Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Basis of Accounting, Policy [Policy Text Block]

Financial Statement Presentation

The condensed 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 condensed consolidated financial statements in conformity with 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, Policy [Policy Text Block]

Changes in Accounting Policies

Except for the changes for the adoption of the new revenue recognition accounting standard, the Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.

Adoption of New Accounting Standard

January

2018,

the Company adopted Revenue from Contracts with Customers (Topic

606

), which created Accounting Standards Codification Topic

606

(“ASC

606”

), using the modified retrospective method applied to those contracts which were

not

completed as of

January

2018.

Results for reporting periods beginning after

January

2018

are presented under ASC

606,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting under Accounting Standards Codification Topic

605

(“ASC

605”

Previously under ASC

605,

revenue from extended assurance warranties was deferred and recognized over the period of the warranty. Under ASC

606,

these warranties are

not

considered a separate performance obligation. Accordingly, on the transition date, the Company recorded a net cumulative adjustment in accumulated deficit of

$177,000,

resulting from the release of

$195,000

for the amount of extended warranties previously recorded in noncurrent liabilities, offset by

$18,000

recorded in accrued liabilities for future costs associated with the assurance-type extended warranties.

The details for the impact of the adoption of ASC

606

are provided below:

	Balance as of December 31, 2017			Adjustment Due to Adoption of ASC 606				Balance as of January 1, 2018

Consolidated Balance Sheet:

Liabilities
Accrued liabilities	$	4,605		$	18		(1)	$	4,623
Other noncurrent liabilities	$	327		$	(195	)	(2)	$	132

Equity
Accumulated deficit	$	(105,581	)	$	177		(3)	$	(105,404	)

	( 1 )	Change relates to future costs associated with extended warranties required to be recorded on adoption of ASC 606.
	( 2 )	Change relates to long-term deferred revenue related to the extended warranties not required to be recorded under ASC 606.
	( 3 )	Change relates to cumulative effect adjustment upon adoption of ASC 606.

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 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.

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

assurance that the Company’s products will receive any of these required clearances or approvals or for the indications requested. If the Company was denied such clearances or approvals or if such clearances or approvals were delayed, it would have a material adverse effect on the Company’s financial results, financial position and future cash flows.

The Company is subject to risks common to companies in the medical device industry including, but

not

limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional financing. The Company’s ultimate success is dependent upon its ability to raise additional capital and to successfully develop and market its products.

The Company designs, develops, manufactures and markets a medical device that it refers to as the Viveve System, which is intended for the non-invasive treatment of vaginal introital laxity, for improved sexual function, for vaginal rejuvenation, for use in general surgical procedures for electrocoagulation and hemostasis, and stress urinary incontinence, depending on the relevant country-specific clearance or approval. The Viveve System consists of

three

main components: a RF, or radio frequency, generator housed in a table-top console, a reusable handpiece and a single-use treatment tip. Included with the system are single-use accessories (e.g. RF return pad, coupling fluid), as well as a cryogen canister that can be used for approximately

four

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

three

months ended

June 30, 2018,

one

distributor accounted for

13%

of the Company’s revenue. During the

three

months ended

June 30, 2017,

three

distributors together accounted for

37%

of the Company’s revenue. During the

six

months ended

June 30, 2018,

one

distributor accounted for

23%

of the Company’s revenue. During the

six

months ended

June 30, 2017,

two

distributors together accounted for

26%

of the Company’s revenue.

There were

direct sales customers that accounted for more than

10%

of the Company’s revenue during the

three

and

six

months ended

June 30, 2018

and

2017.

As of

June 30, 2018,

two

distributors, collectively, accounted for

49%

of total accounts receivable, net. As of

December 31, 2017,

two

distributors, collectively, accounted for

57%

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

$253,000

as of

June 30, 2018

and

$221,000

as of

December 31, 2017.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue consists primarily of the sale of the Viveve System, single-use treatment tips and ancillary consumables. The Company applies the following

five

steps: (

) identify the contract with a customer, (

) identify the performance obligations in the contract, (

) determine the transaction price, (

) allocate the transaction price to the performance obligations in the contract, and (

) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders to be the contracts with a customer. Revenues, net of expected discounts, are recognized when the performance obligations of the contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have been determined to be the only distinct performance obligations, are shipped to the customer. Expected costs of assurance warranties and claims are recognized as expense. Revenue is recognized net of any sales taxes from the sale of the products.

Sales of our products are subject to regulatory requirements that vary from country to country. The Company has regulatory clearance for differing indications, or can sell its products without a clearance, in many countries throughout the world, including countries within the following regions: North America, Latin America, Europe, the Middle East and Asia Pacific. In North America, we market and sell primarily through a direct sales force. Outside of North America, we market and sell primarily through distribution partners.

The Company does

not

provide its customers with a right of return.

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.

such assets existed as of

June 30, 2018

December

31,

2017.

The Company had customer contract liabilities in the amount of

$182,000

primarily related to marketing programs that performance had

not

yet been delivered to its customers as of

June 30, 2018.

such contract liabilities existed as of

December 31, 2017.

Separately, accounts receivable, net represents receivables from contracts with customers.

Significant Financing Component

The Company applies the practical expedient to

not

make any adjustment for a significant financing component if, at contract inception, the Company does

not

expect the period between customer payment and transfer of control of the promised goods or services to the customer to exceed

one

year. During the

three

and

six

months ended

June 30, 2018,

the Company did

not

have any contracts for the sale of its products with its customers with a significant financing component.

Contract Costs

The Company has elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is

one

year or less. During the

three

and

six

months ended

June 30, 2018,

the Company expensed the incremental costs of obtaining the contract as an expense when incurred as the amortization period was

one

year or less.

Shipping and Handling

Shipping costs billed to customers are recorded as revenue. Shipping and handling expense related to costs incurred to deliver product are recognized within cost of goods sold. The Company accounts for shipping and handling activities that occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of shipping and handling are recognized concurrently with the related revenue.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statement of operations for the

three

and

six

months ended

June 30, 2018

and consolidated balance sheet as of

June 30, 2018

was as follows (in thousands):

	For three months ended June 30, 2018									For six months ended June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)			As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Consolidated Statement of Operations
Revenue	$	5,525		$	5,405		$	120	(1)	$	9,224		$	8,894		$	330	(1)
Cost of revenue	$	2,711		$	2,705		$	6	(2)	$	5,063		$	5,048		$	15	(2)
Gross profit	$	2,814		$	2,700		$	114	(3)	$	4,161		$	3,846		$	315	(3)
Loss from operations	$	(10,295	)	$	(10,409	)	$	114	(3)	$	(21,635	)	$	(21,950	)	$	315	(3)
Comprehensive and net loss	$	(11,516	)	$	(11,630	)	$	114	(3)	$	(24,185	)	$	(24,500	)	$	315	(3)
Net loss per share:
Basic and diluted	$	(0.37	)	$	(0.37	)	$	-		$	(0.85	)	$	(0.86	)	$	0.01

(

)

Change relates to revenue from extended assurance warranties for which

deferral is required on the adoption of ASC

606.

(

)

Change relates to the future costs associated with extended assurance warranties required to be recorded on the adoption of ASC

606.

(

)

Change relates to the net gain adjustment on the adoption of ASC

606.

	As of June 30, 2018
	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Consolidated Balance Sheets

Liabilities
Accrued liabilities	$	5,258		$	5,302		$	44		(1)
Other noncurrent liabilities	$	305		$	753		$	448		(2)

Equity
Accumulated deficit	$	(129,589	)	$	(130,081	)	$	(492	)	(3)

(

)

Change relates to future costs associated with extended warranties required to be recorded on the adoption of ASC

606,

partially offset by the current portion of deferred revenue in connection with the extended warranties

not

required to be recorded under ASC

606.

(

)

Change relates to noncurrent portion of deferred revenue in connection with the extended warranties

not

required to be recorded under ASC

606.

(

)

Change relates to

$177,000

cumulative effect adjustment on the adoption of ASC

606

and the net gain adjustment of

$315,000

for the

six

months ended

June 30, 2018.

Revenue by Geographic Area:

Management has determined that the sales by geography is a key indicator for understanding the Company’s financials because of the different sales and business models that are required in the various regions of the world (including regulatory, selling channels, pricing, customers and marketing efforts).

The following table presents the revenue from unaffiliated customers disaggregated by geographic area for the

three

and

six

months ended

June 30, 2018 (

in thousands):

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

United States	$	4,552	$	1,895	$	7,158	$	3,791
Asia Pacific		630		690		1,521		1,433
Europe and Middle East		329		456		531		568
Latin America		14		35		14		325
Total	$	5,525	$	3,076	$	9,224	$	6,117

The Company determines geographic location of its revenue based upon the destination of the shipments of its 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 periodically 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 condensed 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 are reviewed annually for changes in circumstances or the occurrence of events that suggest the investment

may

not

be recoverable.

impairment charges have been recorded in the condensed consolidated statements of operations during the

three

and

six

months ended

June 30, 2018.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranty

The Company’s products are generally subject to warranties between

one

and

three

years, which provides for the repair, rework or replacement of products (at the Company’s option) that fail to perform within stated specifications. The Company has assessed the historical claims and, to date, product warranty claims have

not

been significant.

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 subject 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

three

and

six

months ended

June 30, 2018

and

2017,

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.

	Six Months Ended
	June 30,
	2018		2017

Stock options to purchase common stock		4,209,355		2,287,572
Warrants to purchase common stock		642,622		642,622
Restricted common stock awards		66,250		6,250

Reclassification, Policy [Policy Text Block]

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had

effect on the reported results of operations. The Company has revised the classification in the consolidated statements of cash flows to report other noncurrent liabilities as a separate line item for the

six

months ended

June 30, 2018.

This resulted in a decrease in the amount previously reported for accrued and other liabilities of

$53,000

for the

six

months ended

June 30, 2017.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued and Adopted Accounting Standards

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 condensed 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 adopted this guidance as of

January 1, 2018

and the adoption of the guidance did

not

have a significant impact on the condensed consolidated financial statements.

August 2016,

the FASB issued ASU

No.

2016

18,

“Statement of Cash Flows, Restricted Cash (Topic

230

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

December 15, 2017,

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

January 1, 2018

and the adoption of the guidance did

not

have a significant impact on the condensed consolidated financial statements.

May 2017,

the FASB issued ASU

No.

2017

09,

“Compensation - Stock Compensation (Topic

718

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

may

require an entity to apply modification accounting under Topic

718.

This guidance is effective for annual reporting periods beginning after

December 15, 2017,

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

January 1, 2018

and the adoption of the guidance did

not

have a significant impact on the condensed consolidated financial statements.

June 2018,

the FASB issued ASU

2016

07,

“Stock Compensation (Topic

718

) – Improvements to Nonemployee Share-Based Payment Accounting”. The intent of this guidance is to simplify the accounting for nonemployee share-based payment accounting. The amendments in this guidance expand the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic

718

are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share-based payment awards are measured at the grant date. Consistent with the accounting for employee share-based payment awards, an entity considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. This guidance is effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within the reporting period. We are currently evaluating the effect of the adoption of this guidance on our condensed 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 condensed consolidated financial statements as a result of future adoption.