April 20, 2020 (30)
Form of Common Stock Purchase Warrant issued to affiliates of CRG LP on November 26, 2019 (7)
Form of Common Stock Purchase Warrant for the 2021 Warrants (35)
2.1
2.1.1
2.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17 Warrant Agent Agreement by and between VStock Transfer LLC and the Registrant (7)
4.18
4.19
4.20
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Form of Warrant Agent Agreement by and between VStock Transfer LLC and the Registrant, effective January 2021 (35)
Specimen Common Stock Certificate (12)
Description of Securities*
Intellectual Property Assignment and License Agreement dated February 10, 2006, as amended, between Dr. Edward Knowlton and TivaMed, Inc (13)
Amended and Restated Development and Manufacturing Agreement dated October 4, 2007 between TivaMed, Inc. and Stellartech Research Corporation (13)
Sublease Agreement, entered into on February 1, 2017 and effective as of January 26, 2017, between the Registrant and Ingredion Incorporated (16)
Settlement and License Agreement by and among the Registrant, ThermiGen LLC and ThermiAesthetics LLC, dated June 3, 2018. (24) †
Membership Subscription Agreement, dated August 1, 2017, by and between the Registrant and InControl Medical, LLC (18)
Employment Agreement by and between the Registrant and James G. Atkinson, dated February 27, 2018 (14)+
Amended and Restated Employment Agreement by and between the Registrant and Scott C. Durbin, dated May 11, 2018. (23) +
Amended and Restated Employment Agreement by and between the Registrant and Jim Robbins, dated May 11, 2018. (23) +
70
10.9 Amended and Restated Independent Director Compensation Policy (15) +
10.10 Amended and Restated 2013 Stock Option and Incentive Plan and amendment thereto (20) +
10.11
2017 Employee Stock Purchase Plan (21) +
10.12 Forms of Indemnification Agreement (28) +
10.13 Security Agreement, dated May 25, 2017, by and among the Registrant, Viveve, Inc. and CRG Servicing LLC (11)
10.14 Patent and Trademark Security Agreement, dated May 25, 2017, by and among the Registrant, Viveve, Inc. and CRG Servicing LLC (11)
10.15 Term Loan Agreement, dated May 22, 2017, among the Registrant, Viveve, Inc., CRG Servicing LLC, as administrative agent, and certain lenders (17)
10.16 Waiver No. 2 to Loan Agreement, dated December 12, 2017, among the Registrant, CRG Servicing LLC and the lenders party thereto (19)
10.17 Amendment No. 2 to Loan Agreement, dated November 29, 2018, among the Registrant, CRG Servicing LLC, as administrative agent and collateral agent, the
lenders from time to time party thereto and Viveve, Inc., as subsidiary guarantor (25)
10.18 Amendment No. 3 to the Loan Agreement, dated as of November 12, 2019, by and between the Registrant and CRG LP (26)
10.19 Form of Registration Rights Agreement by and between the Registrant and CRG LP entered into on November 26, 2019 (26)
10.20 Series B Preferred Stock and Warrant Purchase Agreement, dated as of November 12, 2019, by and between the Registrant and affiliates of CRG LP (26)
10.21 Amendment No. 1 to the Series B Preferred Stock and Warrant Purchase Agreement, dated as of November 20, 2019, by and between the Registrant and affiliates
of CRG LP (7)
10.22 Lock-Up Agreement between affiliates of CRG LP and Ladenburg Thalmann & Co. Inc., dated as of November 12, 2019 (26)
10.23 Form of Inducement Letter (29)
10.24 Promissory Note, dated April 24, 2020, by and between Viveve, Inc. and Western Alliance Bank, an Arizona Corporation (30)
10.25 Purchase Agreement between the Registrant and Lincoln Park Capital, LLC dated June 8, 2020 (31)
10.26 Registration Rights Agreement between the Registrant and Lincoln Park Capital, LLC dated June 8, 2020 (31)
10.27 Amendment No. 1 to Sublease Agreement, effective as of March 15, 2021, by and between the Registrant and Ingredion Incorporated.*
14.1
21
23.1
24.1
31.1
31.2
32.1
Code of Conduct, adopted September 23, 2014 (27)
List of the Registrants Subsidiaries (22)
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**
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**
32.2
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 8-K filed with the Securities and Exchange Commission on September 18, 2019.
Incorporated by reference from the Form S-1/A filed with the Securities and Exchange Commission on November 21, 2019.
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 August 11, 2016.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 21, 2016.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 1, 2017.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
71
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
Incorporated by reference to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on October 5, 2017.
Incorporated by reference to the Registrant’s on Form S-1 filed with the Securities and Exchange Commission on November 21, 2014.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2018.
Incorporated by reference to the registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2017.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on February 3, 2017.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 24, 2017.
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2017.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 14, 2017.
Incorporated by reference to the Registrant’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on August 19, 2019.
Incorporated by reference to the Registrant’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on July 7, 2017.
Incorporated by reference to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2017.
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 17, 2018.
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2018.
Incorporated by reference to the Registrant’s Quarterly Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2018.
Incorporated by reference from the Form S-1/A filed with the Securities and Exchange Commission on November 13, 2019.
Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015.
Incorporated by reference to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2018.
Incorporated by reference to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 17, 2020.
Incorporated by reference to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2020.
Incorporated by reference to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2020.
Incorporated by reference from the Form 10-K filed with the Securities and Exchange Commission on March 19, 2020.
Incorporated by reference from the Form 8-K filed with the Securities and Exchange Commission on December 1, 2020.
Incorporated by reference from the Form 8-K filed with the Securities and Exchange Commission on December 18, 2020.
Incorporated by reference to the Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 12, 2021.
101.INS XBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema Document*
101.CALXBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LABXBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*
72
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 18, 2021
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 Scott Durbin and Jim Robbins, 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/Sharon Collins Presnell
Sharon Collins Presnell
Chief Executive Officer and Director
(Principal Executive Officer)
Senior Vice President of Finance and Administration
(Principal Accounting and Financial Officer)
Chairman of the Board of Directors
Director
Director
Director
73
March 18, 2021
March 18, 2021
March 18, 2021
March 18, 2021
March 18, 2021
March 18, 2021
VIVEVE MEDICAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2020 and 2019
Consolidated Statements of Operations and Comprehensive Loss - Years Ended December 31, 2020 and 2019
Consolidated Statements of Stockholders’ Equity (Deficit) - Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows - Years Ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7 – F-34
Report Of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Viveve Medical, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Viveve Medical, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, the
related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020,
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, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period
ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
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 Public Company Accounting Oversight Board (United States) (“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. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to
be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
Inventory Valuation - Adjustments for Excess or Obsolete Inventory
As described in Notes 2 to the consolidated financial statements, the Company’s consolidated inventory balance was $3.3 million as of December 31, 2020. The Company’s
inventory is stated at the lower of cost, which is determined on an actual cost basis on a first-in, first-out method, or net realizable value. The Company evaluates the net
realizable value 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. If actual demand were to be substantially lower than estimated, there could be a
significant adverse impact on the carrying value of the inventory and results of operations.
The principal considerations for our determination that performing procedures relating to adjustments for excess or obsolete inventory is a critical audit matter are the
significant amount of judgement by management in developing the assumptions of the forecasted product demand, which in turn led to significant auditor judgement,
subjectivity, and effort in performing audit procedures and evaluating audit evidence relating to the forecasted product demand. Additionally, for certain new product
launches or sales channels there may be limited historical data with which to evaluate forecasts.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included, among others, testing management’s process for developing the estimate of the adjustments for excess or obsolete inventory, testing
the completeness and accuracy of the underlying data used in the estimate, and evaluating management’s assumptions of forecasted product demand. Evaluating
management’s demand forecast for reasonableness involved considering historical sales of its products, comparing prior period estimates to actual results of the same period,
and determining whether the demand forecast used was consistent with evidence obtained in other areas of the audit.
/s/ BPM LLP
We have served as the Company’s auditor since 2013.
San Jose, California
March 18, 2021
F-2
VIVEVE MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
2020
December 31,
2019
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $124 and $407 as of December 31, 2020 and 2019,
$
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
Current liabilities:
Accounts payable
Accrued liabilities
Paycheck Protection Program loan, current portion
Total current liabilities
Note payable, noncurrent portion
Paycheck Protection Program loan, noncurrent portion
Other noncurrent liabilities
Total liabilities
Commitments and contingences (Note 10)
Stockholders’ equity:
Convertible preferred stock;
10,000,000 shares authorized as of December 31, 2020 and 2019;
Series A preferred stock, $0.0001 par value; 185,218 shares issued and outstanding as of December 31, 2019
Series B preferred stock, $0.0001 par value; 35,819 and 31,678 shares and outstanding as of December 31, 2020
and December 31, 2019, respectively
Common stock, $0.0001 par value;
75,000,000 shares authorized as of December 31, 2020 and December 31, 2019; 2,171,316 and 707,571 shares
issued and outstanding as of December 31, 2020 and December 31, 2019, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
$
6,523 $
770
3,254
2,296
12,843
2,759
833
195
16,630 $
881 $
2,416
918
4,215
4,518
425
498
9,656
-
-
13,308
1,573
4,861
2,447
22,189
3,046
1,216
526
26,977
1,608
4,698
-
6,306
3,983
-
167
10,456
-
-
-
226,800
(219,826)
6,974
16,630 $
-
214,432
(197,911)
16,521
26,977
Note: All share and per share data has been adjusted to reflect the 1-for-10 reverse stock split which became effective after market close on December 1, 2020, as discussed
in Note 2.
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 (loss)
Operating expenses:
Research and development
Selling, general and administrative
Restructuring costs
Total operating expenses
Loss from operations
Loss on debt restructuring
Modification of Series A and B warrants
Interest expense, net
Other expense, net
Net loss from consolidated companies
Loss from minority interest in limited liability company
Comprehensive and net loss
Series B convertible preferred stock dividends
Net loss attributable to common stockholders
Net loss per share of common stock:
Basic and diluted
Weighted average shares used in computing net loss per common share:
Basic and diluted
$
$
$
Year Ended
December 31,
2020
2019
5,479 $
5,183
296
5,125
13,666
-
18,791
(18,495)
-
(1,838)
(910)
(289)
(21,532)
(383)
(21,915)
(4,149)
(26,064) $
6,567
5,551
1,016
8,590
22,363
742
31,695
(30,679)
(6,705)
-
(4,354)
(161)
(41,899)
(627)
(42,526)
(380)
(42,906)
(16.56) $
(343.84)
1,573,528
124,784
Note: All share and per share data has been adjusted to reflect the 1-for-10 reverse stock split which became effective after market close on December 1, 2020, as discussed
in Note 2.
