Viveve Medical, Inc. (“Viveve Medical”, the “Company”, “we”, “our”, or “us”) designs, develops, manufactures and markets a platform medical technology, which we refer to as Cryogen-cooled Monopolar RadioFrequency, or CMRF. Our proprietary CMRF technology is delivered through a radiofrequency generator, handpiece and treatment tip, which collectively, we refer to as the Viveve® System. Viveve Medical competes in the women’s intimate health industry in some countries by marketing Geneveve™the Viveve System as a way to improve the overall sexual well-being and quality of life of women suffering from vaginal laxity.introital laxity, for improved sexual function, or stress urinary incontinence, depending on the relevant country-specific clearance or approval.  In the United States, the Viveve System is currently indicated for use in general surgical procedures for electrocoagulation and hemostasis.

Public OfferingOfferings

On March 22, 2017, In December 2018, in connection with the closing of a public offering (the “March 2017“December 2018 Offering”), the Company issued an aggregate of 8,625,00014,728,504 shares of common stock, including the shares issued in connection with the exercise of the underwriters’underwriters’ overallotment option, at a public offering price of $4.00$1.50 per share for gross proceeds of approximately $22,093,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses, were approximately $20,385,000.  

In February 2018, in connection with the closing of a public offering (the “February 2018 Offering”), the Company issued an aggregate of 11,500,000 shares of common stock, including the shares issued in connection with the exercise of the underwriters’ overallotment option, at a public offering price of $3.00 per share for gross proceeds of approximately $34,500,000. The net proceeds to the Company, after the deduction ofdeducting underwriting discounts and commissions and other offering expenses, were approximately $31,440,000. $32,214,000.  

On June 17, 2016, in connection withThe Company established an “at-the-market” equity offering program through the closingfiling of a public offering (the “June 2016 Offering”),prospectus supplement to its shelf registration statement on Form S-3, which was filed on November 8, 2017, under which the Company issued anmay offer and sell, from time-to-time, up to $25,000,000 aggregate offering price of 3,105,000shares of its common stock (the “November 2017 ATM Facility”). During the three months ended March 31, 2019, the Company sold zero shares of common stock includingunder the November 2017 ATM Facility. During the three months ended March 31, 2018, the Company sold 208,277 shares issued in connection withof common stock under the exercise of the underwriters’ overallotment option, at a public offering price of $5.00 per shareNovember 2017 ATM Facility for grossnet proceeds of approximately $15,525,000. The$1,011,000. As of March 31, 2019, the Company has sold 336,498 shares of common stock under the November 2017 ATM Facility for net proceeds to the Company, after the deduction of underwriting discounts, commissions and other offering expenses, were approximately $13,886,000.

Change of Corporate Domicile

On May 9, 2016, the Company filed the necessary Application for Authorization to Continue into Another Jurisdiction and Statutory Declaration with the Yukon registrar. On May 10, 2016, the Company filed a Certificate of Incorporation with the Secretary of State of the State of Delaware to move its domicile from the Yukon Territory to Delaware. In connection with the incorporation in Delaware, the Company's stock now has a par value of $0.0001 per share.$1,318,000.

Interim Unaudited Financial Information

The accompanying unaudited condensed consolidated financial statements of Viveve Medical have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated financial statements have been included.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016,2018, which was filed with the Securities and Exchange Commission on February 16, 2017.March 15, 2019. The results of operations for the three and nine months ended September 30, 2017March 31, 2019 are not necessarily indicative of the results for the year ending December 31, 20172019 or any future interim period.

Liquidity and Management Plans

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, which requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.

