(

)

Share-Based

Compensation

BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the

2002

Stock Plan in

2002

(the

“2002

Plan”), and the Company assumed the

2002

Plan in the Merger. The Company has

not

granted or do

not

intend to grant any additional awards under the

2002

Plan following the Merger. In

2016,

BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the

2016

Equity Incentive Plan (the

“2016

Plan”), and the Company assumed the

2016

Plan in the Merger. BioCardia has granted awards, including incentive stock options and non-qualified stock options, under the

2016

Plan following the Merger. Under the

2002

Plan and the

2016

Plan, the number of shares, terms, and vesting periods are determined by the Company’s board of directors or a committee thereof on an option-by-option basis. Options generally vest ratably over service periods of

four

years and expire

ten

years from the date of grant. The per share exercise price shall be

less than the fair market value on the date of grant. Compensation cost for employee share-based awards is based on the grant-date fair value and is recognized over the vesting period of the applicable award on a straight-line basis. The number of shares reserved for issuance or transfer pursuant to awards under the

2016

Plan will be increased by (i) the number of shares represented by awards outstanding under

2016

Plan that are returned to the plan because they are either forfeited or lapse unexercised or that are repurchased for the original purchase price thereof, (ii) if approved by the Administrator of the

2016

Plan, an annual increase on the

first

day of each fiscal year equal to at least (A)

of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year; (B)

268,997

shares (as adjusted for the reverse stock split of common stock on

June 6, 2019);

or (C) such other amount as the board of directors

may

determine

later than the last day of the immediately preceding fiscal year. As of

December 31, 2019,

461,605

shares have been authorized and available for awards under the

2016

Plan.

The Company recognizes in the consolidated statements of operations the grant-date fair value of stock options and other equity-based compensation. Share-based compensation expense for the years ended

December 31, 2019,

2018

and

2017

was recorded as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
Cost of goods sold	$	191	$	143	$	140
Research and development		1,115		953		678
Selling, general and administrative		1,416		1,678		1,889
Share-based compensation expense	$	2,722	$	2,774	$	2,707

The following table summarizes activity under the Company’s stock option plans, including the

2002

Plan and the

2016

Plan and related information (in thousands, except share and per share amounts and term):

	Options outstanding
	Number of shares			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrisinsic value (in thousands)

Balance, December 31, 2018		608,547		$	25.20		7.8
Stock options granted		254,785			5.28
Stock options exercised		—			—
Stock options canceled		(41,868	)		26.86
Balance, December 31, 2019		821,464		$	18.99		7.6	$	-
Exercisable and vested, December 31, 2019		428,793		$	23.62		6.6	$	-

The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of

December 31, 2019,

based on the Company’s common stock closing price of

$3.68

per share, which would have been received by the option holders had all their in-the-money options been exercised as of that date.

The total intrinsic value of options exercised during the years ended

December 31, 2019,

2018

and

2017

was approximately zero,

$3,000

and

$400,000,

respectively. The weighted average grant-date fair value of options granted during the years ended

December 31, 2019,

2018

and

2017

was

$3.87,

$15.48

and

$52.20

per share, respectively.

Employee, Director and Non-employee Share-Based Compensation

During the years ended

December 31, 2019

and

2018,

the Company granted stock options to certain employees, non-employee directors and non-employees to purchase

254,785

and

188,716

shares of common stock, respectively. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Years ended December 31,
	2019			2018			2017
Risk-free interest rate	1.40	-	2.14%	2.66	-	2.89%	1.76	-	2.25%
Volatility	74	-	94%	81	-	83%	81	-	89%
Dividend yield		None			None			None
Expected term (in years)	6.25	-	10.0		6.25		5.00	-	6.25

Unrecognized share-based compensation for employees, non-employee directors and non-employee options granted through

December 31, 2019

is approximately

$3.4

million to be recognized over a remaining weighted average service period of

2.1

years.

Share-Based Compensation (RSUs)

During the year ended

December 31, 2019,

the Company granted to certain members of management

34,713

restricted stock units, or RSUs in lieu of paying bonuses. The fair value of each RSU is estimated on the closing market price on the grant date.

The following summarizes the activity of non-vested RSUs:

				Weighted
				average
				grant date
	Number of			fair value
	shares			per share
Balance, December 31, 2018		29,698		$	25.56
RSUs granted		34,713			4.75
RSUs vested		(27,430	)		19.46
RSUs forfeited		-			—
Balance, December 31, 2019		36,981		$	10.56

RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The related compensation expense, which is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted, is recognized ratably over the period during which the vesting restrictions lapse. Unrecognized share-based compensation for RSUs granted through

December 31, 2019

was approximately

$171,000

to be recognized over a remaining weighted average service period of

0.1

year.

Nonemployee Share-Based Compensation

During the year ended

December 31, 2019

the Company complied with the requirements of ASU

No.

2018

07,

Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting. ASU

2018

expanded the scope of Topic

718,

Compensation-Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees are substantially aligned.

longer will nonemployee awards be marked-to-market every reporting period, nor will the expected term be required to be the contractual term. During the years ended

December 31, 2018

and

2017,

the Company granted options to purchase

zero

and

5,139

shares of common stock to consultants. These options were granted in exchange for consulting services to be rendered and vest over the term specified in the grant, which correlates to the period the services are rendered. The Company recorded nonemployee share-based compensation expense of

$176,000

and

$768,000

for the years ended

December 31, 2018

and

2017

respectively. During the years ended

December 31, 2018

and

2017

the Company accounted for share-based compensation arrangements with nonemployees, using the Black Scholes option pricing model, based on the fair value as these instruments vest. Accordingly, at each reporting date, the Company revalued the unearned portion of the share-based compensation and the resulting change in fair value is recognized in the consolidated statements of operations over the period the related services are rendered. The following assumptions were used to value the awards.

	Years ended December 31,
	2018				2017
Risk-free interest rate		2.80	-	2.95%	2.25	-	2.40%
Volatility		78	-	85%	81	-	87%
Dividend yield			None			None
Expected term (in years)		7.6	-	8.8	8.6	-	9.8