9.	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

June 30, 2018,

there are outstanding stock option awards issued from the

2006

Plan covering a total of

38,378

shares of the Company’s common stock and

shares are available for future awards. The weighted average exercise price of the outstanding stock options is

$10.49

per share and the weighted average remaining contractual term is

4.4

years.

December 6, 2017,

the board of directors approved the

2018

evergreen provision increasing the total stock reserved for issuance under the

2013

Plan by

914,016

shares from

4,000,000

shares to a total of

4,914,016

shares, which was effective

January 1, 2018.

As of

June 30, 2018,

there are outstanding stock option awards issued from the

2013

Plan covering a total of

4,170,977

shares of the Company’s common stock and there remain reserved for future awards

486,103

shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is

$4.71

per share, and the remaining contractual term is

8.8

years.

Activity under the

2006

Plan and the

2013

Plan is as follows:

	Six Months Ended June 30, 2018
						Weighted
				Weighted		Average
	Number			Average		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value

Options outstanding, beginning of period		2,694,224		$	5.80		8.6	$	249,154
Options granted		2,023,559		$	3.60
Options exercised		-		$	-
Options canceled		(508,428	)	$	5.66
Options outstanding, end of period		4,209,355		$	4.76		8.8	$	433,626

Vested and exercisable and expected to vest, end of period		3,935,007		$	4.80		8.7	$	392,290

Vested and exercisable, end of period		1,124,400		$	5.65		7.5	$	10,167

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

June 30, 2018.

The options outstanding and exercisable as of

June 30, 2018

are as follows:

			Options Outstanding						Options Exercisable
							Weighted
			Number		Weighted		Average		Number		Weighted
			Outstanding		Average		Remaining		Exercisable		Average
Range of			as of		Exercise		Contractual		as of		Exercise
Exercise Prices			June 30, 2018		Price		Term (Years)		June 30, 2018		Price

$1.75	-	$1.97		552,500	$	1.94		9.9		12,500	$	1.97
$2.64	-	$2.72		82,500	$	2.67		9.5		9,896	$	2.64
$3.11	-	$3.82		319,376	$	3.63		9.2		55,730	$	3.76
$4.30	-	$4.97		1,477,533	$	4.52		9.0		336,424	$	4.65
$5.01	-	$5.67		822,652	$	5.34		8.7		195,456	$	5.22
$6.00	-	$6.61		567,878	$	6.05		7.6		326,724	$	6.00
$7.00	-	$7.92		348,538	$	7.65		8.2		149,292	$	7.68
	$9.92			38,135	$	9.92		4.4		38,135	$	9.92
$59.60	-	$149.04		243	$	100.46		2.5		243	$	100.46
				4,209,355	$	4.76		8.8		1,124,400	$	5.65

Stock

Option Modifications

May 30, 2018,

under approval by the Company’s Board of Directors, the Company entered in to a Separation and Release Agreement with the former Chief Executive Officer. The provisions of the agreement specify that the stock options previously granted to her will continue to vest through the earlier of the date she ends her consulting services to the Company or

December 31, 2018.

As of

May 30, 2018,

these stock options are being accounted for as a non-employee option through the consulting term and are being marked-to-market. Additionally, the former Chief Executive Officer will receive

six

months of accelerated vesting of the stock options and the post-termination exercise period was extended from

three

months to

one

year after the effective date of the agreement. The Company recognized stock-based compensation expense of

$97,000

for the incremental value of the accelerated vesting and the change in the exercise period upon the signing of the agreement.

Restricted Stock Awards

June 2018,

the Company granted an RSA for

50,000

shares to a consultant with a weighted average grant date fair value of

$3.58

per share, based on the market price of the Company’s common stock on the award date. The RSA vests over

two

years beginning as of the award date. As of

June 30, 2018,

zero

shares were vested and issued.

April 2018,

the Company granted RSAs for

14,672

shares of common stock under the

2013

Plan to board members as director compensation with a weighted average grant date fair value of

$3.44

per share, based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of grant and

14,672

shares of common stock were issued.