Since

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, since inception, we have funded our operations primarily through sales of common and preferred stock and borrowing arrangements. We have incurred net losses since our inception, and as of September 30, 2017 have an accumulated deficit of approximately $95.4 million. We expect to continue to incurthe Company has sustained significant operating losses and negative cash flows from operations throughsuch losses are expected to continue for the foreseeable future. DueAs of March 31, 2019, the Company had accumulated a deficit of $165,414,000, cash and cash equivalents of $17,821,000 and working capital of $22,095,000. Additionally, the Company used $11,558,000 in cash for operations in the three months ended March 31, 2019. The Company will require additional cash funding to the proceeds received from the March 2017 Offering, the loan proceeds received and the additional funding expected to be received under the Company’s debt facility (see Note 6) and our forecasted operating results,fund operations through May 9, 2020. Accordingly, management believeshas concluded that the Company does not have sufficient funds to support operations within one year after the date the financial statements are issued and, therefore, the Company concluded there was substantial doubt about the Company’s ability to continue as a going concern, which existed asconcern. Based on management’s plans to reduce operating expenses, including a reduction in force in January 2019, and the availability of our November 2017 ATM Facility, the date of filing our Annual Report on Form 10-K forCompany believes that this substantial doubt has been alleviated.

To fund further operations, the year ended December 31, 2016, is no longer present. InCompany will need to raise additional capital. The Company may obtain additional financing in the future we expect to require additional capital to fund our ongoing operations, respond to business opportunities, challenges, acquisitionsthrough the issuance of its common stock, or unforeseen circumstances and may decide to engage inthrough other equity or debt financingsfinancings. The Company’s ability to continue as a going concern or enter into credit facilities; however, we may not be ablemeet the minimum liquidity requirements in the future is dependent on its ability to timely secure additional debt or equity financing or raise significant additional capital, inof which there can be no assurance. If the public marketsnecessary financing is not obtained or achieved, the Company will likely be required to reduce its planned expenditures, which could have an adverse impact on favorablethe results of operations, financial condition and the Company’s ability to achieve its strategic objective. There can be no assurance that financing will be available on acceptable terms, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. As of September 30, 2017, our principal sources of liquidity consisted of cash and cash equivalents of $19.2 million and $10.0 million of additional borrowing capacity under our debt facility.  

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

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

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 - Leases

The Company adopted FASB’s Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the beginning of the period of adoption. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and we elected the hindsight practical expedient to determine the lease term for existing leases. We determined that the renewal options for the facilities lease would be reasonably certain to be renewed and as such, included that renewal period in determining the expected lease term of that lease. Adoption of the new standard resulted in the recording of operating lease right-of-use assets of $629,000 and operating lease liabilities of $629,000, as of January 1, 2019. The standard did not have an impact on our consolidated results of operations, cash flows or stockholders’ equity previously reported. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The effect of the changes made to our consolidated January 1, 2019 balance sheet for the adoption of the new lease standard was as follows (in thousands):

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 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 no 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’sCompany’s financial results, financial position, and future cash flows.

The Company’sMost of the Company’s products likelyto date require clearance or approvalapprovals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commencing commercial sales. There can be no 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’sCompany’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, and 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, that it refers to as Geneveve™. Geneveve includesapproval. The Viveve System consists of three majormain components: the Viveve System™ (aa RF, or radio frequency, generator housed in a table-top console),console, a reusable handpiece and a single-use treatment tipstip. 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 to five procedures, and other ancillary consumables.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 Geneveve 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 the U.S.,North America, the Company sells its products primarily through a direct sales force to health care practitioners. Outside the U.S.,North America, the Company sells through an extensive network of distribution partners. During the three months ended September 30, 2017, twoMarch 31, 2019, three distributors, togethercollectively, accounted for 38%42% of the Company’s revenue. During the three months ended September 30, 2016,March 31, 2018, two distributors, togethercollectively, accounted for 89%54% of the Company’s revenue. During the nine months ended September 30, 2017, three distributors together accounted for 38% of the Company’s revenue. During the nine months ended September 30, 2016, three distributors together accounted for 83% of the revenue.

There were no direct sales customers that accounted for more than 10% of the Company’sCompany’s revenue during the three and nine months ended September 30, 2017March 31, 2019 and 2016.  2018.

As of September 30, 2017,March 31, 2019, four distributors, collectively, accounted for 62% of total accounts receivable, net. As of December 31, 2018, three distributors, collectively, accounted for 53%54% of total accounts receivable. Asreceivable, net.