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, 2020
(in thousands, except share data)
Accumulated
Deficit
Total
Stockholders’
Equity
$
(155,385) $
Additional
Paid-In
Capital
$
160,297
6,322
9,952
Serie A Convertible
Preferred Stock,
$0.0001 par value
Serie B Convertible
Preferred Stock,
$0.0001 par value
Common Stock,
$0.0001 par value
Shares
Amount
Shares
Amount
Shares
Amount
Balances as of January 1, 2019
August 2019 ATM Facility, net of issuance cost
November 2019 Offering, net of issuance costs
Conversion of Series A convertible preferred
stock into common stock
Issuance of Series B convertible preferred stock
and common stock warrants in connection with
debt conversion, net of issuance costs
Series B convertible preferred stock dividends
Series B convertible preferred stock dividends
paid in PIK shares
Stock-based compensation expense
Issuance of restricted common shares in
connection with consulting agreement
Issuance of common shares from employee stock
purchase plan
Issuance of restricted stock awards to directors,
employees and consultants
Reverse stock split - cancellation and payout of
fractional shares
Net loss
Balances as of December 31, 2019
Issuance costs in connection with November
2019 Offering
$
-
-
547,342
(362,124)
-
-
-
-
-
-
-
-
-
185,218
-
Conversion of Series A convertible preferred
stock into common stock
(185,218)
Issuance of common shares in connection with
Series A and B common warrant exercises
Issuance of common shares in connection with
Series A-2 and B-2 common warrant exercises
Modification of Series A and B warrants in
connection with 2020 Warrant Offering
Issuance of Series A-2 and B-2 warrants in
connection with 2020 Warrant Offering
Issuance costs for Series A-2 and B-2 warrants in
connection with 2020 Warrant Offering
Transaction costs in connection with 2020
Warrant Offering
Issuance of initial purchase common shares under
the Purchase Agreement with LPC
Issuance costs in connection with Purchase
Agreement with LPC
Series B convertible preferred stock dividends
Series B convertible preferred stock dividends
paid in PIK shares
Stock-based compensation expense
Issuance of common shares from employee stock
purchase plan
Issuance of common shares for vesting of
restricted stock award granted to consultant
Issuance of restricted common shares in
connection with consulting agreement
Reverse stock split - rounding adjustment
Net loss
Balances as of December 31, 2020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- $
-
-
-
-
-
-
46,363
100,418
194,595
$
-
362,124
31,300
-
378
-
-
-
-
-
-
31,678
-
-
-
-
-
-
-
-
-
-
-
4,141
-
-
-
-
-
-
35,819 $
-
-
-
-
-
-
-
-
-
3,869
-
-
-
-
-
154
118
(70)
-
707,571
-
-
-
185,218
- 1,115,863
-
93,129
-
-
-
-
-
-
-
-
-
52,500
-
-
-
-
-
-
-
-
-
-
84
25
10,995
-
5,931
-
-
-
- 2,171,316
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,413
(380)
378
2,251
75
56
74
(6)
-
214,432
(33)
-
7,814
593
1,838
1,838
(1,838)
(334)
341
(494)
(4,149)
4,141
2,577
-
-
-
-
-
-
-
-
-
-
-
-
-
(42,526)
(197,911)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
74
-
-
226,800
$
(21,915)
(219,826) $
$
4,912
6,322
9,952
-
35,413
(380)
378
2,251
75
56
74
(6)
(42,526)
16,521
(33)
-
7,814
593
1,838
1,838
(1,838)
(334)
341
(494)
(4,149)
4,141
2,577
-
-
74
-
(21,915)
6,974
Note: All share and per share data has been adjusted to reflect the 1-for-10 reverse stock split which became effective after market close on December 1, 2020, as discussed
in Note 2.
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 doubtful accounts
Depreciation and amortization
Stock-based compensation
Non-cash interest expense
Amortization of operating lease right-of-use assets and accretion of operating lease liabilities
Loss on debt restructuring
Loss from minority interest in limited liability company
Loss on disposal of property and equipment
Modification of Series A and B warrants
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
Net cash used in investing activities
Cash flows from financing activities:
Transaction costs in connection with November 2019 Offering
Proceeds from exercise of common warrants
Transaction costs in connection with 2020 Warrant Offering
Proceeds from Paycheck Protection Program loan
Proceeds from intial purchase of common shares under Purchase Agreement with LPC
Transaction costs in connection with Purchase Agreement with LPC
Proceeds from sale of common shares, net of issuance cost
Proceeds from issuance of common shares from employee stock purchase plan
Transaction costs in connection with note payable
Reverse stock split - cancellation and payout of fractional shares
Net cash provided by financing activities
Net decrease 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 Series B convertible preferred stock in settlement of dividends
Issuance of note payable in settlement of accrued interest
Net transfer of equipment between inventory and property and equipment
Issuance of Series B convertible preferred stock and common stock warrants in connection with debt conversion
Supplemental cash flow information related to leases was as follows:
Operating cash outflows from operating leases
Right-of-use assets obtained in exchange for operating lease liabilities (upon adoption of ASC 842)
Year Ended
December 31,
2020
2019
$
(21,915) $
(42,526)
454
1,295
2,651
535
2
-
383
20
1,838
349
1,360
151
461
(727)
(2,422)
331
(15,234)
(781)
(781)
(33)
8,407
(334)
1,343
341
(494)
-
-
-
-
9,230
(6,785)
13,308
6,523 $
- $
- $
4,141 $
532 $
247 $
- $
303 $
$
1,028
1,177
2,400
1,577
5
6,705
627
108
-
3,103
(1,070)
111
40
(2,386)
(1,536)
(599)
(31,236)
(1,087)
(1,087)
-
-
-
-
-
-
16,274
56
(216)
(6)
16,108
(16,215)
29,523
13,308
2,508
-
378
1,226
207
35,529
295
629
$
$
$
$
$
$
$
$
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”) 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, which collectively, we refer to as the Viveve® System. Viveve Medical 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.
2021 Public Offering
On January 19, 2021, the Company closed an upsized underwritten public offering of units (the “January 2021 Offering”) for gross proceeds of approximately
$27,600,000, which included the exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting
underwriting discounts and commissions and offering expenses payable by Viveve.
In connection with the closing of the public offering, on January 19, 2021, the Company filed a Certificate of Designation of Preferences, Rights and
Limitations of Series C Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series
C Certificate of Designation provides for the issuance of shares of Series C convertible preferred stock. The shares of Series C convertible preferred stock rank
on par with the shares of the common stock. With certain exceptions, as described in the Series C Certificate of Designation, the shares of Series C convertible
preferred stock have no voting rights. Each share of Series C convertible preferred stock is convertible at any time at the holder’s option into one share of
common stock.
The offering comprised of: (1) 4,607,940 Class A Units, priced at a public offering price of $3.40 per Class A Unit, with each unit consisting of one share of
common stock and one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth anniversary of the date
of issuance; and (2) 2,450,880 Class B Units, priced at a public offering price of $3.40 per Class B Unit, with each unit consisting of one share of Series C
convertible preferred stock and one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth
anniversary of the date of issuance. The underwriter exercised an over-allotment option to purchase an additional 1,058,820 shares of common stock and
warrants to purchase 1,058,820 shares of common stock in the offering. The net proceeds to the Company, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, are expected to be approximately $25,223,000.
A total of 2,450,880 shares of Series C convertible preferred stock were issued in the January 2021 Offering. In January 2021, all Series C convertible
preferred stock were converted into common stock and there are no remaining shares of Series C convertible preferred stock outstanding.
Elimination of Series A Convertible Preferred Stock
On December 16, 2020, the Company filed a Certificate of Elimination (the “Certificate of Elimination”) with the Delaware Secretary of State with respect to
547,345 authorized shares of Series A convertible preferred stock, par value $0.0001 per share. The Series A convertible preferred stock had been designated
pursuant to the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed with the Delaware Secretary of
State on November 25, 2019. As of the date of the filing of the Certificate of Elimination, no shares of Series A convertible preferred stock were outstanding.
Upon filing the Certificate of Elimination, the 547,345 authorized shares of Series A convertible preferred stock were returned to the status of authorized but
unissued shares of preferred stock of the Company, without designation as to series or rights, preferences, privileges or limitations.
Purchase Agreement with Lincoln Park Capital, LLC
On June 8, 2020, the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to
which the Company has the right to sell to LPC, and LPC has committed to purchase from us, from time to time, up to $10,000,000 of our common stock,
subject to certain limitations, during the 30-month term of the Purchase Agreement.
F-7
On June 9, 2020, LPC purchased 52,500 shares of common stock at a price per share of $6.50 (the “Initial Purchase Shares”) under the Purchase Agreement.
Thereafter, under the Purchase Agreement, on any business day selected by us, the Company may direct LPC to purchase up to 25,000 shares (and in certain
circumstances up to 50,000 shares) of our common stock. (See Note 12 – Common Stock.) LPC has no right to require the Company to sell any shares of
common stock to LPC, but LPC is obligated to make purchases as the Company directs, subject to certain conditions. The purchase price per share for each
such Regular Purchase will be based off of prevailing market prices of our common stock immediately preceding the time of sale without any fixed discount.
Other than as described above and Note 12 – Common Stock, there are no trading volume requirements or restrictions under the Purchase Agreement, and the
Company will control the timing and amount of any sales of our common stock to LPC.
2020 Warrant Offering
On April 15, 2020, the Company reduced the exercise price of the outstanding Series A warrants and Series B warrants from $15.50 per share to $6.10 per
share. On April 16, 2020, the Company entered into inducement letter agreements with certain institutional and accredited holders of Series A warrants and
Series B warrants pursuant to which such holders agreed to exercise Series A warrants to purchase 482,059 shares of common stock and Series B warrants to
purchase 24,279 shares of common stock for aggregate exercise proceeds to the Company of approximately $3,089,000. In conjunction, the Company also
agreed to issue new Series A-2 warrants to purchase up to 482,059 shares of common stock as an inducement for the exercise of Series A warrants, and new
Series B-2 warrants to purchase up to 24,279 shares of common stock as an inducement for the exercise of Series B warrants, in each case at an exercise price
of $6.371 per share and for a term of five years. The transaction closed on April 20, 2020. Transaction costs in connection with the 2020 Warrant Offering
totaled approximately $334,000. (See Note 12 – Common Stock.) As of December 31, 2020, there were Series A-2 warrants to purchase a total of 392,830
shares of common stock and Series B-2 warrants to purchase a total of 20,380 shares of common stock still remaining and outstanding.
2019 Public Offering and CRG Debt Conversion
In November 2019, the Company closed an underwritten public offering of units (the “November 2019 Offering”) for gross proceeds of approximately
$11,500,000, which included the full exercise of the underwriter's overallotment option to purchase additional shares and warrants. The net proceeds to the
Company, after deducting underwriting discounts and commissions and other offering expenses and payable by the Company, were approximately $9,922,000.
The offering comprised of: (1) Class A Units, priced at a public offering price of $15.50 per unit, with each unit consisting of one share of common stock, a
Series A warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the first anniversary of the date of issuance
and a Series B warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the fifth anniversary of the issuance;
and (2) Class B Units, priced at a public offering price of $15.50 per unit, with each unit consisting of one share of Series A convertible preferred stock,
convertible into one share of common stock, a Series A warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on
the first anniversary of the date of issuance and a Series B warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires
on the fifth anniversary of the issuance.
The securities comprising the units were immediately separable and were issued separately.
A total of 194,595 shares of common stock, 547,345 shares of Series A convertible preferred stock, Series A warrants to purchase up to 741,939 shares of
common stock, and Series B warrants to purchase up to 741,939 shares of common stock were issued in the offering, including the full exercise of the over-
allotment option. As of December 31, 2020, all Series A convertible preferred stock had been converted into common stock and there were no remaining
shares of Series A convertible preferred stock outstanding. As of December 31, 2020, all Series A warrants to purchase shares of common stock had been
exercised and there were no remaining Series A warrants outstanding. As of December 31, 2020, there were Series B warrants to purchase a total of 325,632
shares of common stock still remaining and outstanding. (See Note 11 – Preferred Stock; and Note 12 – Common Stock.)
In connection with the closing of the November 2019 Offering, the Company’s secured lender, affiliates of CRG LP (“CRG”), converted approximately
$28,981,000 of the outstanding principal amount under its term loan with CRG (plus accrued interest, the prepayment premium and the back-end facility fee
applicable thereto), for an aggregate amount of converted debt obligations of approximately $31,300,000, into 31,300 shares of the newly authorized Series B
convertible preferred stock and issued warrants to purchase up to 989,379 shares of common stock (see Note 7 – Note Payable). These warrants have a term of
5 years and an exercise price equal to 120% of the Series B convertible preferred stock conversion price of $15.30 or $18.36 per share. CRG also entered into a
one year lock up agreement on all securities that it holds.
F-8
Liquidity and Management Plans
Management evaluates 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, 2020, the
Company had accumulated deficit of $219,826,000, cash and cash equivalents of $6,523,000 and working capital of $8,628,000. Additionally, the Company
used $15,234,000 in cash for operations in the year ended December 31, 2020. The Company's financing activities provided cash of $9,230,000 during the year
ended December 31, 2020, which was primarily due to the exercise of common warrants. The Company will require additional cash funding to fund operations
through March 31, 2022. Accordingly, the Company concluded there was substantial doubt about the Company’s ability to continue as a going concern as of
December 31, 2020. However, due to the Company’s January 2021 Offering for net proceeds of approximately $25,223,000 and the remaining equity financing
commitment of $9,700,000 from LPC, management 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.
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.
Reverse Stock Split - December 2020
The Company effected a 1-for-10 reverse stock split of its common stock that became effective after market close on December 1, 2020. The reverse stock
split uniformly affected all issued and outstanding shares of the Company’s common stock. The reverse stock split provided that every ten shares of the
Company’s issued and outstanding common stock was automatically combined into one issued and outstanding share of common stock, without any change in
par value per share. The number of authorized shares of common stock remained at 75,000,000 shares.