January 2018,

the Company granted RSAs for

9,637

shares of common stock under the

2013

Plan to board members as director compensation with a weighted average grant date fair value of

$5.19

per share, based on the market price of the Company’s common stock on the award date. The RSAs were fully vested on the date of grant and

9,637

shares of common stock were issued.

January 2018,

the Company granted an RSA for

25,000

shares to a consultant with a weighted average grant date fair value of

$5.19

per share, based on the market price of the Company’s common stock on the award date. The RSA vests over

one

year beginning as of the award date. As of

June 30, 2018,

18,750

shares were vested and issued.

As of

June 30, 2018,

there are

66,250

shares of unvested restricted stock outstanding that have been granted pursuant to RSAs.

2017

Employee Stock Purchase Plan

The

second

offering period under the Company’s

2017

Employee Stock Purchase Plan (the

“2017

ESPP”) began on

January 1, 2018

and ended on

March 31, 2018,

and

20,744

shares were issued on

March 29, 2018

at a purchase price of

$3.11.

The

third

offering period under the Company’s

2017

Employee Stock Purchase Plan (the

“2017

ESPP”) began on

April 1, 2018

and ended on

June 30, 2018,

and

25,618

shares were issued on

June 29, 2018

at a purchase price of

$2.31.

As of

June 30, 2018,

the remaining shares available for issuance under the

2017

ESPP were

335,744

shares.

The Company estimates the fair value of purchase rights under the ESPP using a Black-Scholes valuation model. The fair value of each purchase right was estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

	Three Months Ended	Six Months Ended
	June 30, 2018	June 30, 2018

Expected term (in years)	0.25	0.25
Average volatility	74%	67%
Risk-free interest rate	1.73%	1.58%
Dividend yield	0%	0%

The weighted average grant date fair value of the purchase rights issued under the

2017

ESPP during the

three

and

six

months ended

June 30, 2018

was

$0.95

and

$1.11,

respectively.

Stock-Based Compensation

During the

three

months ended

June 30, 2018

and

2017,

the Company granted stock options to employees to purchase

570,000

and

185,250

shares of common stock with a weighted average grant date fair value of

$1.34

and

$3.31

per share, respectively. During the

six

months ended

June 30, 2018

and

2017,

the Company granted stock options to employees to purchase

1,821,171

and

415,110

shares of common stock with a weighted average grant date fair value of

$2.32

and

$2.56

per share, respectively. There were

stock options exercised during the

three

and

six

months ended

June 30, 2018.

A total of

7,730

shares pursuant to stock options issued to employees were exercised during the

three

and

six

months ended

June 30, 2017.

The aggregate intrinsic value of options exercised during the

six

months ended

June 30, 2017

was

$30,785,

respectively.

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:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017

Expected term (in years)	5	5	5	5
Average volatility	69%	48%	75%	48%
Risk-free interest rate	2.82%	1.76%	2.63%	1.90%
Dividend yield	0%	0%	0%	0%

During the

three

and

six

months ended

June 30, 2018,

the Company granted stock options to nonemployees to purchase

200,000

and

202,388

shares of common stock with a weighted average grant date fair value of

$1.59

and

$1.61

respectively. During the

three

and

six

months ended

June 30, 2017,

the Company granted stock options to nonemployees to purchase

5,875

shares of common stock with a weighted average grant date fair value of

$5.11.

There were

stock options exercised by nonemployees during the

three

and

six

months ended

June 30, 2018

and

2017.

The fair value of nonemployee stock options granted was estimated using the following weighted average assumptions:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017

Expected term (in years)	10	10	10	10
Average volatility	91%	55%	91%	55%
Risk-free interest rate	2.85%	2.00%	2.85%	2.29%
Dividend yield	0%	0%	0%	0%

Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of comparable companies’ stock, look-back volatilities and the Company specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options.

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 condensed consolidated statements of operations for the

three

and

six

months ended

June 30, 2018

and

2017

(in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017

Cost of revenue	$	17	$	4	$	28	$	7
Research and development		65		57		187		108
Selling, general and administrative		694		394		1,314		712
Total	$	776	$	455	$	1,529	$	827

As of

June 30, 2018,

the total unrecognized compensation cost in connection with unvested stock options was approximately

$6,341,000.

These costs are expected to be recognized over a period of approximately

3.0

years.