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 collectability 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 $395,000 as of March 31, 2019 and $284,000 as of December 31, 2016, three distributors, collectively, accounted for 81% of total accounts receivable.2018.

Revenue Recognition

The Company recognizes revenue fromRevenue consists primarily of the sale of its products, the Viveve System, single-use treatment tips and ancillary consumables. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) 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 upon shipment, provided that persuasive evidencenet of an arrangement exists,any sales taxes from the price is fixed or determinable and collectionsale of the resulting receivable is reasonably assured. 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. No such assets existed as of March 31, 2019 or December 31, 2018. The Company had customer contracts liabilities in the amount of $679,000, primarily related to marketing programs that performance had not yet been delivered to its customers as of March 31, 2019 and $686,000 as of December 31, 2018.

The following table reflects the changes in our customer contract liabilities for the three months ended March 31, 2019:

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 months ended March 31, 2019 and 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 months ended March 31, 2019 and 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.

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 months ended March 31, 2019 and 2018 (in thousands):

The Company determines geographic location of its revenue based upon the destination of the shipments of its products.

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 (1) the proportionate share of the investees’investees’ net income or losses after the date of investment, (2) additional contributions made and dividends or distributions received, and (3) 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. The Company utilizes a three-month lag in reporting equity income from its 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’sinvestee’s business segment might indicate a loss in value. The carrying value of the investments areis reviewed annually for changes in circumstances or the occurrence of events that suggest the investment may not be recoverable. During the three and nine months ended September 30, 2017, noNo impairment charges have been recorded.recorded in the condensed consolidated statements of operations during the three months ended March 31, 2019 and 2018.

Product Warranty

The Company’sCompany’s products are generally subject to a one-year warranty,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 specification.specifications. The Company has assessed the historical claims and, to date, product warranty claims have not been significant.

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 will continuerecognizes compensation expense on a straight-line basis over the requisite service period of the award.

The Company 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 assessnonemployees are recorded at their fair value on the needmeasurement date and are subject to record a warranty accrual atperiodic adjustment as the time of sale going forward. underlying equity instruments vest.

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 nine months ended September 30, 2017March 31, 2019 and 2016,2018, the Company’s comprehensive loss is the same as its net loss. 

Net Loss per Share

The Company’sCompany’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. 

Other Recently Issued and Adopted Accounting Standards

In 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).” 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 to January 1,June 2018, while allowing for early adoption as of January 1, 2017 (ASU 2015-14); ii) clarify the application of the principal versus agent guidance (ASU 2016-08); iii) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU 2016-10); and clarify the guidance on certain sections of the guidance providing technical corrections and improvements (ASU 2016-10). In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers2018-07, “Stock Compensation (Topic 606) Narrow-Scope718) – 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 has set up a team for the implementation of the new revenue recognition accounting standard.Nonemployee Share- 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 arrangementsPayment Accounting”. The Company 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 has not yet selected a transition method and is still finalizing the analysis to quantify the adoption impact of the provisionsintent of this guidance on its condensed consolidated financial statements.

In February 2016,is to simplify the FASB issued ASU 2016-02, “Leases (Topic 842)”. Underaccounting 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 requiredobligated to recognize right-of-use assetsissue when the good has been delivered or the service has been rendered and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specificany 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 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 useremployee share-based payment awards, an entity considers the probability of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.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,period. We adopted this guidance as of January 1, 2019 and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the effect of the adoption of thisthe guidance did not have a significant impact on ourthe condensed consolidated financial statements.

In 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 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 no material effect is expected on the condensed consolidated financial statements as a result of future adoption.

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. 

There were no financial instruments that were measured at fair value on a recurring basis as of September 30, 2017March 31, 2019 and December 31, 2016.2018.

The carrying amounts of the Company’sCompany’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as of September 30, 2017March 31, 2019, and December 31, 20162018 approximate fair value because of the short maturity of these instruments. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of the note payable approximates fair value. 

