(

)

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. We have

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. We have granted awards, including incentive stock options and nonstatutory 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. As of

December 31, 2018,

7,932,494

shares have been authorized 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, 2018,

2017

and

2016

was recorded as follows (in thousands):

	Years ended December 31,
	2018		2017		2016
Cost of goods sold	$	143	$	140	$	14
Research and development		953		678		127
Selling, general and administrative		1,678		1,889		801
Share-based compensation expense	$	2,774	$	2,707	$	942

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, 2017		4,213,100		$	2.96		8.1	$	1,890
Stock options granted		1,698,452			2.41
Stock options exercised		(2,488	)		1.80
Stock options canceled		(431,700	)		2.92
Balance, December 31, 2018		5,477,364		$	2.80		7.8	$	-
Exercisable and vested, December 31, 2018		2,346,990		$	2.72		6.9	$	-

The total intrinsic value of options exercised during the years ended

December 31, 2018,

2017

and

2016

was approximately

$3,000,

$400,000

and

$144,000,

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

December 31, 2018,

2017

and

2016

was

$1.72,

$5.80

and

$1.33

per share, respectively.

Employee Share-Based Compensation

During the years ended

December 31, 2018

and

2017,

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

1,698,452

and

796,399

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,
	2018			2017			2016
Risk-free interest rate	2.66	-	2.89%	1.76	-	2.25%	1.28	-	1.58%
Volatility	81	-	83%	81	-	89%		88%
Dividend yield	None			None			None
Expected term (in years)		6.25		5.00	-	6.25		6.25

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

December 31, 2018

is approximately

$5.0

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

2.4

years.

Non-Employee Director Share-Based Compensation (RSUs)

During the year ended

December 31, 2018,

the Company granted to certain non-employee directors

226,471

restricted stock units, or RSUs. 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, 2017		97,996		$	8.71
RSUs granted		226,471		$	1.36
RSUs vested		(57,108	)	$	7.03
RSUs forfeited		-			—
Balance, December 31, 2018		267,359		$	2.84

Unrecognized share-based compensation for employee RSUs granted through

December 31, 2018

was approximately

$235,000

to be recognized over a remaining weighted average service period of

1.0

years.

Nonemployee Share-Based Compensation

During the year ended

December 31, 2018,

2017

and

2016,

the Company granted options to purchase, zero,

46,254

and

490,849

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,

$768,000

and

$545,000

for the years ended

December 31, 2018,

2017

and

2016

respectively. Unrecognized share-based compensation expense for nonemployee options granted through

December 31, 2018

is approximately

$204,000

to be recognized over a remaining weighted average service period of

1.8

years.

The Company accounts 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 revalues 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			2016
Risk-free interest rate	2.80	-	2.95%	2.25	-	2.40%	1.60	-	2.42%
Volatility	78	-	85%	81	-	87%	89	-	91%
Dividend yield	None			None			None
Expected term (in years)	7.6	-	8.8	8.6	-	9.8	9.6	-	9.9