As a result of the reverse stock split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the
exercise or vesting of all then outstanding stock options, deferred restricted stock awards and warrants, which will result in a proportional decrease in the
number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, deferred restricted stock awards and
warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the
number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective date will be reduced
proportionately. The Company issued 5,931 shares of common stock as a result of this adjustment.
No fractional shares were issued as a result of the reverse stock split. Stockholders of record who would otherwise have been entitled to receive a fractional
share were rounded up to the nearest whole number.
All of the share numbers, share prices, and exercise prices have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split.
F-9
Reverse Stock Split - September 2019
The Company effected a 1-for-100 reverse stock split of its common stock that became effective after market close on September 18, 2019. The reverse stock
split uniformly affected all issued and outstanding shares of the Company’s common stock. The reverse stock split did not alter any stockholder's percentage
ownership interest in the Company, except to the extent that the reverse stock split resulted in fractional shares. No fractional shares were issued in connection
with the reverse stock split. Any fractional shares that resulted from the reverse stock split were rounded down, and stockholders were issued cash in lieu of
such fractional share interest of approximately $6,000.
The par value of the Company’s common stock remained unchanged at $0.0001 per share after the reverse stock split.
The number of authorized shares of common stock remained at 75,000,000.
The reverse stock split proportionately affected the number of shares of common stock available for issuance under the Company’s equity incentive plans. All
stock options, warrants and restricted stock awards of the Company outstanding shares immediately prior to the reverse stock split were adjusted in accordance
with their terms.
On the effective date of the reverse stock split, (i) each 100 shares of outstanding common stock were reduced to one share of common stock; (ii) the number
of shares of common stock into which each outstanding stock option or warrant to purchase common stock is exercisable were proportionately reduced on an
100-to-1 basis; (iii) the exercise price of each outstanding stock option or warrant to purchase common stock were proportionately increased on a 1-to-100
basis; and (iv) the number of shares of common stock each outstanding restricted stock award will be issued upon vesting were proportionally reduced on a
100-to-1 basis.
All of the share numbers, share prices, and exercise prices have been adjusted, on a retroactive basis, to reflect this 1-for-100 reverse stock split.
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 accounting standard for leases, the Company has consistently applied the accounting policies to all periods
presented in these consolidated financial statements.
Adoption of New Accounting Standard-Leases
The Company adopted FASB’s Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the modified
retrospective approach. The modified retrospective approach provides a method for recording existing leases at the beginning of the period of adoption. In
addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things,
allowed us to carry forward the historical lease classification and we elected the hindsight practical expedient to determine the lease term for existing leases.
We determined that the renewal options for the facilities lease would be reasonably certain to be renewed and as such, included that renewal period in
determining the expected lease term of that lease. Adoption of the new standard resulted in the recording of operating lease right-of-use assets of $629,000 and
operating lease liabilities of $629,000, as of January 1, 2019. The standard did not have an impact on our consolidated results of operations, cash flows or
stockholders’ equity previously reported. The comparative information has not been restated and continues to be reported under the accounting standards in
effect for those periods.
F-10
The effect of the changes made to our consolidated January 1, 2019 balance sheet for the adoption of the new lease standard was as follows (in thousands):
Other assets
Total assets
Accrued liabilities
Total current liabilities
Other noncurrent liabilities
Total liabilities
Total liabilities and stockholders' equity
December 31,
2018
Adjustments
Due to
Adoption of
ASC 842
January 1,
2019
$
$
$
$
$
$
$
171 $
46,834 $
6,766 $
10,760 $
634 $
41,922 $
46,834 $
629(1) $
629(1) $
230(2) $
230(2) $
399(2) $
629(2) $
629(2) $
800
47,463
6,996
10,990
1,033
42,551
47,463
(1) Represents capitalization of operating lease right-of-use assets and reclassification of deferred rent.
(2) Represents recognition of operating lease liabilities.
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 U.S. Food and Drug Administration (“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 radiofrequency 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. 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, 2020, one distributor accounted for 36% of the Company’s
revenue. During the year ended December 31, 2019, one distributor accounted for 16% of the Company’s revenue.
There were no direct sales to customers that accounted for more than 10% of the Company’s revenue during the years ended December 31, 2020 and 2019.
As of December 31, 2020, one distributor, accounted for 37% of total accounts receivable, net. As of December 31, 2019, two distributors, collectively,
accounted for 49% of total accounts receivable, net.
F-11
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 $124,000 and $407,000 as of December 31, 2020 and 2019,
respectively.
During the year ended December 31, 2020, the Company wrote-off accounts receivable totaling $736,000 primarily related to Middle Eastern and Latin
American distributors in connection with the Company’s shift in its international business model to a strategic focus on the Asia Pacific geographic territory.
During the year ended December 31, 2019, the Company wrote-off accounts receivable totaling $905,000 primarily related to U.S. distributors in connection
with the Company’s shift in its U.S. business model to a recurring revenue rental model versus selling systems under a capital equipment sales model.
Inventory
Inventory is stated at the lower of cost or net realizable value. Inventory as of December 31, 2020 consisted of $2,818,000 of finished goods and $436,000 of
raw materials. Inventory as of December 31, 2019 consisted of $4,051,000 of finished goods and $810,000 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 recurring revenue rental model, the Company utilizes Viveve Systems transferred from finished goods inventory. The Company is
amortizing these units over an estimated useful life of five years. The amortization of these Viveve Systems is charged to cost of sales and these units are
included in the property and equipment, net balance on the consolidated balance sheets as of December 31, 2020 and 2019.
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 property and equipment, net balance on the consolidated balance sheets as of
December 31, 2020 and 2019.
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.
F-12
Revenue from Contracts with Customers
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.
Rental revenue is generated through the lease of the Viveve System. The Company’s operating leases for the Viveve System generally have a rental period of
six to nine months and can be extended or terminated by the customer after that time or the Viveve System could be purchased by the customer. Rental
revenue on those operating leases is recognized on a straight-line basis over the terms of the underlying leases. The Company began this rental program in the
quarter ended June 30, 2019. For the years ended December 31, 2020 and 2019, rental revenue recognized was $1,337,000 and $530,000. As of December 31,
2020 and 2019, the Company had deferred revenue in the amount of $345,000 and $662,000 related to its rental program. During the year ended December 31,
2020, the Company recognized $594,000 of rental revenue, which was deferred as of December 31, 2019.
Late in the first quarter of 2020, the negative impact of the COVID-19 pandemic on medical facilities and practitioners was in full effect in the United States.
Federal, regional, and local government and public health agencies issued directives halting performance of non-essential medical treatments and elective
procedures in an effort to combat the spread of the coronavirus and protect public health and safety. As a result, an estimated 70-80% of Viveve’s U.S.
customers either temporarily closed their medical practices or dramatically reduced services and staff. The consequence has been both a public health and
economic crisis that is continuing for existing and prospective Viveve customers. In a supportive partnership response, Viveve contacted all of its subscription
customers and provided them with a three-month deferral of the rental payment. Although clinics in various regions are beginning to re-open and provide
limited services, we anticipate that until the COVID-19 pandemic abates, more practices begin to re-open and elective patient’s safety concerns are reduced,
that we will continue to experience reduced revenue from existing subscription customers, as well as a greatly reduced number of new and prospective
customers.
In connection with the lease of the Viveve System, the Company offers single-use treatment tips and ancillary consumables that are considered non-lease
components. In the contracts with lease and non-lease components, the Company follows the relevant guidance in ASC 606, Revenue from Contracts with
Customers, to determine how to allocate contractual consideration between the lease and non-lease components.
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.
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, 2020 or 2019. The Company had customer contract liabilities in the amount of $17,000
and $108,000, primarily related to marketing programs that performance had not yet been delivered to its customers as of December 31, 2020 and December
31, 2019, respectively. Contract liabilities are recorded in accrued liabilities on the consolidated balance sheets.
F-13
The following table reflects the changes in our customer contract liabilities for the year ended December 31, 2020:
Customer contracts liabilities:
Marketing programs
Total
December 31,
2020
December 31,
2019
Change
$
$
17 $
17 $
108 $
108 $
(91)
(91)
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 years
ended December 31, 2020 and 2019, 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 began its rental program in the quarter ended June 30, 2019. The Company expects that commissions paid to obtain subscriptions are
recoverable and has therefore capitalized them as a contract costs in the amount of $132,000 and $486,000 at December 31, 2020 and 2019, respectively.
Capitalized commissions are amortized based on the subscription periods to which the assets relate and are included in selling, general and administrative
expenses. For the year ended December 31, 2020 and 2019, the amount of amortization was $417,000 and $143,000, respectively. There was no impairment
loss in relation to the costs capitalized.
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.
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).
The following table presents the revenue from unaffiliated customers disaggregated by geographic area for the year ended December 31, 2020 and 2019 (in
thousands):
Asia Pacific
United States
Canada
Europe and Middle East
Latin America
Total
Year Ended
December 31,
2020
2019
$
$
2,732 $
2,537
110
86
14
5,479 $
2,349
3,672
277
254
15
6,567
The Company determines geographic location of its revenue based upon the destination of the shipments of its products.
F-14
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.
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 is 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, 2020 and 2019, no impairment charges have been recorded in the consolidated statements of operations.
Product Warranty
The Company’s products sold to customers 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, 2020 and 2019.
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, 2020 and 2019. 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.
F-15
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.
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 in the same manner as similar instruments issued to employees.
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, 2020 and 2019, 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 attributable to common stockholders 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.
Convertible preferred stock:
Series A convertible preferred stock
Series B convertible preferred stock
Warrants to purchase common stock
Stock options to purchase common stock
Deferred restricted common stock awards
December 31,
2020
2019
-(a)
2,341,111(b)
1,728,725
986,399
394
185,218
2,070,458
2,473,785
1,008,833
277
(a) Each share of Series A convertible preferred stock was convertible at any time at the holder's option into one share of common stock. In December
2020, the Company filed a Certificate of Elimination with the Delaware Secretary of State with respect to the authorized shares of Series A convertible
preferred stock. As of December 31, 2020, all Series A convertible preferred stock had been converted into common stock and there were no remaining
shares outstanding.
(b) As of December 31, 2020 and 2019, a total of 35,819 and 31,678 shares of Series B convertible preferred stock were outstanding and convertible into
2,341,111 and 2,70,458 shares of common stock, respectively. Each share of Series B convertible preferred stock is convertible at the holder's option
into shares of common stock at a conversion ratio of 1-for-65.36 per share determined by dividing the Series B liquidation amount of $1,000 per share
by the Series B conversion price of $15.30 per share. However, under the terms of the Series B Preferred Stock and Warrant Purchase Agreement, as
amended, CRG will not convert the Series B preferred stock or exercise the CRG warrants until the Company’s stockholders act to authorize additional
number of shares of common stock sufficient to cover the conversion shares.
Other Recently Issued and Adopted Accounting Standards
In November 2019, the FASB issued ASU 2019-08, “Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The
amendments in this Update require measurement and classification of share-based payment awards granted to a customer by applying the guidance in Topic
718. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with
early adoption permitted. We adopted this guidance as of January 1, 2020 and the adoption of the guidance did not have a significant impact on the
consolidated financial statements.
F-16
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740). The amendments in this Update provide further simplification of accounting
standards for the accounting for income taxes. Certain exceptions for are removed and requirements regarding the accounting for franchise taxes, tax basis of
goodwill, and tax law rate changes are made. This guidance is effective for annual reporting periods beginning after December 15, 2020, including interim
periods within that reporting period, with early adoption permitted. We will adopt this guidance as of January 1, 2021 and the adoption of the guidance is not
expected to have a significant impact on the 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, 2020 and 2019.
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, 2020 and 2019 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.
F-17
4.
Property and Equipment, Net
Property and equipment, net, consisted of the following as of December 31, 2020 and 2019 (in thousands):
Medical equipment
Rental program equipment
Computer equipment
Leasehold Improvements
Furniture and fixtures
Software
Less: Accumulated depreciation and amortization
Property and equipment, net
Life
(in years)
December 31,
2020
2019
5
5
3
3
7
3
$
$
3,111 $
1,812
242
122
386
25
5,698
(2,939)
2,759 $
2,933
1,619
243
122
385
25
5,327
(2,281)
3,046
Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $1,295,000 and $1,177,000, 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 terms of the Distribution Agreement also included a minimum purchase requirement to purchase a certain quantity of ICM products per month. In
addition, the parties agreed to certain mutual marketing obligations to promote sales of the licensed products. During the years ended December 31, 2020 and
2019, the Company has purchased 485 and 300 units of ICM products for approximately $51,000 and $26,000 and, respectively. The Company paid ICM
approximately $52,000 and $27,000 for product related costs during the years ended December 31, 2020 and 2019, respectively. There were no amounts due to
ICM for accounts payable as of December 31, 2020 and 2019.