4.        InvestmentThere were no changes in Limited Liability Companyvaluation techniques from prior periods.

On August 8,, 2017, the Company entered into an exclusive Distributorship Agreement (the “Distributorship Agreement”) with InControl Medical, LLC (“ICM”), a Wisconsin limited liability company focused on women's health, pursuant to which the Company will directly market, promote, distribute and sell ICM’s products to licensed medical professional offices and hospitals.hospitals in North America.

Under the terms of the Distributorship Agreement, ICM agreed to not directly or indirectly appoint or authorize any third party to market, promote, distribute or sell any of the licensed products to any licensed medical professional offices and hospitals in the United States. In exchange, the Company agreed to not market, promote, distribute or sell (or contract to do so) any product which substantially replicates all or almost all of the key features of the licensed products. The Company has a minimum purchase requirement to purchase a certain quantity of ICM products per month during the term of this Distributorship Agreement. In addition, the parties agreed to certain mutual marketing obligations to promote sales of the licensed products. As of March 31, 2019, the Company has purchased approximately 4,800 units of ICM products. The Company paid ICM approximately $27,000 for product related costs during the three months ended March 31, 2019.  There were no amounts due to ICM for the accounts payable as of March 31, 2019 and December 31, 2018.

In connection with the Distributorship Agreement, the Company also entered into a Membership Unit Subscription Agreement with ICM and the associated limited liability company operating agreement of ICM, pursuant to which the Company invested $2,500,000 in, and acquired membership units of, ICM. This investment has been recorded in investment in a limited liability company in the condensed consolidated balance sheets. The Company used the equity method to account for the investment in ICM because the Company does not control it but has the ability to exercise significant influence over it. As of March 31, 2019, the Company owns approximately 9% ownership interest in ICM. The Company’sCompany recognizes its allocated portion of ICM’s results of operations foron a three-month lag due to the timing of financial information. For the three and nine months ended September 30, 2017March 31, 2019, the allocated net loss from ICM’s operations was immaterial.$125,000 that was recorded as loss from minority interest in limited liability company in the condensed consolidated statements of operations.

5.        Accrued LiabilitiesIn February 2019, the Company executed a mutual termination of the Distributorship Agreement with ICM. As a result, the Company no longer has a minimum purchase requirement to purchase a certain quantity of ICM products per month.

Accrued liabilities consisted of the following as of March 31, 2019 and December 31, 2018 (in thousands): 

Operating Lease

In January 2012, the Company entered into a lease agreement for office and laboratory facilities in Sunnyvale, California. The lease agreement, as amended, in September 2016, commenced in March 2012 and will terminateterminated in MarchApril 2018.

On February 1, 2017, the Company entered into a sublease agreement (the “Sublease”) for approximately 12,400 square feet of building space for the relocation of the Company’sCompany’s corporate headquarters to Englewood, Colorado (the “Sublease Premises”), which was effective as of January 26, 2017. The lease term commenced on June 1, 2017 and will terminate in May 2020. WeThe Company relocated ourits corporate headquarters from Sunnyvale, California to Englewood, Colorado in June 2017.

The monthly base rent under the Sublease is equal to $20.50 per rentable square foot of the Sublease Premises during the first year. The monthly base rent is equal to $21.12 and $21.75 per rentable square foot during the second and third years, respectively. In connection with the execution of the Sublease, the Company also agreed to pay a security deposit of approximately $22,000. The Company is entitled towas also provided an allowance of approximately $88,000 for certain tenant improvements relating to the engineering, design and construction of the Sublease Premises. Premises which has been reimbursed.

Rent expense for the three months ended March 31, 2018 was $138,000.

In September 30, 20172018, the Company entered into a 36-month noncancelable operating lease agreement for office equipment.  The lease commenced on September 20, 2018.  The monthly payment is approximately $3,000. 

