Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, Viveve, Inc.

and Viveve BV. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U

. GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are

not

readily apparent from other sources. Actual results

may

differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results.

Cash and Cash Equivalents, Policy [Policy Text Block]

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 Risk, Credit Risk, Policy [Policy Text Block]

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

assurance that any such products can be developed or manufactured at an acceptable cost and with appropriate performance charact

eristics, 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.

The Company

’s products likely require clearance or approvals from the U.S. Food and Drug Administration or other international regulatory agencies prior to commencing commercial sales. There can be

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 for the non-invasive treatment of vaginal introital laxity for improved sexual function, and for vaginal rejuvenation depending on the relevant country-specific clearance or approval that it refers to as the Viveve System

. 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. Single-use accessories (e.g. RF return pad, coupling fluid), a foot pedal and a cryogen canister that can be used for approximately

four

five

procedures are also included with the System. 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.

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,

2017

two

distributors together accounted for

35%

of the Company’s revenue. During the year ended

December 31, 2016,

three

distributors together accounted for

78%

of the Company’s revenue.

There are

direct sales to customers that accounted for more than

10%

of the Company

’s revenue during the years ended

December 31, 2017

and

2016

As of

December 31, 2017,

two

distributors, collectively, accounted for

% of total accounts receivable, net. As of

December 31, 2016,

three

distributors, collectively, accounted for

81%

of total accounts receivable, net.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

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 collectibility of its accounts receivable in its calculation of the allowance for doubtful accounts. In determining the amount of the allowance, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations and assesses current economic trends affecting its customers that might impact the level of credit losses in the future and result in different rates of bad debts than previously seen. The Company also considers its historical level of credit losses. The allowance for doubtful accounts was

$221,000

and

zero

as of

December 31, 2017

and

2016,

respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost or

net realizable value. Inventory as of

December 31, 2017

consisted of

$1,990,000

of finished goods and

$400,000

of raw materials. Inventory as of

December 31, 2016

consisted of

$2,506,000

of finished goods and

$181,000

of raw materials. Cost is determined on an actual cost basis on a

first

-in,

first

-out method. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do

not

result in the restoration or increase in that newly established cost basis.

As part of the Company

’s normal business, the Company generally utilizes various finished goods inventory as sales demos to facilitate the sale of its products to prospective customers. The Company is amortizing these demos over an estimated useful life of

five

years. The amortization of the demos is charged to selling, general and administrative expense and the demos are included in the medical equipment line within the property and equipment, net balance on the consolidated balance sheets as of

December 31, 2017

and

2016.

Property, Plant and Equipment, Policy [Policy Text Block]

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

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 or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

The Company reviews long-lived assets for

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might

not

be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has

not

identified any such impairment losses to date.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue

net of sales taxes from the sale of its products, the Viveve System, single-use treatment tips and ancillary consumables. Revenue is recognized upon shipment, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable and collection of the resulting receivable is reasonably assured. Sales of our products are subject to regulatory requirements that vary from country to country. The Company has regulatory clearance, 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.

The Company also sells 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. Revenue is recognized over the service agreement period. Revenue from sale of such extended service agreements was immaterial for the years ended

December 31, 2017

and

2016.

When a sales agreement involves multiple deliverables, such as extended warranties, the multiple deliverables are evaluated to determi

ne the units of accounting. Judgment is required to properly identify the accounting units of multiple element transactions and the manner in which revenue is allocated among the accounting units. Judgments made, or changes to judgments made,

may

significantly affect the timing or amount of revenue recognition.

Revenue related to the multiple

deliverables is allocated to each unit of accounting using the selling price hierarchy. Consistent with accounting guidance, the selling price is based upon vendor specific objective evidence (“VSOE”). If VSOE is

not

available,

third

party evidence (“TPE”) is used to establish the selling price. In the absence of VSOE or TPE, estimated selling price (“ESP”) is used. For the years ended

December 31, 2017

and

2016,

the Company has used ESP to calculate the relative fair value of the deliverables. The Company regularly reviews ESP and maintains internal controls over the establishment and updates of these estimates. There were

material changes to our estimates of ESP during the years reported on.

The Company does

not

provide its customers with a right of return.

Customer Advance Payments, Policy [Policy Text Block]

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

Equity Method Investments [Policy Text Block]

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 periodica

lly to recognize (

) the proportionate share of the investees’ net income or losses after the date of investment, (

) additional contributions made and dividends or distributions received, and (

) 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.

We utilize a

three

-month lag in reporting equity income from our 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 year ended

December 31, 2017,

impairment charges have been recorded.

Standard Product Warranty, Policy [Policy Text Block]

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.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

The Company includes amounts billed for shipping and handling in revenue and shipping and handling costs in cost of revenue.

Advertising Costs, Policy [Policy Text Block]

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, 2017

and

2016.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are charged to operations a

s 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 Tax, Policy [Policy Text Block]

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, 2017

and

2016.

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 techni

cal 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

months of the reporting date.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Accounting for Stock-Based Compensation

Share-based compensation cost is measured at grant date, based on the fair

value of the award, and is recognized as expense over the employee’s service period. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award.

We determined that the Black-Scholes option pricing

model is the most appropriate method for determining the estimated fair value for stock options and purchase rights under the employee stock purchase plan. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards, including the option’s expected term and the price volatility of the underlying stock.

Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subje

ct to periodic adjustment as the underlying equity instruments vest.

Comprehensive Income, Policy [Policy Text Block]

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, 2017

and

2016,

the Company’s comprehensive loss is the same as its net loss.