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, 2020, the
Company owns approximately 7% 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 years ended December 31, 2020 and 2019, the allocated net loss from ICM’s operations was $383,000
and $627,000, respectively. The allocated net loss from ICM’s operations was recorded as a loss from minority interest in limited liability company in the
consolidated statements of operations.
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-18
6.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2020 and 2019 (in thousands):
Accrued bonuses
Accrued payroll and other related expenses
Deferred revenue - subscription rental program
Accrued professional fees
Current operating lease liabilities
Accrued inventory
Accrued sales commission
Customer contracts liabilities
Customer advances
Accrued interest
Other accruals
Total accrued liabilities
7.
Note Payable
December 31,
2020
December 31,
2019
$
$
744 $
473
345
290
132
87
37
17
14
9
268
2,416 $
726
839
662
592
268
474
281
108
53
440
255
4,698
On May 22, 2017, the Company entered into a Term Loan Agreement, as amended on December 12, 2017 and November 29, 2018 (collectively, 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.
In connection with the 2017 Loan Agreement, the Company issued two 10-year warrants to CRG to purchase a total of 223 shares of the Company’s common
stock at an exercise price of $9,500.00 per share. (See Note 12 – Common Stock.)
Under the 2017 Loan Agreement, as in effect prior to the November 12, 2019 amendment, the credit facility had a six-year term with four years of interest-only
payments after which quarterly principal and interest payments were to be due through the maturity date. Amounts borrowed under the 2017 Loan Agreement
accrued interest at an annual fixed rate of 12.5%, 4.0% of which may, at the election of the Company, could be paid in-kind during the interest-only period by
adding such accrued amount to the principal loan amount each quarter. During the year ended December 31, 2019, the Company paid interest in-kind of
$1,226,000, which was added to the total outstanding principal loan amount. The Company was 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.
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.
The terms of the 2017 Loan Agreement also required the Company to meet certain financial and other covenants. The 2017 Loan Agreement also contained
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.
On November 12, 2019, the Company and CRG amended the 2017 Loan Agreement (the “Amendment No. 3”). In connection with the amendment, the
Company converted approximately $28,981,000 of the outstanding principal amount under the term loan plus accrued interest, the prepayment premium and
the back-end facility fee for an aggregate amount of converted debt obligations of approximately $31,300,000. The debt obligations converted into 31,300
shares of the newly authorized Series B convertible preferred stock and warrants to purchase up to 989,379 shares of common stock were also issued. The
warrants have a term of 5 years and an exercise price equal to 120% of the Series convertible B preferred stock conversion price of $15.30 or $18.36 per share.
(See Note 12 – Common Stock.) CRG entered into a one year lock up agreement on all securities that it holds.
F-19
The Amendment No. 3 to the 2017 Loan Agreement addressed, among other things:
●
●
repayment provisions were amended such that repayment is permitted only with, or after, the redemption in full of the Series B convertible preferred
stock issued to CRG;
the interest only payment period and the period during which the Company may elect to pay the full interest in PIK interest payments was extended
through the 23rd date after the first payment date. Pursuant to the amendment, CRG shall consent to the payment of such interest in the form of PIK
loans, provided that (i) as of such payment date, no default shall have occurred and be continuing, and (ii) the principal amount of each PIK loan shall
accrue interest in accordance with the provisions of the 2017 Loan Agreement;
● modified certain of the covenants, including (i) to permit issuance of the Series B convertible preferred stock and any preferred stock issued in the
equity financing and the exercise and performance by the Company of its rights and obligations in connection with such CRG preferred stock and any
preferred stock issued in the equity financing, (ii) eliminate the Company’s ability to enter into permitted acquisitions, (iii) further restrict the
incurrence of additional indebtedness and removal of the equity cure right, and (iv) eliminate the minimum revenue requirement; and
the back-end facility fee on the aggregate remaining principal balance on the term loan shall be increased from 5% to 25%.
●
Pursuant to the amendment, the Company paid interest in-kind of $532,000 during the year ended December 31, 2020, which was added to the total
outstanding principal loan amount.
As of December 31, 2020, the Company was in compliance with all covenants.
As of December 31, 2020 and 2019, $4,518,000 and $3,983,000 was recorded on the consolidated balance sheets as note payable, noncurrent portion, which is
net of the remaining unamortized debt discount. The term loan has a maturity date of March 31, 2023.
The Company accounted for the changes in the 2017 Loan Agreement as a troubled debt restructuring. The Company reduced the amount of the debt
obligation by the fair value of the equity interests transferred. The remaining difference was charged to the loss on debt restructuring and reported on the
consolidated statements of operations and comprehensive loss. The equity interests transferred included the 31,300 shares of the newly authorized Series B
convertible preferred stock and warrants to purchase up to 989,379 shares of common stock. The Company determined the fair value of the Series B
convertible preferred stock on November 26, 2019 using the option pricing method. The fair value of the Series B convertible preferred stock was determined
to be $1,023.23 for an aggregate fair value amount of approximately $32,027,000. (See Note 11 – Preferred Stock.) The Company determined the fair value of
the warrants on the date of issuance to be approximately $3,502,000 using the Black-Scholes option pricing model (see Note 12 – Common Stock.) After
consideration of the fair value of the equity interests transferred and the carrying value of the debt, the remaining difference is the loss on debt restructuring of
$6,705,000, which was recorded in the consolidated statement of operations for the year ended December 31, 2019.
As of December 31, 2020, future minimum payments under the note payable were as follows (in thousands):
Year Ending December 31,
2021
2022
2023
Total payments
Less: Amount representing interest
Present value of obligations
Less: Unamortized debt discount
Note payable, noncurrent portion
8.
Paycheck Protection Program Loan
$
$
-
-
5,992
5,992
(1,465)
4,527
(9)
4,518
The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is
administered by the U.S. Small Business Administration (“SBA”). On April 24, 2020, Viveve, Inc. (“Viveve”), a wholly-owned subsidiary of the Company,
entered into a promissory note evidencing an unsecured loan in the aggregate amount of approximately $1,343,000 made to Viveve under the PPP (the “PPP
Loan”). The PPP Loan to Viveve is being made through Western Alliance Bank. The interest rate on the PPP Loan is 1.00% and the term is two years. In
accordance with the updated Small Business guidance, the PPP Loan was modified so that, beginning ten months from the date of the PPP Loan, Viveve is
required to make monthly payments of principal and interest. The promissory note evidencing the PPP Loan contains customary events of default relating to,
among other things, payment defaults or breaching the terms of the PPP Loan documents. The occurrence of an event of default may result in the repayment of
all amounts outstanding, collection of all amounts owing from Viveve, or filing suit and obtaining judgment against Viveve. Under the terms of the CARES
Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined,
subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. No assurance is
provided that Viveve will obtain forgiveness of the PPP Loan in whole or in part.
F-20
In October 2020, the Company was notified that the terms of its PPP Loan with Western Alliance Bank were modified. The amount of time that the Company
had to spend the proceeds of the PPP Loan (the “covered period”) was extended from 8 weeks to 24 weeks. The date to begin repaying unforgiven portions of
the PPP Loan was also extended from six months after the funding date to up to 10 months after the end of the covered period (approximately 16 months from
the funding date) depending on when the Company applies for forgiveness. The SBA will also cover interest on the forgiveness portion of the loan during this
period. There was no change to the maturity date of the loan. All PPP Loans must be repaid or forgiven within two years after the funding date. The Company
submitted its PPP Loan forgiveness application to the SBA in October 2020. However, no assurance can be given that the PPP Loan will be forgiven.
As of December 31, 2020, future minimum payments under the PPP Loan are as follows (in thousands):
Year Ending December 31,
2021
2022
Total payments
Less: Amount representing interest
Present value of obligations
Paycheck Protection Program loan,current portion
Paycheck Protection Program loan, noncurrent portion
$
$
938
426
1,364
(20)
1,344
918
425
9.
Leases
Lessee:
The following information pertains to those operating lease agreements where the Company is the lessee.
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 2021. 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.
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 lease payment is approximately $3,000.
After the adoption of ASU 842 – Leases on January 1, 2019, operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on
the date the Company takes possession of the property. At lease inception, the Company determines the lease term by assuming the exercise of those renewal
options that are reasonably assured. The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent
expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Leases with an initial term of 12 months or less are
not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
F-21
The following table reflects the Company's lease assets and lease liabilities at December 31, 2020 and 2019. (in thousands):
Assets:
Operating lease right-of-use assets
Liabilities:
Current operating lease liabilities
Noncurrent operating lease liabilities
December 31,
2020
December 31,
2019
$
$
$
130 $
132 $
-
132 $
395
268
132
400
The operating lease right-of-use assets are included in other assets on the consolidated balance sheets. The operating lease liabilities are included in accrued
liabilities and other noncurrent liabilities on the consolidated balance sheets.
The operating lease expense for the years ended December 31, 2020 and 2019 was $300,000 and $301,000, respectively.
As of December 31, 2020, the maturity of operating lease liabilities was as follows (in thousands):
Year Ending December 31,
2021
Total lease payments
Less: Amount representing interest
Present value of lease liabilities
$
$
137
137
(5)
132
The weighted average remaining lease term was approximately 5 months as of December 31, 2020. The weighted average discount rate for the year ended
December 31, 2020 was 12.5%.
Lessor:
The following information pertains to those operating lease agreements where the Company is the lessor.
As of December 31, 2020, minimum future rentals from customers on non-cancellable operating leases of Viveve Systems are as follows (in thousands):
Year Ending December 31,
2021
Thereafter
Total
$
$
345
-
345
As of December 31, 2020, the Company included rental program equipment related to these operating leases agreements with a net value of $841,000 in
property and equipment, net. The depreciation expense for rental program equipment for the years ended December 31, 2020 and 2019 is $462,000 and
$121,000, respectively.
10.
Commitments and Contingencies
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 amounts 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.
F-22
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.
11.
Preferred Stock
Series A Convertible Preferred Stock
In connection with the closing of a public offering, on November 26, 2019, the Company filed the Certificate of Designation of Preferences, Rights and
Limitations of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series
A Certificate of Designation provides for the issuance of the shares of Series A convertible preferred stock. The shares of Series A convertible preferred stock
rank on par with the shares of the common stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of
the Company.
With certain exceptions, as described in the Series A Certificate of Designation, the shares of Series A convertible preferred stock have no voting rights.
Each share of Series A convertible preferred stock is convertible at any time at the holder’s option into one share of common stock, which conversion ratio
will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the
Series A Certificate of Designation.
A total of 547,345 shares of Series A convertible preferred stock were issued in the November 2019 Offering. In November and December of 2019, the
holders of Series A convertible preferred stock converted 362,127 shares into common stock and as of December 31, 2019, 185,218 shares of Series A
convertible preferred stock were remaining and outstanding. In January and February of 2020, the holders of Series A convertible preferred stock converted
the remaining 185,218 shares into common stock.
On December 16, 2020, the Company filed a Certificate of Elimination with the Delaware Secretary of State with respect to the authorized shares of Series A
convertible preferred stock. As of the date of the filing of the Certificate of Elimination, no shares of Series A convertible preferred stock were outstanding.
Upon filing the Certificate of Elimination, the 547,345 authorized shares of Series A convertible preferred stock were returned to the status of authorized but
unissued shares of preferred stock of the Company, without designation as to series or rights, preferences, privileges or limitations.
Series B Convertible Preferred Stock
As previously reported (see Note 7 – Note Payable), the CRG debt obligations converted into 31,300 shares of the newly authorized Series B convertible
preferred stock and warrants to purchase up to 989,379 shares of common stock were also issued.
In connection with the CRG debt conversion, on November 26, 2019, the Company filed the Certificate of Designation of Preferences, Rights and Limitations
of Series B Convertible Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series B
Certificate of Designation provides for the issuance of the shares of Series B convertible preferred stock. The holders of Series B convertible preferred stock
are entitled to receive compounding dividends at a rate of 12.5% per annum payable quarterly at the Company’s option through additional paid in-kind shares
of Series B convertible preferred stock or in cash. During the year ended December 31, 2019, the Company paid dividend in-kind of an additional 378 shares
of Series B convertible preferred stock and a cash dividend of approximately $2,000 for the remaining fractional shares. During the year ended December 31,
2020, the Company paid dividend in-kind of an additional 4,141 shares of Series B convertible preferred stock and a cash dividend of approximately $8,000
for the remaining fractional shares. As of December 31, 2020, there were 35,819 shares of Series B convertible preferred stock outstanding. The shares of
Series B convertible preferred stock have no voting rights and rank senior to all other classes and series of our equity in terms of repayment and certain other
rights.
F-23
We have paid approximately $10,000 in cash and issued a total of 4,519 shares of Series B convertible preferred stock as preferred dividend to the holders of
Series B convertible preferred stock through December 31, 2020.
The Series B convertible preferred stock provides that for so long as any shares are outstanding, the consent of the holders of the Series B convertible preferred
stockholders would be required to amend the Company’s organizational documents, approve any merger, sale of assets, or other major corporate transaction,
or incur additional indebtedness, among other items.
The fair value of the Series B convertible preferred stock was determined in connection with the CRG debt conversion as part of the accounting for that
transaction as a troubled debt restructuring. Based on our valuation analysis, as of November 26, 2019, the date of issuance, the estimated fair value of the
Series B convertible preferred stock was $1,023.23 per share or a total value of approximately $32,027,000 for the 31,300 shares of Series B convertible
preferred stock that were issued. (See Note 7 – Note Payable.)
Under the terms of the Series B Preferred Stock and Warrant Purchase Agreement, as amended, CRG will not convert the Series B convertible preferred stock
or exercise the warrants until the Company’s stockholders act to authorize additional number of shares of common stock sufficient to cover the conversion
shares.
12.
Common Stock
Purchase Agreement with Lincoln Park Capital, LLC
On June 8, 2020, the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to
which the Company has the right to sell to LPC, and LPC has committed to purchase from us, from time to time, up to $10,000,000 of our common stock,
subject to certain limitations, during the 30 months term of the Purchase Agreement.
On June 9, 2020, LPC purchased 52,500 shares of common stock at a price per share of $6.50 (the “Initial Purchase Shares”) under the Purchase Agreement.
Thereafter, under the Purchase Agreement, on any business day selected by us (the “Purchase Date”), the Company may direct LPC to purchase up to 25,000
shares of our common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to
30,000 shares, provided that the closing sale price of our common stock is not below $10 on the Purchase Date and (ii) the Regular Purchase may be increased
to up to 50,000 shares, provided that the closing sale price of our common stock is not below $20 on the Purchase Date. In each case, LPC’s maximum
commitment in any single Regular Purchase may not exceed $1,000,000. LPC has no right to require the Company to sell any shares of common stock to LPC,
but LPC is obligated to make purchases as the Company directs, subject to certain conditions. The purchase price per share for each such Regular Purchase will
be based off of prevailing market prices of our common stock immediately preceding the time of sale without any fixed discount.
In addition to Regular Purchases described above, the Company may also direct LPC, on any business day following the date on which the Company has
properly submitted a Regular Purchase notice directing LPC to purchase the maximum number of shares of our common stock that the Company is then
permitted to include in a single Regular Purchase notice (the “Accelerated Purchase Date”), to purchase an additional amount of our common stock (an
“Accelerated Purchase”), not to exceed the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase, and (ii) 30% of the
trading volume on the Accelerated Purchase Date at a purchase price equal to the lesser of (a) the closing sale price on the Accelerated Purchase Date, and (b)
95% of the Accelerated Purchase Date’s volume weighted average price. The Company shall have the right in its sole discretion to set a minimum price
threshold for each Accelerated Purchase.
Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct LPC to purchase shares in multiple Accelerated
Purchases on the same trading day, provided that all prior Accelerated Purchases (including those that have occurred earlier on the same day) have been
completed and all of the shares to be purchased thereunder (and under the corresponding Regular Purchase) have been properly delivered to LPC in accordance
with the Purchase Agreement.
Other than as described above, there are no trading volume requirements or restrictions under the Purchase Agreement, and the Company will control the
timing and amount of any sales of our common stock to LPC.
F-24
Transaction costs in connection with the Purchase Agreement with LPC totaled approximately $494,000. Included in these transaction costs was a commitment
fee paid by the Company in the amount of $325,000. While this commitment fee relates to the entire offering and the purchases of common shares that will
occur over time, the Company has recorded the entire commitment fee as issuance costs in additional paid-in capital at the time the commitment fee was paid
because the offering has been consummated, and there is no guaranteed future economic benefit from this payment.
2019 Public Offering
In November 2019, the Company closed an underwritten public offering of units (the “November 2019 Offering”) for gross proceeds of approximately
$11,500,000, which included the full exercise of the underwriter's overallotment option to purchase additional shares and warrants. The net proceeds to the
Company, after deducting underwriting discounts and commissions and other offering expenses and payable by the Company, were approximately $9,922,000.
The offering comprised of: (1) Class A Units, priced at a public offering price of $15.50 per unit, with each unit consisting of one share of common stock, a
Series A warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the first anniversary of the date of issuance
and a Series B warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the fifth anniversary of the issuance;
and (2) Class B Units, priced at a public offering price of $15.50 per unit, with each unit consisting of one share of Series A preferred stock, convertible into
one share of common stock, a Series A warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the first
anniversary of the date of issuance and a Series B warrant to purchase one share of common stock at an exercise price of $15.50 per share that expires on the
fifth anniversary of the issuance.
The securities comprising the units were immediately separable and were issued separately.
A total of 194,595 shares of common stock 547,341 shares of Series A preferred stock, Series A warrants to purchase up to 741,939 shares of common stock,
and Series B warrants to purchase up to 741,939 shares of common stock were issued in the offering, including the full exercise of the over-allotment option.
As of December 31, 2020, all Series A convertible preferred stock had been converted into common stock. (See Note 11 – Preferred Stock.)
As of December 31, 2020, there are no Series A warrants remaining to purchase shares of common stock and Series B warrants to purchase a total of
325,632 shares of common stock still remaining and outstanding. (See “Warrants for Common Stock” below.)
ATM Equity Offerings
Through the August 2019 ATM Facility, the Company may offer and sell, from time-to-time, up to $6,760,000 aggregate offering price of shares of its
common stock”). The Company’s offering of $6,760,000 of its common stock under the August 2019 ATM Facility was completed in late September 2019.
During the year ended December 31, 2019, the Company sold 100,423 shares of common stock under the August 2019 ATM Facility for net proceeds, after
deducting sales commissions and other offering costs, of approximately $6,322,000. As of December 31, 2019, the Company had no remaining capacity to
issue shares under the August 2019 ATM Facility.
In August 2019, the Company terminated the November 2017 ATM Facility under which the Company could offer and sell, from time-to-time, up to
$25,000,000 aggregate offering price of shares of its common stock. During the year ended December 31, 2019, the Company sold zero shares of common
stock under the November 2017 ATM Facility.
Restricted Common Shares
The activity of restricted common shares for the year ended December 31, 2020 is described as follows:
In March 2020, the Company issued 2,832 restricted shares of its common stock at an aggregate value of approximately $24,000.
In June 2020, the Company issued 3,453 restricted shares of its common stock at an aggregate value of approximately $25,000.
In September 2020, the Company issued 4,709 restricted shares of its common stock at an aggregate value of approximately $25,000.
F-25
The activity of restricted common shares for the year ended December 31, 2019 is described as follows:
In March 2019, the Company issued 28 restricted shares of its common stock at an aggregate value of approximately $25,000.
In October 2019, the Company issued 774 restricted shares of its common stock at an aggregate value of approximately $25,000.
In December 2019, the Company issued 3,068 restricted shares of its common stock at an aggregate value of approximately $25,000.
Warrants for Common Stock
As of December 31, 2020, outstanding warrants to purchase shares of common stock were as follows:
Issuance Date
February 2015
March 2015
May 2015
December 2015
April 2016
May 2016
June 2016
May 2017
November 2019
November 2019
April 2020
Exercisable
for
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Expiration
Date
Exercise
Price
$
February 17, 2025
$
March 26, 2025
May 12, 2025
$
December 16, 2025 $
$
April 1, 2026
$
May 11, 2021
$
June 20, 2026
May 25, 2027
$
November 26, 2024 $
November 26, 2024 $
$
April 21, 2025
4,000.00
2,720.00
4,240.00
5,600.00
6,080.00
7,740.00
4,980.00
9,500.00
6.10
18.36
6.37
As of December 31, 2019, outstanding warrants to purchase shares of common stock were as follows:
Issuance Date
February 2015
March 2015
May 2015
May 2015
December 2015
April 2016
May 2016
June 2016
May 2017
November 2019
November 2019
November 2019
Exercisable
for
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
Expiration
Date
Exercise
Price
$
February 17, 2025
$
March 26, 2025
$
May 12, 2025
May 17, 2020
$
December 16, 2025 $
$
April 1, 2026
$
May 11, 2021
$
June 20, 2026
May 25, 2027
$
November 26, 2020 $
November 26, 2024 $
November 26, 2024 $
4,000.00
2,720.00
4,240.00
4,240.00
5,600.00
6,080.00
7,740.00
4,980.00
9,500.00
18.36
15.50
15.50
Number of
Shares
Outstanding
Under
Warrants
79
2
37
31
25
6
101
223
325,632
989,379
413,210
1,728,725
Number of
Shares
Outstanding
Under
Warrants
79
2
37
22
31
25
6
101
223
989,379
741,940
741,940
2,473,785
In connection with the November 2019 Offering, Series A warrants to purchase up to 741,939 shares of common stock, and Series B warrants to purchase up to
741,939 shares of common stock were issued in the offering. A Series A warrant to purchase one share of common stock at an exercise price of $15.50 per
share that expires on the first anniversary of the date of issuance and a Series B warrant to purchase one share of common stock at an exercise price of $15.50
per share that expires on the fifth anniversary of the issuance. The Series A warrants to purchase one share of common stock have a contractual term of one
year and an exercise price of $15.50 per share. The Series B warrants to purchase one share of common stock have a contractual term of five years and an
exercise price of $15.50 per share. The Company determined the fair value of the Series A warrants on the date of issuance to be approximately $1,210,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 91.1%, risk free interest rate of 1.59% and a
contractual life of one year. The Company determined the fair value of the Series B warrants on the date of issuance to be approximately $2,871,000 using the
Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 68.8%, risk free interest rate of 1.58% and a contractual life of
five years. The fair value of the Series A and B warrants totaling approximately $4,081,000 is recorded as issuance costs relating to November 2019 Offering.
F-26
In February 2020, a total of 102,626 shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of
approximately $1,591,000, and a total of 4,548 shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of
approximately $70,000.
On April 15, 2020, the Company reduced the exercise price of the outstanding Series A warrants and Series B warrants from $15.50 per share to $6.10 per
share. The Series A and B warrant exercise price adjustment to $6.10 per share from $15.50 per share resulted in the recognition of a modification expense on
April 15, 2020, under the analogous guidance with respect to stock option modification under FASB ASC Topic 718, Stock-Based Compensation (ASC 718),
wherein an exchange of warrants is deemed to be a modification of the initial warrant agreement by the replacement with a revised warrant agreement,
requiring the incremental fair value, measured as the difference between the fair value immediately after the modification as compared to the fair value
immediately before the modification, to the extent an increase, recognized as a modification expense. In this regard, the Series A warrants and Series B
warrants exercise price adjustment resulted in the recognition of a current period modification expense of $1,838,000 included in other income (expense) in the
consolidated statement of operations, with a corresponding increase to additional paid-in capital in the consolidated balance sheet. The modification expense
incremental fair value was estimated using a Black-Scholes valuation model, using the following assumptions:
Exercise price
Common stock price
Expected term (in years)
Average volatility
Risk-free interest rate
Dividend yield
Immediately
before Modification
Immediately
After Modification
$
$
$
$
15.50
6.30
2.8
97%
0.27%
0%
6.10
6.30
2.8
97%
0.27%
0%
On April 16, 2020, the Company entered into inducement letter agreements with certain institutional and accredited holders of Series A warrants and Series B
warrants pursuant to which such holders agreed to exercise Series A warrants to purchase 482,059 shares of common stock and Series B warrants to purchase
24,279 shares of common stock for aggregate exercise proceeds to the Company of approximately $3,089,000.
In conjunction, the Company also agreed to issue new Series A-2 warrants to purchase up to 482,059 shares of common stock as an inducement for the
exercise of Series A warrants, and new Series B-2 warrants to purchase up to 24,279 shares of common stock as an inducement for the exercise of Series B
warrants, in each case at an exercise price of $6.371 per share and for a term of five years. The Company determined the fair value of the Series A-2 and the
Series B-2 warrants on the date of issuance to be approximately $1,838,000 using the Black-Scholes option pricing model. Assumptions used were dividend
yield of 0%, volatility of 84.1%, risk free interest rate of.35% and a contractual life of five years. The fair value of the Series A-2 and B-2 warrants is recorded
as a cost of issuance of the offering and as additional paid-in capital. The transaction closed on April 20, 2020. Other transaction costs in connection with the
2020 Warrant Offering were approximately $334,000.
In May 2020, a total of 410 shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$2,000.
In June 2020, a total of 2,761 shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$17,000, and a total of 5,070 shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of approximately
$31,000.
F-27
In August 2020, a total of 111,704 shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of
approximately $681,000, and a total of 380,913 shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of
approximately $2,324,000.
In August 2020, a total of 89,230 shares of common stock were issued in connection with the exercise of Series A-2 warrants for gross proceeds of
approximately $568,000, and a total of 3,899 shares of common stock were issued in connection with the exercise of Series B-2 warrants for gross proceeds of
approximately $25,000.
In September 2020, a total of 1,500 shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of
approximately $9,000.
As of December 31, 2020, there were no Series A warrants remaining to purchase shares of common stock and Series B warrants to purchase a total of 325,632
shares of common stock still remaining and outstanding.
As of December 31, 2020, there were Series A-2 warrants to purchase a total of 392,830 shares of common stock, and Series B-2 warrants to purchase a total
of 20,380 shares of common stock still remaining and outstanding.
In connection with the CRG Debt Conversion, CRG received warrants exercisable for 989,379 shares of common stock, an amount equal to 15% of our
common stock on a fully diluted basis after taking the November 2019 Offering into account (the “CRG Warrants”). The CRG Warrants have a contractual
term of five years and an exercise price equal to 120% of the Series B convertible preferred stock conversion price of $15.30 or $18.36 per share. The
Company determined the fair value of the warrants on the date of issuance to be approximately $3,502,000 using the Black-Scholes option pricing model.
Assumptions used were dividend yield of 0%, volatility of 68.8%, risk free interest rate of 1.58% and a contractual life of five years. The fair value of the CRG
warrants is recorded as additional paid-in capital as part of the accounting for the debt conversion.
In connection with the 2017 Loan Agreement, the Company issued warrants to purchase a total of 223 shares of common stock at an exercise price of
$9,500.00 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, 2020 and 2019, the Company recorded
$3,000 and $352,000, respectively, of interest expense relating to the debt issuance costs using the effective interest method. As of December 31, 2020, the
unamortized debt discount was $9,000.
During the year ended December 31, 2020, a total of 1,209,000 shares were issued in connection with the exercise of warrants for gross proceeds of
approximately $8,407,000. No shares were issued in connection with the exercise of warrants during the year ended December 31, 2019.
No shares issuable pursuant to warrants have been cancelled during the year ended December 31, 2020 and 2019.
A total of 42,404 shares issuable pursuant to warrants expired during the year ended December 31, 2020. A total of 140 shares issuable pursuant to warrants
expired during the year ended December 31, 2019.
13.
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”).
As of December 31, 2020, there are outstanding stock option awards issued from the 2006 Plan covering a total of 12 shares of the Company’s common stock
and no shares are available for future awards. The weighted average exercise price of the outstanding stock options is $9,920.00 per share and the weighted
average remaining contractual term is 2.1 years.
F-28
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.
In January 2019, the board of directors approved the 2019 evergreen provision increasing the total stock reserved for issuance under the 2013 Plan by 2,044
shares from 4,914 shares to a total of 6,958 shares, which was effective January 1, 2019.
In September 2019, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of common stock reserved for
issuance thereunder to equal 18% of the issued and outstanding shares of common stock of the Company on a fully diluted basis calculated as of the earlier of:
(1) the day immediately after the consummation of the Company’s next underwritten public equity offering with gross proceeds of $5.0 million or more; or (2)
December 31, 2019. Accordingly, the total stock reserved for issuance under the 2013 Plan increased to a total of 1,187,253 shares, which was effective
November 26, 2019.
In January 2020, the board of directors approved the 2020 evergreen provision increasing the total stock reserved for issuance under the 2013 Plan by 263,993
shares from 1,187,253 shares to a total of 1,451,246 shares, which was effective January 1, 2020.
As of December 31, 2020, there are outstanding stock option awards issued from the 2013 Plan covering a total of 986,387 shares of the Company’s common
stock and there remain reserved for future awards 466,200 shares of the Company’s common stock. The weighted average exercise price of the outstanding
stock options is $18.98 per share, and the remaining contractual term is 8.9 years.
Activity under the 2006 Plan and the 2013 Plan is as follows:
Year Ended December 31, 2020
Weighted
Average
Remaining
Contractual
Term (years)
Weighted
Average
Exercise
Price
Number
of
Shares
Aggregate
Intrinsic
Value
Options outstanding, January 1, 2019
Options granted
Options exercised
Options canceled
Options outstanding, December 31, 2019
Options granted
Options exercised
Options canceled
Options outstanding, December 31, 2020
4,098 $
1,006,602 $
-
(1,867) $
1,008,833 $
146,700 $
-
(169,134) $
986,399 $
4,567.36
11.42
4,040.64
22.47
6.36
28.45
19.10
Vested and exercisable and expected to vest, December 31, 2020
923,646 $
19.77
Vested and exercisable, December 31, 2020
245,445 $
45.09
7.4 $
-
9.9 $
3,928,715
8.9 $
8.9 $
8.6 $
675
598
-
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, 2020.
F-29
The options outstanding and exercisable as of December 31, 2020 are as follows:
Range of
Exercise Prices
$4.45 - $8.91
$10.90 - $13.60
$380.00 - $580.00
$1,000.00 - $1,970.00
$2,020.00 - $2,830.00
$3,110.00 - $3,580.00
$4,360.00 - $4,970.00
$5,010.00 - $5,670.00
$6,000.00 - $6,000.00
$7,140.00 - $7,920.00
$9,920.00 - $9,920.00
Total:
Number
Outstanding
as of
December 31, 2020
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Number
Exercisable
as of
December 31, 2020
Weighted
Average
Exercise
Price
967,288 $
15,500 $
125 $
1,954 $
74 $
189 $
619 $
300 $
138 $
200 $
12 $
986,399 $
8.32
12.64
552.00
1,426.46
2,501.22
3,439.26
4,549.77
5,366.00
6,000.00
7,679.20
9,920.00
19.10
8.9
9.2
8.4
7.6
7.0
7.6
6.2
6.2
5.0
4.1
2.1
8.9
238,900 $
3,750 $
113 $
1,334 $
53 $
156 $
510 $
285 $
138 $
194 $
12 $
245,445 $
8.69
13.60
567.61
1,437.21
2,520.19
3,455.90
4,554.04
5,356.84
6,000.00
7,676.29
9,920.00
45.09
Deferred Restricted Stock Awards
As of December 31, 2020, there are 234 shares of unvested restricted stock outstanding that have been granted pursuant to deferred restricted stock awards
(“RSAs”).
During the year ended December 31, 2020, no RSAs for shares of common stock under the 2013 Plan were granted by the Company.
In June 2020, the Company issued 25 shares of common stock to a consultant in connection with the annual vesting of an RSA granted to the consultant in
June 2018.
In July 2019, the Company issued 38 shares of common stock under the 2013 Plan to members of the Company’s board of directors with a weighted average
grant date fair value of $380.80 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 38 shares of common stock were issued.
In June 2019, the Company issued 25 shares to a consultant in connection with the vesting of an RSA granted to the consultant in June 2018.
In April 2019, the Company issued 53 shares of common stock under the 2013 Plan to board members as director compensation with a weighted average grant
date fair value of $910.00 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 53 shares of common stock were issued.
In January 2019, the Company granted RSAs for 384 shares of common stock under the 2013 Plan to employees as part of their 2018 annual performance
bonuses. The bonuses for 2018 performance were paid 50% in cash and 50% in the form of RSAs that will vest in full upon FDA approval of the Viveve
System for improvement of sexual function or stress urinary incontinence in the United States. During the year ended December 31, 2020, a total of 18 shares
pursuant to these RSAs were cancelled. During the year ended December 31, 2019, a total of 132 shares pursuant to these RSAs were cancelled. As of
December 31, 2020, zero shares were vested and issued.
F-30
2017 Employee Stock Purchase Plan
In August 2017, the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”). Eligible employees may purchase shares
of common stock through periodic payroll deductions, with a maximum purchase of 200 shares of common stock in any offering period. The price of common
stock purchased under the 2017 ESPP is equal to 85% of the lesser of the fair market value of common stock on the first or last day of the offering period. Each
offering period is for a period of three months. In September 2020, the board of directors approved the suspension of the Company’s 2017 ESPP following the
twelfth offering period and the ESPP purchase on September 30, 2020.
During the years ended December 31, 2020 and 2019, the Company’s 2017 ESPP issued 84 shares and 154 shares, respectively, for aggregate offering
proceeds of approximately $1,000 and $56,000, respectively.
The Company estimated the fair value of purchase rights under the ESPP using the Black-Scholes option valuation model and the straight-line attribution
approach.
As of December 31, 2020, the remaining shares available for issuance under the 2017 ESPP were 22 shares.
Stock-Based Compensation
During the years ended December 31, 2020 and 2019, the Company granted stock options to employees and nonemployees to purchase 146,700 and 1,006,602
of common stock with a weighted average grant date fair value of $4.08 and $7.23 per share, respectively. There were no stock options exercised by
employees and nonemployees during the years ended December 31, 2020 and 2019.
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,
2020
2019
5
82%
0.37%
-
6
70%
1.62%
-
Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock.
The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options,
trading volume of comparable companies’ stock, look-back volatilities and the Company specific events that affected volatility in a prior period. The expected
term of stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and
cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding
options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend
yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future.
The following table shows stock-based compensation expense included in the consolidated statements of operations for the years ended December 31, 2020
and 2019 (in thousands):
Cost of revenue
Research and development
Selling, general and administrative
Total
Year Ended
December 31,
2020
2019
$
$
208 $
325
2,118
2,651 $
135
192
2,073
2,400
As of December 31, 2020, the total unrecognized compensation cost in connection with unvested stock options was approximately $4,781,000. These costs are
expected to be recognized over a period of approximately 2.5 years.
F-31
14.
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.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 in the United States. The CARES Act includes
several significant provisions for corporations, including the usage of net operating losses and payroll benefits. The Company is evaluating the impact, if any,
the CARES Act and other economic stimulus measures will have on the Company’s financials and disclosures.
The Company’s effective tax rate is 0% for the years ended December 31, 2020 and 2019.
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
Income tax benefit at statutory rate
State income taxes, net of federal benefit
Change in valuation allowance
Debt restructuring
Limitation on net operating loss and credit carryovers
Other
Effective tax rate
The components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):
Year Ended
December 31,
2020
2019
(21)%
(3)%
20%
0%
0%
4%
0%
(21)%
(4)%
(39)%
6%
56%
2%
0%
16,688
3,225
527
532
128
21,100
December 31,
2020
2019
$
20,891 $
2,866
631
773
291
25,452
(25,452)
(21,100)
$
- $
-
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
Deferred tax liabilities:
Valuation allowance
Net deferred tax assets
The Company has recorded a full valuation allowance for its deferred tax assets based on its past losses and the uncertainty regarding the ability to
project future taxable income. The valuation allowance increased by approximately $4,352,000 during the year ended December 31, 2020 and decreased by
approximately $16,506,000 during the year ended December 31, 2019.
As of December 31, 2020, the Company has net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $95,395,000
and $20,239,000, respectively. The federal NOLs do not expire and the state NOLs will begin to expire in the year 2028.
The Company also has California research and development tax credits of approximately $817,000. The 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. The Company experienced a change of control in November
2019, resulting in the expiration of a portion of the NOL and research and development credit carryforwards before utilization. Subsequent ownership changes
could further impact the limitation in future years. 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.
F-32
As of December 31, 2020, 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,
2020
2019
Balance at the beginning of the year
Additions (deletions) based upon tax positions related to the current year
Balance at the end of the year
$
$
223 $
22
245 $
450
(227)
223
If the ending balance of $245,000 of unrecognized tax benefits as of December 31, 2020 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.
15.
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, 2020, the Company has purchased 855 units. The price per unit is variable and dependent on the volume and timing of units
ordered. In conjunction with the Agreement, Stellartech purchased 38 shares of Viveve, Inc.’s common stock. Under the Agreement, the Company paid
Stellartech $1,051,000 and $4,889,000 for goods and services during the years ended December 31, 2020 and 2019, respectively.
In August 2017, the Company entered into a Distributorship Agreement with ICM. Under the terms of the Distributorship Agreement, the Company had a
minimum purchase requirement to purchase a certain quantity of ICM products per month during the term of this agreement. 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. (See Note 5 – Investment in Limited Liability Company for transactions with ICM.)
16.
Segments and Geographic Information
The Company’s long-lived assets by geographic area were as follows (in thousands):
United States
Asia Pacific
Canada
Europe
Total
December 31,
2020
2019
$
$
2,622 $
76
54
7
2,759 $
2,818
64
142
22
3,046
Long-lived assets, comprised of property and equipment, are reported based on the location of the assets at each balance sheet date.
F-33
17.
Subsequent Events
2021 Public Offering
On January 19, 2021, the Company closed an upsized underwritten public offering of units (the “January 2021 Offering”) for gross proceeds of approximately
$27,600,000, which included the exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting
underwriting discounts and commissions and offering expenses payable by Viveve.
The offering comprised of: (1) 4,607,940 Class A Units, priced at a public offering price of $3.40 per Class A Unit, with each unit consisting of one share of
common stock and one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth anniversary of the date
of issuance; and (2) 2,450,880 Class B Units, priced at a public offering price of $3.40 per Class B Unit, with each unit consisting of one share of Series C
convertible preferred stock and one warrant to purchase one share of common stock, at an exercise price of $3.40 per share that expires on the fifth
anniversary of the date of issuance. The underwriter exercised an over-allotment option to purchase an additional 1,058,820 shares of common stock and
warrants to purchase 1,058,820 shares of common stock in the offering. The net proceeds to the Company, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, are expected to be approximately $25,223,000.
Series C Convertible Preferred Stock
In connection with the closing of a public offering, on January 19, 2021, the Company filed the Certificate of Designation of Preferences, Rights and
Limitations of Series C Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series
C Certificate of Designation provides for the issuance of the shares of Series C convertible preferred stock. The shares of Series C convertible preferred stock
rank on par with the shares of the common stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of
the Company.
With certain exceptions, as described in the Series C Certificate of Designation, the shares of Series C convertible preferred stock have no voting rights.
Each share of Series C convertible preferred stock is convertible at any time at the holder’s option into one share of common stock, which conversion ratio will
be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series C
Certificate of Designation.
A total of 2,450,880 shares of Series C convertible preferred stock were issued in the January 2021 Offering. In January 2021, all Series C convertible
preferred stock were converted into common stock and there are no remaining shares of Series C convertible preferred stock outstanding.
2013 Plan - 2021 Evergreen
Effective January 1, 2021, the total common stock reserved for issuance under the 2013 Plan was increased by 307,705 shares from 1,451,246 shares to a total
of 1,758,951 shares under the evergreen provision of the 2013 Plan.
November 2019 Offering – Amendment to Warrant Pricing Terms
On January 19, 2021, the Company closed a public offering at an effective price of $3.40 per share of its common stock. As a result, the pricing terms of the
Series B, A-2 and B-2 Common Stock Purchase Warrants (the “Warrants”) were modified so that each Warrant entitles the holder to purchase one share of
common stock for an adjusted exercise price of $3.40. The exercise price for Series B Warrants was modified from $6.10 per share to $3.40 per share. The
exercise price for Series A-2 and B-2 Warrants was modified from $6.371 per share to $3.40 per share. There was no change to the quantity of warrant shares.
Annual Equity Awards
In January 2021, the Company granted annual equity awards to employees and board members for 690,000 shares of common stock issuable upon vesting of
deferred restricted stock units (RSUs) under the 2013 Plan. The RSUs vest in full on the second anniversary of the grant date.
Office Lease Amendment
In March 2021, the Company amended the sublease for its office building space. The lease term was extended for a period of 34 months and will terminate on
March 31, 2024. The monthly gross rent for the first, second and third years of the lease extension is $21,028, $21,643 and $22,258 per month, respectively.
The Company was also provided a rent abatement for the month of June 2021. Additionally, the sublandlord has agreed to perform certain construction, repair,
maintenance or other tenant improvements to the subleased premises with estimated costs of approximately $19,000.
F-34
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2020
Exhibit 4.20
Viveve Medical, Inc. (“Viveve”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): common
stock, par value $0.0001 per share (the “common stock”).
DESCRIPTION OF COMMON STOCK
The following summary description sets forth some of the general terms and provisions of the common stock. Because this is a summary description, it does not contain all
of the information that may be important to you. For a more detailed description of the common stock, you should refer to the provisions of our amended and restated
certificate of incorporation and amendments thereto and the form of certificate of designation of our Series B Preferred Stock (collectively, the “Charter”) and our amended
and restated bylaws (“Bylaws”), each of which is an exhibit to this Annual Report on Form 10-K to which this description is an exhibit.
General
Under the Charter, Viveve is authorized to issue up to 75,000,000 shares of common stock with a par value $0.0001 per share and 10,000,000 shares of preferred stock, par
value $0.0001 per share. Of our 10,000,000 shares of preferred stock, 100,000 shares are designated Series B Preferred Stock. On December 16, 2020, Viveve filed a
certificate of elimination with the State of Delaware to eliminate the Company’s class of Series A Preferred Stock.
Common Stock
The holders of common stock are entitled to one vote per share. Our Charter does not expressly prohibit cumulative voting. The holders of our common stock are entitled to
receive ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. Upon liquidation, dissolution or winding-up, the holders of
our common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock have no preemptive, subscription,
redemption or conversion rights.
The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred
stock, which may be designated solely by action of the board of directors and issued in the future.
Preferred Stock
Our board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of
preferred stock in one or more series. The directors may from time to time by resolution passed before the issue of any preferred stock of any particular series, fix the
number of shares of preferred stock of any particular series, determine the designation of the shares of preferred stock of that series and create, define and attach special
rights and restrictions to the shares of preferred stock of that series including, but without in any way limiting or restricting the generality of the foregoing: the rate or
amount of dividends, whether cumulative, non-cumulative or partially cumulative; the dates, places and currencies of payment thereof; the consideration for, and the terms
and conditions of, any purchase for cancellation or redemption thereof, including redemption after a fixed term or at a premium; conversion or exchange rights or rights of
retraction (provided that any such conversion or exchange rights or rights of retraction shall be in accordance with the provisions existing at the time of creation of such
series relating to conversion, exchange, or retraction as prescribed by the policies of any stock exchange on which our shares are then listed); the terms and conditions of any
share purchase plan or sinking fund; and voting rights and restrictions.
Holders of preferred stock will be entitled, on the distribution of our assets or in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or
on any other distribution of our assets among our stockholders for the purpose of winding-up our affairs, to receive before any distribution to be made to holders of common
stock or any other shares of stock ranking junior to the preferred stock with respect to repayment of capital, but after any distributions shall be made on any Series B
preferred stock or any of our existing or future indebtedness, the amount due to the holders of preferred stock in accordance with our Charter with respect to each share of
preferred stock held by them, together with all accrued and unpaid cumulative dividends on Series B preferred stock and any preferential dividends on any other series of
preferred stock, and all declared and unpaid non-cumulative dividends (if any and if preferential) on any series of preferred stock.
Except for voting rights that may be attached to any series of the preferred stock by the directors, holders of preferred stock will not be entitled to vote at any meeting of our
stockholders. Holders of Series B Preferred Stock do not have any rights with respect to such shares prior to conversion of such shares to common stock. Holders of
preferred stock will be given notice of and be invited to attend meetings of our voting stockholders.
It is not possible to state the actual effect of the issuance of any other preferred stock upon the rights of holders of our common stock until the board of directors determines
the specific rights of the holders of such preferred stock. However, the effects might include, among other things:
impairing dividend rights of our common stock;
diluting the voting power of our common stock;
impairing the liquidation rights of our common stock; and
delaying or preventing a change of control without further action by our stockholders.
●
●
●
●
Listing
Our common stock is listed on The NASDAQ Capital Market under the symbol “VIVE.”
Delaware as the Exclusive Jurisdiction for State Law Claims
Unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law
claim for: (1) any derivative action or proceeding brought on the Company's behalf; (2) any action asserting a claim of, or a claim based on, breach of a fiduciary duty or
other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders; (3) any action asserting a claim against us or our directors, officers,
employees or stockholders arising pursuant to any provision of the Delaware General Corporation Law or our Charter and Bylaws; or (4) any action asserting a claim
governed by the internal affairs doctrine (the “Delaware Forum Provision”); provided, however, that this Delaware Forum Provision does not apply to any actions arising
under the Securities Act or the Exchange Act. The Delaware Forum Provision may impose additional litigation costs on stockholders in pursuing such claims, particularly if
the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision may limit our stockholders' ability to bring a claim in a judicial
forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of such lawsuits. The Court of Chancery of the
State of Delaware may also reach different judgment or results than would other courts, including courts where a stockholder considering an action may be located or would
otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
Antitakeover Effects of Delaware Law and Provisions of our Charter and Bylaws
Certain provisions of the Delaware General Corporation Law and of our Charter and Bylaws could have the effect of delaying, deferring or discouraging another party from
acquiring control of us unless such takeover or change of control is approved by the board of directors. These provisions, which are summarized below, are expected to
discourage certain types of coercive takeover practices and inadequate takeover bids and, as a consequence, they might also inhibit temporary fluctuations in the market
price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions are also designed in part to encourage anyone seeking to
acquire control of us to first negotiate with our board of directors. These provisions might also have the effect of preventing changes in our management. It is possible that
these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests. However, we believe that the
advantages gained by protecting our ability to negotiate with any unsolicited and potentially unfriendly acquirer outweigh the disadvantages of discouraging such proposals,
including those priced above the then-current market value of our common stock, because, among other reasons, the negotiation of such proposals could improve their
terms.
Delaware Takeover Statute
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder,
unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is
prohibited unless it satisfies one of the following conditions:
•
•
•
before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding,
shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the
interested stockholder; or
at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special
meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines a business combination to include:
•
•
•
•
•
any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, lease, pledge, exchange, mortgage or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the
corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any
entity or person affiliated with or controlling or controlled by the entity or person.
Provisions of our Charter and Bylaws
Our Charter and Bylaws include a number of provisions that may have the effect of delaying, deferring or discouraging another party from acquiring control of us and
encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated
takeover attempts. These provisions include the items described below.
Board composition and filling vacancies. In accordance with our Charter, our board is divided into three classes serving staggered three-year terms, with one class being
elected each year. Our Charter also provides that directors may be removed only for cause and then only by the affirmative vote of the holders of 75% or more of the shares
then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the
size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum.
No written consent of stockholders. Our Charter provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting,
and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and
would prevent the amendment of our Bylaws or removal of directors by our stockholder without holding a meeting of stockholders.
Meetings of stockholders. Our Bylaws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and
only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our Bylaws limit the business that
may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Advance notice requirements. Our Bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as
directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing
to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less
than 90 days or more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in
our Bylaws.
Amendment to Charter and Bylaws. As required by the Delaware General Corporation Law, any amendment of our Charter must first be approved by a majority of our
board of directors, and if required by law or our Charter, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment, and a
majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, directors,
limitation of liability and the amendment of our Charter must be approved by not less than 75% of the outstanding shares entitled to vote on the amendment, and not less
than 75% of the outstanding shares of each class entitled to vote thereon as a class. Our Bylaws may be amended by the affirmative vote of a majority vote of the directors
then in office, subject to any limitations set forth in the Bylaws; and may also be amended by the affirmative vote of at least 75% of the outstanding shares entitled to vote
on the amendment, or, if the board of directors recommends that the stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares
entitled to vote on the amendment, in each case voting together as a single class.
Undesignated preferred stock. Our Charter provides for authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable
our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of us or our
stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions
that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our Charter grants our board of directors
broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount
of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights,
of these holders and may have the effect of delaying, deterring or preventing a change in control of us.
FIRST AMENDMENT TO SUBLEASE AGREEMENT
Exhibit 10.27
THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (hereinafter referred to as this “Amendment”) is made effective as of March 15, 2021 (the “Effective
Date”) by and between Ingredion Incorporated, a Delaware corporation (“Sublandord”), and Viveve Medical, Inc., a Delaware corporation (“Subtenant”).
WITNESSETH:
WHEREAS, Sublandord and Subtenant are party to that certain Sublease Agreement, dated as of January 26, 2017 (the “Sublease”, as may be further amended or
modified from time to time), pursuant to which Sublandord subleases to Subtenant certain premises consisting of approximately 12,303 rentable square feet with a common
address of 345 Inverness Drive South, Building B, Suite 250, Englewood, Colorado 80112, as more particularly described in the Sublease (the “Subleased Premises”).
Capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the Sublease.
WHEREAS, the Term is scheduled to expire on May 31, 2021 and Sublandord and Subtenant desire to extend the Term for an additional thirty-four (34) full calendar months
from such expiration date and to amend the terms and conditions of the Sublease as hereinafter provided.
AGREEMENT:
NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, and the
mutual covenants set forth herein, the parties hereto agree as follows:
1. Extension of Term. The Term is hereby extended for a period of thirty-four (34) full calendar months, commencing as of June 1, 2021 (the “Extended Term
Commencement Date”) and expiring on March 31, 2024 (the “Extended Term”). From and after the date hereof, the “Term” shall be deemed to include the Extended Term.
2. Rent
(a) Gross Rent Schedule. Effective as of the Extended Term Commencement Date, the monthly gross Rent for the Subleased Premises payable by Subtenant to
Sublandord during the Extended Term is as follows:
From:
June 1, 2021
June 1, 2022
June 1, 2023
To:
May 31, 2022
May 31, 2023
March 31, 2024
Gross Rent (per month)
$21,027.88
$21,643.03
$22,258.18
under the Sublease shall remain as set forth thereunder.
Except as otherwise set forth in this Amendment, all other terms and conditions with respect to the payment of any other sums due and payable by Subtenant
(b) Rent Abatement Period. Notwithstanding the foregoing subsection (a), Subtenant’s obligation to pay gross Rent shall be conditionally abated as follows (the
“Rent Abatement Period”):
From:
To:
June 1, 2021
June 30, 2021
Gross Rent
(per month)
$21,027.88
Gross Rent Abated
(per month)
$21,027.88
Gross Rent Due and
Payable
(per month)
$0.00
During the Rent Abatement Period, Subtenant’s obligation to pay any and all other charges pursuant to the terms of the Sublease shall continue in full force and effect
without abatement of any kind. The abatement of gross Rent described above is expressly conditioned on Subtenant’s performance of its obligations under the Sublease
throughout the Term. If there is default under the Sublease and such default leads to the enforcement of any remedies against Subtenant (including the termination of the
Sublease prior to the expiration of the Term), then Subtenant shall immediately pay to Sublandlord on demand, in addition to all other amounts and damages to which
Sublandlord is entitled, the amount of gross Rent which would otherwise have been due and payable during any portion of the Rent Abatement Period.
3. AS-IS Condition; Sublandord’s Work.
(a) AS-IS Condition. Subtenant hereby acknowledges and agrees that it has accepted the Subleased Premises as of the date hereof, and will continue to accept the
Subleased Premises as of the Extended Term Commencement Date, in AS-IS, WHERE-IS condition without any representation or warranty of any kind made by Sublandord in
favor of Subtenant.
( b ) Sublandord’s Work. Notwithstanding the foregoing subsection (a), Sublandord shall complete the work set forth on Exhibit A attached hereto in accordance
with the terms and conditions set forth on such exhibit.
4. Notice. Notwithstanding anything to the contrary, the parties’ addresses for notice shall be as follows:
Subtenant:
Sublandord:
Viveve Medical, Inc.
Attn: Jim Robbins
345 Inverness Drive South
Building B, Suite 250
Englewood, CO 80112
JRobbins@viveve.com
Ingredion Incorporated
345 Inverness Drive South
Building B, Suite 200
Englewood, CO 80112
Attn: Adams Berzins
With a copy to:
Ingredion Incorporated
5 Westbrook Corporate Center
Westchester, IL 60154
Attn: General Counsel
Either party may by notice given aforesaid change its address for all subsequent notices.
5. Limitation of Liability. Any obligation or liability whatsoever of Sublandord which may arise at any time under the Sublease or any obligation or liability which
may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the
enforcement thereof be had to the property of, its trustees, directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the
nature of contract, tort, or otherwise.
6. Additional Changes. Effective as of the date hereof, Section 7 of the Sublease is hereby deemed null and void and of no further force and effect.
7. OFAC. Subtenant hereby represents and warrants that, to the best of its knowledge, neither Subtenant, nor any persons or entities holding any legal or beneficial
interest whatsoever in Subtenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets
Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive
Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked
Persons.” If the foregoing representation is untrue at any time during the Term, a default will be deemed to have occurred, without the necessity of notice to the defaulting
party.
8. Brokers. Subtenant represents and warrants to Sublandlord that Subtenant was not represented by any broker or agent with respect to this Sublease except Colliers
International ("Subtenant's Broker''). Sublandlord represents and warrants to Subtenant that Sublandlord was not represented by any broker or agent with respect to this
Sublease other than Cushman & Wakefield ("Sublandlord's Broker''). Subtenant and Sublandlord each agree to indemnify and hold harmless the other party against any loss,
expense, cost or liability incurred by such party as a result of any claims by brokers other than Subtenant's Broker and Sublandlord's Broker.
9. No Offer. Submission of this Amendment by Sublandord is not an offer to enter into this Amendment, but rather is a solicitation for such an offer by Subtenant.
Sublandord shall not be bound by this Amendment until Sublandord and Subtenant have fully executed and delivered this Amendment.
10. Authority. Subtenant represents and warrants to Sublandord that Subtenant has been and is qualified to do business in the state in which the Subleased Premises
is located, that the entity has the full right and authority to enter into this Amendment, and that all persons signing on behalf of the entity were authorized to do so by
appropriate actions.
11. Severability. If any clause or provision of this Amendment is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the
intention of the parties hereto that the remainder of this Amendment shall not be affected thereby. It is also the intention of the parties to this Amendment that in lieu of each
clause or provision of this Amendment that is illegal, invalid or unenforceable, there be added, as a part of this Amendment, a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
12. Counterparts and Delivery. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such
counterparts shall constitute one Amendment. Execution copies of this Amendment may be delivered by facsimile or email, and the parties hereto agree to accept and be bound
by facsimile signatures or scanned signatures transmitted via email hereto, which signatures shall be considered as original signatures with the transmitted Amendment having
the binding effect as an original signature on an original document. Notwithstanding the foregoing, Subtenant shall, upon Sublandord’s request, deliver original copies of this
Amendment to Sublandord at the address set forth in such request. Neither party may raise the use of a facsimile machine or scanned document or the fact that any signature
was transmitted through the use of a facsimile machine or email as a defense to the enforcement of this Amendment.
13. Conflict; Ratification. Insofar as the specific terms and provisions of this Amendment purport to amend or modify or are in conflict with the specific terms,
provisions and exhibits of the Sublease, the terms and provisions of this Amendment shall govern and control. Sublandord and Subtenant hereby agree that (a) this Amendment
is incorporated into and made a part of the Sublease, (b) any and all references to the Sublease hereinafter shall include this Amendment, and (c) the Sublease, and all terms,
conditions and provisions of the Sublease, are in full force and effect as of the date hereof, except as expressly modified and amended hereinabove.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly authorized, executed and delivered as of the day and year first set forth above.
SUBTENANT:
VIVEVE MEDICAL, INC.,
a Delaware corporation
/s/ Scott Durbin
By:
Name: Scott Durbin
Its:
Chief Executive Officer
SUBLANDLORD:
INGREDION INCORPORATED,
a Delaware corporation
By:
/s/ E Yildiz
Name: M. Erhan Yildiz
Its:
Sr. Director, Technical Services
EXHIBIT A
SUBLANDLORD’S WORK
(a) Sublandlord’s Work. Sublandlord agrees to perform or cause to be performed that certain construction, repair, maintenance, or those certain improvements to
the Subleased Premises as specified below (the “Sublandlord’s Work”), without warranty and using Sublandlord’s standard building materials and finishes:
1. The work generally described in Exhibit B attached hereto.
(b) Substantial Completion. Sublandlord agrees to use commercially reasonable efforts to Substantially Complete (as hereinafter defined) the Sublandlord’s Work
by the date that is seven (7) months from the Effective Date, subject to extensions for force majeure and any Subtenant caused delays (including, without limitation,
Subtenant’s failure to provide Sublandlord with reasonable access to the Subleased Premises to undertake the Sublandlord’s Work); provided, however, Subtenant
acknowledges and agrees that Sublandlord makes no guaranty or warranty of Substantial Completion by such date. The Sublandlord’s Work shall be deemed substantially
completed (“Substantially Completed” or “Substantial Completion”) when, in the opinion of the construction manager (whether an employee or agent of Sublandlord or a third
party construction manager, the “Construction Manager”), the Sublandlord’s Work is substantially completed except for punch list items which do not prevent in any material
way the use of the Subleased Premises for the purposes for which they were intended. In the event Subtenant, its employees, agents, or contractors cause, directly or indirectly,
the construction or completion of the Sublandlord’s Work to be delayed, then the date of Substantial Completion shall be deemed to be the date that, in the opinion of the
Construction Manager, Substantial Completion would have occurred if such delays or impairments had not taken place. Without limiting the foregoing, Subtenant shall be
solely responsible for delays caused by Subtenant’s request for any changes in the plans, Subtenant’s request for long lead items, Subtenant’s failure to provide Sublandlord
with reasonable access to the Subleased Premises to undertake the Sublandlord’s Work, and/or Subtenant’s interference with the construction of the Sublandlord’s Work, and
such delays shall not entitle Subtenant to any abatement of rent or other rights of any kind. Substantial Completion is only material for purposes of determining the completion
of the Sublandlord’s Work and has no impact whatsoever on the Extended Term Commencement Date and/or Subtenant’s other obligations under the Sublease, including,
without limitation, the obligation to pay rent. In no event shall Sublandlord have any obligation for any defects in the Subleased Premises or any limitation on its use.
(c) Access. From and after the date of execution of this Amendment, Subtenant shall provide Sublandlord with all necessary access to the Subleased Premises, and
shall cooperate with Sublandlord in all respects, to undertake and complete the Sublandlord’s Work, it being understood that Subtenant shall not be entitled to any abatement of
rent or claims of any kind against Sublandlord in connection with any inconvenience or accommodations which are required by Sublandlord, or in connection with any
interference with Subtenant’s business operations or damage to any of Subtenant’s property, as part of the completion of the Sublandlord’s Work. Subtenant, at its sole cost and
expense and prior to the commencement of the Sublandlord’s Work, shall promptly remove all personal property, trade fixtures, equipment, office furniture and/or other similar
items, if any, as may be required by Sublandlord for Sublandlord to undertake and complete the Sublandlord’s Work.
EXHIBIT B
DESCRIPTION OF SUBLANDLORD’S WORK
(See attached)
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. 333-237279, 333-226152, 333-220833,
333-213363, 333-206041 and 333-201551) of Viveve Medical, Inc. of our report dated March 18, 2021 relating to the consolidated financial statements of Viveve Medical, Inc.,
which appears in this Annual Report on Form 10-K.
/s/ BPM LLP
San Jose, California
March 18, 2021
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1
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 18, 2021
/s/ Scott Durbin
Scott Durbin
Chief Executive Officer
(Principal Executive Officer)
Certification of Principal Accounting and Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2
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 18, 2021
/s/ Jim Robbins
Jim Robbins
Senior 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, 2020 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 18, 2021
/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, 2020 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 18, 2021
/s/ Jim Robbins
Jim Robbins
Senior Vice President of Finance and Administration
(Principal Accounting and Financial Officer)