After the adoption of ASU 842 – Leases on January 1, 2019, operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property. At lease inception, the Company determines the lease term by assuming the exercise of those renewal options that are reasonably assured. The lease term is used to determine whether a lease is financing or operating and 2016 was $138,000is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The following table reflects the Company's lease assets and $55,000, respectively. Rentlease liabilities at March 31, 2019 and January 1, 2019:

The operating lease right-of-use assets are included in other assets on the condensed consolidated balance sheet. The operating lease liabilities are included in accrued liabilities and other noncurrent liabilities on the condensed consolidated balance sheet.

The operating leases expense for the ninethree months ended September 30, 2017 and 2016March 31, 2019 was $305,000 and $164,000, respectively.$75,000.

As of September 30, 2017, future minimum payments underMarch 31, 2019, the leases arematurity of operating lease liabilities was as follows (in thousands):follows:

The weighted average remaining lease term was approximately 26 months as of March 31, 2019. The weighted average discount rate for the three months ended March 31, 2019 was 12.5%.

Indemnification Agreements

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with performance of services within the scope of the agreement, breach of the agreement by the Company, or noncompliance of regulations or laws by the Company, in all cases provided the indemnified party has not breached the agreement and/or the loss is not attributable to the indemnified party’sparty’s negligence or willful malfeasance. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. 

Loss Contingencies

The Company is or has been subject to proceedings, lawsuits and other claims arising in the ordinary course of business. The Company evaluates contingent liabilities, including threatened or pending litigation, for potential losses. If the potential loss from any claim or legal proceeding inis considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Because of uncertainties related to these matters, accruals are based upon the best information available. For potential losses for which there is a reasonable possibility (meaning the likelihood is more than remote but less than probable) that a loss exists, the Company will disclose an estimate of the potential loss or range of such potential loss or include a statement that an estimate of the potential loss cannot be made. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation and may revise its estimates, which could materially impact its condensed consolidated financial statements.  Management does not believe that the outcome of any outstanding legal matters will have a material adverse effect on the Company's consolidated financial position, results of operations and cash flows.

8.        Common Stock

On May 19, 2017,In March 2019, the Company issued 35,00027,473 restricted shares of its common stock at a value of $7.42 a$0.91 per share, or an aggregate value of approximately $260,000.$25,000.

On March 22, 2017,In December 2018, in connection with the closing of the March 2017December 2018 Offering, wethe Company issued an aggregate of 8,625,00014,728,504 shares of common stock, including the shares issued in connection with the exercise of the underwriters’underwriters’ overallotment option, at a public offering price of $4.00$1.50 per share for gross proceeds of approximately $22,093,000. The net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses, were approximately $20,385,000.  

In June 2018, the Company issued 100,000 restricted shares of its common stock at a value of $2.56 per share, or an aggregate value of approximately $256,000.

In February 2018, in connection with the closing of the February 2018 Offering, the Company issued an aggregate of 11,500,000 shares of common stock, including the shares issued in connection with the exercise of the underwriters’ overallotment option, at a public offering price of $3.00 per share for gross proceeds of approximately $34,500,000. The net proceeds to the Company, after the deduction ofdeducting underwriting discounts and commissions and other offering expenses, were approximately $31,440,000.$32,214,000.  

On June 17, 2016, in connection withThrough the closingNovember 2017 ATM Facility, the Company may offer and sell, from time-to-time, up to $25,000,000 aggregate offering price of shares of its common stock. During the June 2016 Offering, we issued an aggregate of 3,105,000three months ended March 31, 2019, the Company sold zero shares of common stock includingunder the exerciseNovember 2017 ATM Facility. During the three months ended March 31, 2018, the Company sold 208,277 shares of common stock under the underwriters’ overallotment option, at a public offering price of $5.00 per shareNovember 2017 ATM Facility for grossnet proceeds of approximately $15,525,000. The$1,011,000. As of March 31, 2019, the Company has sold 336,498 shares of common stock under the November 2017 ATM Facility for net proceeds to the Company, after the deduction of underwriting discounts, commissions and other offering expenses, were approximately $13,886,000.$1,318,000.