Earnings Per Share, Policy [Policy Text Block]

Net Loss per Share

The Company

’s basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents outstanding during the period. For purposes of this calculation, stock options and warrants to purchase common stock and restricted common stock awards are considered common stock equivalents. For periods in which the Company has reported net losses, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are

not

assumed to have been issued if their effect is anti-dilutive.

The following

securities were excluded from the calculation of net loss per share because the inclusion would be anti-dilutive.

	Year Ended
	December 31,
	2017		2016

Stock options to purchase common stock		2,694,224		1,909,764
Warrants to purchase common stock		642,622		425,274
Restricted common stock awards		10,000		58,155

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued and Adopted Accounting Standards

May 2014,

as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards (“

IFRS”), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2014

09,

“Revenue from Contracts with Customers (Topic

606

)” which created Accounting Standards Codification Topic

606

(“ASC

606”

). The new guidance sets forth a new

five

-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were

not

addressed completely in the prior accounting guidance. The ASU provides alternative methods of initial adoption and is effective for annual and interim periods beginning after

December 15, 2017.

The FASB has issued several updates to the standard which i) defer the original effective date from

January 1, 2017

January 1, 2018,

while allowing for early adoption as of

January 1, 2017 (

ASU

2015

); ii) clarify the application of the principal versus agent guidance (ASU

2016

); iii) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU

2016

); and clarify the guidance on certain sections of the guidance providing technical corrections and improvements (ASU

2016

). In

May 2016,

the FASB issued ASU

2016

12,

“Revenue from Contracts with Customers (Topic

606

) Narrow-Scope Improvements and Practical Expedients”, to address certain narrow aspects of the guidance including collectibility criterion, collection of sales taxes from customers, noncash consideration, contract modifications and completed contracts. This issuance does

not

change the core principle of the guidance in the initial topic issued in

May 2014.

The Company did

not

early adopt

this guidance, and accordingly, will adopt this new standard effective

January 1, 2018.

The guidance permits the use of either a full retrospective or modified retrospective transition method as of the adoption date. The Company currently plans to adopt the standard using the modified retrospective approach. Should the adoption of ASC

606

under the modified retrospective method result in the deferral of revenue previously recognized, or the recognition of revenue previously deferred under ASC

605

beyond

January

2018,

the Company would record a cumulative catch-up adjustment at

January

2018.

As part of its preliminary evaluation, the Company has also considered the impact of the guidance in ASC

340

40,

“Other Assets and Deferred Costs; Contracts with Customers”, with respect to capitalization and amortization of incremental costs of obtaining a contract. This guidance, requires the capitalization of all incremental costs that the Company incurs to obtain a contract with a customer that it would

not

have incurred if the contract had

not

been obtained, provided the Company expects to recover the costs. The Company does

not

believe that it will

not

be required to capitalize any additional costs of obtaining the contract or additional sales commissions.

The Company has set up a team for the implementation of the new revenue recognition accou

nting standard. Based on preliminary analysis, the Company expects that the new standard will

not

significantly impact the recognition of product sales given their point of sale nature. The Company is still in the process of evaluating its arrangements with distributors as well as those related to extended warranties under ASC

606.

July 2015,

the FASB issued ASU

2015

11,

“

Simplifying the Measurement of Inventory” (“ASU

2015

11”

). ASU

2015

requires that an entity should measure inventory within the scope of this pronouncement at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The pronouncement does

not

apply to inventory that is being measured using the last-in,

first

-out (“LIFO”) method or the retail inventory method. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU

2015

was effective for the Company’s fiscal year beginning

January 1, 2017.

The adoption did

not

have a significant impact on the consolidated financial statements.

February 2016,

the FASB issued ASU

2016

02,

“

Leases (Topic

842

)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within the reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the effect of the adoption of this guidance on our consolidated financial statements.

March 2016,

the FASB issued ASU

2016

09,

“

Compensation – Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting”. This guidance identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. We adopted this standard on

January 1, 2017

and have elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The adoption did

not

have a significant impact on the consolidated financial statements.

August 2016,

the FASB issued ASU

No.

2016

15,

“

Statement of Cash Flows, Classification of Certain Cash Receipts and Cash Payments (Topic

230

)”. This guidance addresses specific cash flow issues with the objective of reducing the diversity in practice for the treatment of these issues. The areas identified include: debt prepayment or debt extinguishment costs; settlement of

zero

-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and application of the predominance principle with respect to separately identifiable cash flows. This guidance is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period, with early adoption permitted. We plan to adopt this guidance as of

January 1, 2018

and believe the adoption of the guidance will

not

have a significant impact on the consolidated financial statements.

August 2016,

the FASB issued ASU

No.

2016

18,

“Statement of Cash Flows, Restricted Cash (Topic

230

)”. This guidance requires that a statement of cash flows explain the total change during the period of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period to total amounts shown on the statement of cash flows. This guidance is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period, with early adoption permitted. We plan to adopt this guidance as of

January 1, 2018

and believe the adoption of the guidance will

not

have a significant impact on the consolidated financial statements.

May 2017,

the FASB issued ASU

No.

2017

09,

“

Compensation - Stock Compensation (Topic

718

), Scope of Modification Accounting”. This pronouncement provides guidance about which changes to the terms or conditions of a share-based payment award

may

require an entity to apply modification accounting under Topic

718.

This guidance is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period, with early adoption permitted. We plan to adopt this guidance as of

January 1, 2018

and believe the adoption of the guidance will

not

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

material effect is expected on the consolidated financial statem

ents as a result of future adoption.