10 .	Summary of Stock Options

Stock Option Plans

The Company has issued equity awards in the form of stock options and restricted stock awards (“RSAs”) from

two

employee benefit plans. The plans include the Viveve Amended and Restated

2006

Stock Plan (the

“2006

Plan”) and the Company’s Amended and Restated

2013

Stock Option and Incentive Plan (the

“2013

Plan”).

As of

March 31, 2019,

there are outstanding stock option awards issued from the

2006

Plan covering a total of

10,434

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

$10.05

per share and the weighted average remaining contractual term is

3.84

years.

As of

March 31, 2019,

there are outstanding stock option awards issued from the

2013

Plan covering a total of

5,582,696

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

678,216

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

$3.26

per share, and the remaining contractual term is

8.2

years.

January 2019,

the board of directors approved the

2019

evergreen provision increasing the total stock reserved for issuance under the

2013

Plan by

2,043,142

shares from

4,914,016

shares to a total of

6,957,158

shares, which was effective

January 1, 2019.

Activity under the

2006

Plan and the

2013

Plan is as follows:

	Three Months Ended March 31, 2019
						Weighted
				Weighted		Average
	Number			Average		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value
Options outstanding, beginning of period		4,014,475		$	4.56		7.4	$	-
Options granted		2,145,000		$	1.24
Options exercised		-
Options canceled		(566,345	)	$	4.63
Options outstanding, end of period		5,593,130		$	3.28		8.2	$	-

Vested and exercisable and expected to vest, end of period		5,291,876		$	3.33		8.1	$	-

Vested and exercisable, end of period		1,725,352		$	5.04		5.6	$	-

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

March 31, 2019.

The options outstanding and exercisable as of

March 31, 2019

are as follows:

							Weighted
			Number		Weighted		Average		Number		Weighted
			Outstanding		Average		Remaining		Exercisable		Average
Range of			as of		Exercise		Contractual		as of		Exercise
Exercise Prices			March 31, 2019		Price		Term (Years)		March 31, 2019		Price

$1.00	-	$1.97		2,655,417	$	1.38		9.67		183,487	$	1.51
$2.02	-	$2.83		97,500	$	2.42		8.93		12,240	$	2.64
$3.03	-	$3.82		484,376	$	3.55		8.81		93,126	$	3.77
$4.30	-	$4.97		1,000,954	$	4.52		7.69		437,550	$	4.55
$5.01	-	$5.67		630,739	$	5.35		5.98		411,788	$	5.35
$6.00	-	$6.61		463,483	$	6.02		3.47		415,932	$	6.02
$7.00	-	$7.92		250,227	$	7.68		6.93		160,795	$	7.68
$9.92				10,424	$	9.92		3.85		10,424	$	9.92
$59.60	-	$149.04		10	$	149.04		2.56		10	$	149.04
Total:				5,593,130	$	3.28		8.16		1,725,352	$	5.04

Restricted Stock Awards

(‘RSA”)

During the

three

months ended

March 31, 2019,

the Company granted RSAs for

364,072

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. The RSAs were granted in

January 2019.

A total of

1,800

shares pursuant to these RSAs were cancelled in

March 2019.

As of

March 31, 2019,

zero

shares were vested and issued.

As of

March 31, 2019,

there are

419,147

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

2017

Employee Stock Purchase Plan

The

sixth

offering period under the Company’s

2017

Employee Stock Purchase Plan (the

“2017

ESPP”) began on

January 1, 2019

and ended on

March 31, 2019,

and

43,759

shares were issued on

March 29, 2019

at a purchase price of

$0.80.

As of

March 31, 2019,

the remaining shares available for issuance under the

2017

ESPP were

212,560

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
	March 31,
	2019	2018

Expected term (in years)	0.25	0.25
Average volatility	74%	59%
Risk-free interest rate	2.45%	1.39%
Dividend yield	0%	0%

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

2017

ESPP during the

three

months ended

March 31, 2019

and

2018

was

$0.33

and

$1.30,

respectively.

Stock-Based Compensation

During the

three

months ended

March 31, 2019

and

2018,

the Company granted stock options to employees to purchase

2,117,500

and

1,251,171

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

$1.24

and $

2.77

per share, respectively. There were

stock options exercised during the

three

months ended

March 31, 2019

and

2018.

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
	March 31,
	2019	2018

Expected term (in years)	5	5
Average volatility	73%	76%
Risk-free interest rate	2.53%	2.48%
Dividend yield	0%	0%

During the

three

months ended

March 31, 2019

and

2018,

the Company granted stock options to nonemployees to purchase

27,500

and

2,388

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

$1.22

and

$2.98,

respectively. There were

stock options exercised by nonemployees during the

three

months ended

March 31, 2019

and

2018.

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

	Three Months Ended
	March 31,
	2019	2018

Expected term (in years)	5	10
Average volatility	73%	77%
Risk-free interest rate	2.49%	2.73%
Dividend yield	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

months ended

March 31, 2019

and

2018

(in thousands):

	Three Months Ended
	March 31,
	2019		2018

Cost of revenue	$	32	$	11
Research and development		40		122
Selling, general and administrative		424		620
Total	$	496	$	753

As of

March 31, 2019,

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

$4,607,000.

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

2.6

years.