Warrants for Common Stock

As of September 30, 2017,March 31, 2019, outstanding warrants to purchase shares of common stock were as follows: 

In connection with the Loan and Security Agreement entered into on September 30, 2014, as amended on February 19, 2015, May 14, 2015, November 30, 2015 and March 18, 2016 (collectively, the “2014 Loan Agreement”), with Pacific Western Bank (as successor in interest by merger to Square 1 Bank), the Company issued a warrant to purchase a total of 58,962 shares of common stock at an exercise price of $4.24 per share. The fair value of the warrant was recorded as debt issuance costs, presented in the condensed consolidated balance sheets as a deduction from the carrying amount of the note payable, and was being amortized to interest expense over the loan term. The outstanding indebtedness was repaid in June 2016 from the proceeds of the new term loan in connection with the 2016 Loan Agreement and the remaining unamortized balance of debt issuance costs was recorded to interest expense for the quarter ended June 30, 2016. During the three and nine months ended September 30, 2016, the Company recorded zero and $387,000, respectively, of interest expense relating to the debt issuance costs. The warrant was exercised on a cashless basis in August 2016 and 17,295 net shares were issued.

In conjunction with the second amendment to the 2014 Loan Agreement in May 2015, the Company issued a warrant to the lender to purchase a total of 3,125 shares of common stock at an exercise price of $2.96 per share. The debt issuance costs for this warrant were fully amortized as of September 30, 2015. The warrant was exercised on a cashless basis in July 2016 and 885 net shares of common stock were issued.

In connection with the 2016 Loan Agreement, the Company issued a warrant to purchase a total of 100,402 shares of common stock at an exercise price of $4.98 per share. The Company determined the fair value of the warrant on the date of issuance to be $350,000. The fair value along with legal fees totaling $90,000, was recorded as debt issuance costs and was amortized to interest expense over the loan term. The debt issuance costs were presented in the condensed consolidated balance sheet as a deduction from the carrying amount of the note payable. The outstanding indebtedness was repaid in May 2017 from the proceeds of the term loan made in connection with the 2017 Loan Agreement and the remaining unamortized balance of debt issuance costs was recorded to interest expense for the three months ended June 30, 2017. During the three and nine months ended September 30, 2017, the Company recorded zero and $371,000 respectively, of interest expense relating to the debt issuance costs. During the three and nine months ended September 30, 2016, the Company recorded $35,000 interest expense relating to the debt issuance costs. As of September 30, 2017, the unamortized debt discount related to the 2016 Loan Agreement was zero.

In connection with the 2017 Loan Agreement, the Company issued warrants to purchase a total of 222,049, shares of common stock at an exercise price of $9.50 per share. The warrants have a contractual life of ten years and are exercisable immediately in whole or in part. The Company determined the fair value of the warrants on the date of issuance to be $940,000 using the Black-Scholes option pricing model. Assumptions used were dividend yield of 0%, volatility of 55.1%, risk free interest rate of 2.25% and a contractual life of ten years. The fair value of the warrants along with financing and legal fees totaling $786,000,$790,000, are recorded as debt issuance costs and presented in the condensed consolidated balance sheets as a deduction from the carrying amount of the note payable. The debt issuance costs will beare amortized to interest expense over the loan term. During the three and nine months ended September 30, 2017,March 31, 2019 and 2018, the Company recorded $68,000$83,000 and $106,000$77,000, respectively, of interest expense relating to the debt issuance costs using the effective interest method. As of September 30, 2017, the unamortized debt discount was $1,620,000.

A total of 4,701 and 25,268No shares issuable pursuant to warrants issued in connection with a private offering on September 30, 2014, were issued in connection with the exercise of warrants during the ninethree months ended September 30, 2017March 31, 2019 and 2016, respectively.2018.

No shares issuable pursuant to warrants have been cancelled during the nine months ended September 30, 2017. A total of 1,094 shares issuable pursuant to warrants issued to two vendors in October 2014 were cancelled during the nine months ended September 30, 2016 as the milestones related to these shares were not achieved.   

The stock-based compensation expense related to warrants issued was zero for both the three months ended September 30, 2017March 31, 2019 and 2016. The stock-based compensation expense related to warrants issued was zero and $162,000 for the nine months ended September 30, 2017 and 2016, respectively.2018.

Stock Option Plans

The Company has issued equity awards in the form of stock options and restricted stock awards (“RSAs”) from threetwo employee benefit plans. The plans include the Company’s 2005 Stock Incentive Plan (the “2005 Plan”), 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”).

ThereAs of March 31, 2019, there are currently no outstanding stock option awards issued from the 2005 Plan and no shares are available for future awards.

The 2006 Plan was adopted by the board of directors of Viveve, Inc. and was terminated in conjunction with the merger that took place on September 23, 2014 between PLC Systems Inc., Viveve, Inc. and PLC Systems Acquisition Corp. (the “Merger”). Prior to the Merger, the board of directors voted to accelerate the vesting of all unvested options that were outstanding as of the date of the Merger such that all options would be immediately vested and exercisable by the holders. In conjunction with the Merger, the Company agreed to assume and administer the 2006 Plan and all outstanding options to purchase shares of Viveve, Inc. common stock issued from the 2006 Plan were converted into options to purchase shares of the Company’s common stock (rounded down to the nearest whole share). There are currently outstanding stock option awards issued from the 2006 Plan covering a total of 38,37810,434 shares of the Company’s common stock and no shares are available for future awards. The weighted average exercise price of the outstanding stock options is $10.49$10.05 per share and the weighted average remaining contractual term is 5.133.84 years.

The 2013 Plan was also adopted by the Company’s board of directors and approved by its stockholders. The 2013 Plan is administered by the compensation committee of the Company’s board of directors (the “Administrator”). Under the 2013 Plan, the Company may grant equity awards to eligible participants which may take the form of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted, deferred or unrestricted stock awards, performance based awards or dividend equivalent rights. Awards may be granted to officers, employees, nonemployee directors (as defined in the 2013 Plan) and other key persons (including consultants and prospective employees). The term of any stock option award may not exceed 10 years and may be subject to vesting conditions, as determined by the Administrator. Options granted generally vest over four years. Incentive stock options may be granted only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Internal Revenue Code. The exercise price of any stock option award cannot be less than the fair market value of the Company’s common stock, provided, however, that an incentive stock option granted to an employee who owns more than 10% of the Company’s outstanding voting power must have an exercise price of no less than 110% of the fair market value of the Company’s common stock and a term that does not exceed five years.

On August 22, 2016, the Company’s stockholders approved an amendment to the 2013 Plan to add an “evergreen” provision to the 2013 Plan which will automatically increase annually, on the first day of each January, the maximum number of shares of common stock reserved and available for awards under the 2013 Plan (the “Stock Issuable”) by an amount equal to the lesser of (i) the number of shares that will increase the Stock Issuable by 4% of the total number of shares of common stock outstanding (on a fully diluted basis) or (ii) an amount determined by the board of directors. On December 23, 2016, the board of directors approved the 2017 evergreen increasing the total stock reserved for issuance under the 2013 Plan by 523,209 shares from 2,000,000 shares to a total of 2,523,209 shares, which was effective January 1, 2017. On August 15, 2017, the Company’s stockholders approved an amendment to the 2013 Plan increasing the number of shares of common stock authorized for awards under the 2013 Plan from 2,523,209 shares to a total of 4,000,000 shares.

As of September 30, 2017,March 31, 2019, there are outstanding stock option awards issued from the 2013 Plan covering a total of 2,451,6015,582,696 shares of the Company’s common stock and there remain reserved for future awards 1,408,655678,216 shares of the Company’s common stock. The weighted average exercise price of the outstanding stock options is $5.80$3.26 per share, and the remaining contractual term is 8.768.2 years.

 In 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 2005 Plan, the 2006 Plan and the 2013 Plan is as follows:

The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’sCompany’s closing share price as of September 30, 2017.March 31, 2019.

The options outstanding and exercisable as of September 30, 2017March 31, 2019 are as follows: