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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/19/19 BioCardia, Inc. 10-Q 9/30/19 61:3.7M RDG Filings/FA |
Document/Exhibit Description Pages Size
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28: R5 Condensed Consolidated Statements of Stockholders' HTML 81K
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56: R6 Condensed Consolidated Statements of Cash Flows HTML 95K
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40: R7 Note 1 - Summary of Business and Basis of HTML 28K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019
or
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 0-21419
BioCardia, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
23-2753988 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
125 Shoreway Road, Suite B
(Address of principal executive offices including zip code)
(650) 226-0120
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, par value $0.001 Warrant to Purchase Common Stock |
BCDA BCDAW |
The Nasdaq Capital Market The Nasdaq Capital Market |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
There were 6,825,183 shares of the registrant’s Common Stock issued and outstanding as of November 12, 2019.
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Part I. |
FINANCIAL INFORMATION |
4 |
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Item 1. |
Unaudited Condensed Consolidated Financial Statements |
4 |
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Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 |
4 |
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Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 |
5 |
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Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and nine months ended September 30, 2019 and 2018 |
6 |
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 |
7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
24 |
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Item 4. |
Controls and Procedures |
25 |
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Part II. |
OTHER INFORMATION |
25 |
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Item 1. |
Legal Proceedings |
25 |
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Item 1A. |
Risk Factors |
26 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
27 |
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Item 3. |
Defaults Upon Senior Securities |
27 |
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Item 4. |
Mine Safety Disclosures |
27 |
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Item 5. |
Other Information |
27 |
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Item 6. |
Exhibits |
27 |
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27 |
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SIGNATURES |
28 |
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FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q, or report, contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks and uncertainties. Certain statements contained in this report are not purely historical including, without limitation, statements regarding our expectations, beliefs, intentions, anticipations, commitments or strategies regarding the future that are forward-looking. These statements include those discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including “Critical Accounting Policies and Estimates,” “Results of Operations,” “Liquidity and Capital Resources,” and “Future Funding Requirements,” and elsewhere in this report.
In this report, the words “may,” “could,” “would,” “might,” “will,” “should,” “plan,” “ forecast,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “predict,” “potential,” “continue,” “future,” “moving toward” or the negative of these terms or other similar expressions also identify forward-looking statements. Our actual results could differ materially from those forward-looking statements contained in this report as a result of a number of risk factors including, but not limited to, those listed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, and elsewhere in this report. You should carefully consider these risks, in addition to the other information in this report and in our other filings with the SEC. All forward-looking statements and reasons why results may differ included in this report are made as of the date of this report, and we undertake no obligation to update any such forward-looking statement or reason why such results might differ after the date of this Quarterly Report on Form 10-Q, except as required by law.
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BIOCARDIA, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
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September 30, |
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2018 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 8,910 | $ | 5,358 | ||||
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Accounts receivable, net of allowance for doubtful accounts of $14 and $9 at September 30, 2019 and December 31, 2018 |
103 | 274 | ||||||
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Inventory |
45 | 141 | ||||||
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Prepaid expenses and other current assets |
179 | 445 | ||||||
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Total current assets |
9,237 | 6,218 | ||||||
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Property and equipment, net |
210 | 145 | ||||||
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Operating lease right-of-use asset, net |
1,180 | — | ||||||
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Other assets |
54 | 54 | ||||||
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Total assets |
$ | 10,681 | $ | 6,417 | ||||
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ | 1,112 | $ | 743 | ||||
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Accrued expenses and other current liabilities |
2,424 | 1,805 | ||||||
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Operating lease liability - current |
508 | — | ||||||
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Total current liabilities |
4,044 | 2,548 | ||||||
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Operating lease liability - noncurrent |
752 | — | ||||||
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Deferred revenue - noncurrent |
691 | — | ||||||
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Deferred rent |
— | 77 | ||||||
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Total liabilities |
5,487 | 2,625 | ||||||
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Stockholders’ equity: |
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Preferred stock, $0.001 par value, 25,000,000 shares authorized as of September 30, 2019 and December 31, 2018; no shares issued and outstanding as of September 30, 2019 and December 31, 2018 |
— | — | ||||||
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Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 6,825,183 and 4,845,697 shares issued and outstanding as of September 30, 2019 and December 31, 2018 |
46 | 43 | ||||||
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Additional paid-in capital |
102,716 | 90,110 | ||||||
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Accumulated deficit |
(97,568 |
) |
(86,361 |
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Total stockholders’ equity |
5,194 | 3,792 | ||||||
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Total liabilities and stockholders’ equity |
$ | 10,681 | $ | 6,417 | ||||
See accompanying notes to condensed consolidated financial statements.
BIOCARDIA, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(unaudited)
See accompanying notes to condensed consolidated financial statements.
BIOCARDIA, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except share amounts)
(unaudited)
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Common stock |
Additional |
Accumulated |
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Shares |
Cost |
paid in capital |
deficit |
Total |
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Balance at December 31, 2018 |
4,845,697 | $ | 43 | $ | 90,110 | $ | (86,361 | ) | $ | 3,792 | ||||||||||
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Restricted stock units vested and issued |
2,268 | 1 | — | — | 1 | |||||||||||||||
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Share-based compensation |
— | — | 690 | — | 690 | |||||||||||||||
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Net loss |
— | — | — | (3,665 | ) | (3,665 | ) | |||||||||||||
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Balance at March 31, 2019 |
4,847,965 | $ | 44 | $ | 90,800 | $ | (90,026 | ) | $ | 818 | ||||||||||
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Reverse stock split fractional share true up |
(494 | ) | — | — | — | — | ||||||||||||||
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Share-based compensation |
— | — | 696 | — | 696 | |||||||||||||||
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Net loss |
— | — | — | (3,750 | ) | (3,750 | ) | |||||||||||||
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Balance at June 30, 2019 |
4,847,471 | $ | 44 | $ | 91,496 | $ | (93,776 | ) | $ | (2,236 | ) | |||||||||
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Restricted stock units vested and issued |
25,158 | — | — | — | — | |||||||||||||||
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Issuance of stock and warrants, net of issuance costs |
1,741,667 | 2 | 9,258 | — | 9,260 | |||||||||||||||
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Issuance of stock and warrants from conversion of convertible notes |
210,887 | — | 1,206 | — | 1,206 | |||||||||||||||
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Share-based compensation |
— | — | 756 | — | 756 | |||||||||||||||
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Net loss |
— | — | — | (3,792 | ) | (3,792 | ) | |||||||||||||
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Balance at September 30, 2019 |
6,825,183 | $ | 46 | $ | 102,716 | $ | (97,568 | ) | $ | 5,194 | ||||||||||
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Balance at December 31, 2017 |
4,246,519 | $ | 38 | $ | 83,537 | $ | (72,450 | ) | $ | 11,125 | ||||||||||
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Adjustments to opening balance for change in accounting principle |
— | — | — | 46 | 46 | |||||||||||||||
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Restricted stock units vested and issued |
2,271 | — | — | — | — | |||||||||||||||
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Exercise of stock options |
237 | — | 5 | — | 5 | |||||||||||||||
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Share-based compensation |
— | — | 615 | — | 615 | |||||||||||||||
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Net loss |
— | — | — | (3,584 | ) | (3,584 | ) | |||||||||||||
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Balance at March 31, 2018 |
4,249,027 | $ | 38 | $ | 84,157 | $ | (75,988 | ) | $ | 8,207 | ||||||||||
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Adjustments to opening balance for change in accounting principle |
— | — | — | 30 | 30 | |||||||||||||||
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Restricted stock units vested and issued |
4,073 | — | — | — | — | |||||||||||||||
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Share-based compensation |
— | — | 738 | — | 738 | |||||||||||||||
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Net loss |
— | — | — | (3,217 | ) | (3,217 | ) | |||||||||||||
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Balance at June 30, 2018 |
4,253,100 | $ | 38 | $ | 84,895 | $ | (79,175 | ) | $ | 5,758 | ||||||||||
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Adjustments to opening balance for change in accounting principle |
— | — | — | — | — | |||||||||||||||
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Restricted stock units vested and issued |
— | — | — | — | — | |||||||||||||||
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Share-based compensation |
— | — | 730 | — | 730 | |||||||||||||||
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Net loss |
— | — | — | (3,544 | ) | (3,544 | ) | |||||||||||||
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Balance at September 30, 2018 |
4,253,100 | $ | 38 | $ | 85,625 | $ | (82,719 | ) | $ | 2,944 |
See accompanying notes to condensed consolidated financial statements.
BIOCARDIA, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
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Nine months ended September 30, |
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2018 |
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Operating activities: |
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Net loss |
$ | (11,208 |
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$ | (10,345 |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Write-off of inventory |
54 | — | ||||||
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Depreciation |
78 | 66 | ||||||
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Amortization of right-of-use asset |
325 | — | ||||||
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Share-based compensation |
2,142 | 2,083 | ||||||
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Amortization of debt discount on convertible shareholder notes |
112 | — | ||||||
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Change in fair value of redemption feature embedded in convertible notes |
(52 |
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— | |||||
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Loss on extinguishment of convertible notes |
521 | — | ||||||
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Changes in operating assets and liabilities: |
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Accounts receivable |
171 | (75 |
) |
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Inventory |
43 | 57 | ||||||
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Prepaid expenses and other current assets |
265 | 116 | ||||||
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Accounts payable |
372 | 200 | ||||||
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Accrued expenses and other current liabilities |
687 | 141 | ||||||
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Deferred revenue |
691 | (65 |
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Deferred rent |
— | (1 |
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Operating lease liability - noncurrent |
(390 |
) |
— | |||||
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Net cash used in operating activities |
(6,189 |
) |
(7,823 |
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Investing activities: |
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Purchase of property and equipment |
(144 |
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(51 |
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Net cash used in investing activities |
(144 |
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(51 |
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Financing activities: |
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Proceeds from sale of stock and warrants, net of issuance costs |
9,260 | — | ||||||
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Proceeds from issuance of convertible loan payable |
625 | — | ||||||
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Proceeds from the exercise of common stock options |
— | 5 | ||||||
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Net cash provided by financing activities |
9,885 | 5 | ||||||
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Net change in cash and cash equivalents |
3,552 | (7,869 |
) |
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Cash and cash equivalents at beginning of period |
5,358 | 12,689 | ||||||
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Cash and cash equivalents at end of period |
$ | 8,910 | $ | 4,820 | ||||
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Supplemental disclosure for noncash investing and financing activities: |
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Conversion of interest payable to stock and warrants |
$ | 8 | — | |||||
See accompanying notes to condensed consolidated financial statements.
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(1) |
Summary of Business and Basis of Presentation |
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(a) |
Description of Business |
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BioCardia, Inc., (BioCardia or the Company), is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. The Company’s lead therapeutic candidate is the CardiAMP® cell therapy system and its second therapeutic candidate is the CardiALLO™ cell therapy system. To date, the Company has devoted substantially all its resources to research and development efforts relating to its therapeutic candidates and biotherapeutic delivery systems including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting its intellectual property. |
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BioCardia also has three enabling device product lines: (1) the CardiAMP cell processing system; (2) the Helix™ biotherapeutic delivery system, or Helix; and (3) the Morph® steerable guide and sheath catheter portfolio, including the new AVANCE™ steerable introducer family. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. |
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(2) |
Significant Accounting Policies |
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(a) |
Basis of Preparation |
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The accompanying condensed consolidated balance sheets, statements of operations, shareholders equity, and cash flows as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 are unaudited. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information and on a basis consistent with the annual financial statements and, in the opinion of management, reflect all adjustments which include only normal recurring adjustments, necessary to present fairly its financial position as of September 30, 2019, results of operations for the three and nine months ended September 30, 2019 and 2018, and cash flows for the nine months ended September 30, 2019 and 2018. The results for the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other interim period or for any other future year. Certain changes in the prior period consolidated balance sheet have been made to conform to the current period presentation. Changes to reduce the December 31, 2018 accounts payable and increase the accrued expenses and other current liabilities accounts were made in the amount of $277,000. These changes had no effect on the Consolidated Statement of Operations or cash flow. |
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These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on April 2, 2019. |
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(b) |
Liquidity |
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The Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit of $97.6 million as of September 30, 2019. Management expects operating losses and negative cash flows to continue through the next several years. These factors raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date these financial statements are issued. Based on management’s current plans, management believes cash and cash equivalents of $8,910,000 as of September 30, 2019, will not be sufficient to fund the Company for one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
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If adequate funds are not available, BioCardia may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require it to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations. While the Company believes it has a viable strategy to raise additional funds, there can be no assurances that it will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund its operating needs. |
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(c) |
Use of Estimates |
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The preparation of the financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include share-based compensation, the useful lives of property and equipment, allowances for doubtful accounts and sales returns, incremental borrowing rate, and inventory valuation. |
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(d) |
Principles of Consolidation |
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The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated during the consolidation process. |
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(e) |
Changes to Significant Accounting Policies |
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The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in its Annual Report on Form 10-K filed for the year ended December 31, 2018. Apart from the adoption of ASU No. 2018-07, Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting on January 1, 2019, which led to an amended stock-based compensation policy, and the adoption of ASU No. 2016-02, Leases (Topic 842), which led to an amended lease policy as described in the following paragraphs, there have been no changes to those policies.
Measurement of nonemployee awards - The measurement of equity-classified nonemployee awards is fixed at the grant date, and the Company may use the expected term to measure nonemployee options or elect to use the contractual term as the expected term, on an award-by-award basis. This differs from the guidance in ASC 505-50 that requires the use of the contractual term. Forfeitures of nonemployee awards will be recognized as they occur.
Operating lease right-of-use asset and liabilities - The Company will determine if an arrangement is a lease at the inception of the arrangement. All leases are assessed for classification as an operating lease or finance lease. The Company will recognize a lease liability and a ROU asset for all leases, including operating leases, with a term greater than 12 months. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Variable lease payments are expensed as incurred and are not included the computation of the lease liability. The lease liability discount rate is generally the Company’s incremental borrowing rate unless the lessor’s rate implicit in the lease is readily determinable, in which case the lessor’s implicit rate is used.
The Company's ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor, if any. The Company amortizes a right-of-use (ROU) asset, and the periodic amortization is the difference between the straight-line total lease cost for the period (including amortization of initial direct costs) and the periodic accretion of the lease liability using the effective interest method.
The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise any such options. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term.
The Company’s lease contracts often include lease and non-lease components. The Company has elected the practical expedient offered by the standard to not separate lease from non-lease components and accounts for them as a single lease component.
The Company has elected not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term. |
|
|
(f) |
Recently Adopted Accounting Pronouncement
In February 2016, the FASB amended its guidance related to lease accounting. The amended guidance required lessees to recognize a majority of their leases on the balance sheet as a ROU asset and a lease liability. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, or ASU No. 2018-11. In issuing ASU No. 2018-11, the FASB is permitting another transition method for ASU 2016-02, which allows the transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected this available transition method. |
|
|
|
The Company adopted the new standard using the cumulative-effect method on January 1, 2019. The Company's adoption included lease codification improvements that were issued by the FASB through March 2019.
The FASB made available several practical expedients in adopting the amended lease accounting guidance. The Company elected the package of practical expedients permitted under the transition guidance, which among other things, allowed registrants to carry forward historical lease classification, its assessment on whether a contract is or contains a lease, and its initial direct costs for any leases that exist prior to adoption of the new standard. BioCardia also elected to keep leases with an initial term of 12 months or less off the consolidated balance sheet, and to recognize the associated lease payments in the statements of operations on a straight-line basis over the lease term.
The most significant impact was the recognition of ROU assets and related lease liabilities for operating leases on the condensed consolidated balance sheet. The Company recognized ROU assets and related lease liabilities of $1,505,000 and $1,593,000 respectively, related to operating lease commitments, as of January 1, 2019. The operating lease ROU asset represents the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received. The amended guidance did not have a material impact on the Company's cash flows or results of operations. See Note 6 of the condensed consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. ASU 2018-07 expands 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 will be substantially aligned. No longer will nonemployee awards be marked-to-market every reporting period, nor will the expected term be required to be the contractual term. However, forfeitures will continue to be recognized when incurred. ASU 2018-07 supersedes Subtopic 505-50, Equity-Based Payments to Non-Employees. The Company adopted ASU 2018-07 effective January 1, 2019 using the cumulative-effect method for equity-classified nonemployee awards which have not been settled as of the adoption date. The cumulative effect did not have a material impact on the condensed consolidated balance sheet, statement of operations or statement of cash flows. |
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|
(g) |
Recently Issued Accounting Pronouncements |
|
|
|
|
|
|
|
Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures. |
(3) Fair Value Measurement
The fair value of financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company follows a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:
Level 1 – quoted prices in active markets for identical assets and liabilities
Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table sets forth the fair value of its financial assets measured on a recurring basis as of September 30, 2019 and December 31, 2018 and indicates the fair value hierarchy utilized to determine such fair value (in thousands):
|
As of September 30, 2019 |
||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
|
Assets: |
||||||||||||||||
|
Money market funds |
$ | 8,910 | $ | — | $ | — | $ | 8,910 | ||||||||
|
As of December 31, 2018 |
||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
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Assets: |
||||||||||||||||
|
Money market funds |
$ | 5,358 | $ | — | $ | — | $ | 5,358 | ||||||||
(4) Inventories
Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventories consisted of the following (in thousands):
|
September 30, |
||||||||
|
2018 |
||||||||
|
Raw materials |
$ | — | $ | 79 | ||||
|
Work in process |
45 | 39 | ||||||
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Finished goods |
— | 23 | ||||||
|
Total |
$ | 45 | $ | 141 | ||||
Write downs for excess or expired inventory are based on management’s estimates of forecasted usage of inventories and are included in cost of goods sold. A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional write downs for excess or expired inventory in the future. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage and expired inventories totaled approximately $0, and $80,000 for the three and nine months ended September 30, 2019, respectively. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage and expired inventories totaled approximately $13,000, and $15,000 for the three and nine months ended September 30, 2018, respectively.
(5) Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
Depreciation expense totaled approximately $29,000 and $78,000 for the three and nine months ended September 30, 2019, respectively. Depreciation expense totaled approximately $22,000 and $66,000 for the three and nine months ended September 30, 2018, respectively.
(6) Operating Lease Right-of-Use Asset, Net
The Company adopted the new lease standard on January 1, 2019 using the cumulative-effect method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.
The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company’s operating lease is primarily related to a property lease for its laboratory and corporate offices. BioCardia’s lease agreement does not contain any material residual guarantees or material restrictive covenants, nor does it contain an additional lease extension.
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s lease does not provide an implicit rate. The Company used an adjusted historical incremental borrowing rate, based on the information available at the approximate lease commencement date, to determine the present value of lease payments. The net lease asset was adjusted for deferred rent, lease incentives, and prepaid rent. Variable rent expense is made up of expenses for common area maintenance and shared utilities and were not included in the determination of the present value of lease payments. The Company has no finance leases. The new lease standard did not materially impact its condensed consolidated statements of operations.
The components of lease expense for the three and nine months ended September 30, 2019 was as follows (in thousands, except years and percentages):
Supplemental cash flow information related to the operating lease was as follows (in thousands):
Future minimum lease payments under the operating lease as of September 30, 2019 are as follows (in thousands):
|
Operating Lease |
||||
|
Remainder of 2019 |
$ | 153 | ||
|
Years ending December 31, |
||||
| 630 | ||||
|
2021 |
649 | |||
|
Total undiscounted lease payments |
1,432 | |||
|
Less imputed interest |
172 | |||
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Total operating lease liabilities |
$ | 1,260 | ||
Prior to the Company’s adoption of the new lease standard, future minimum lease payments as of December 31, 2018, which were undiscounted, were as follows (in thousands):
|
Years ending December 31, |
||||
| $ | 612 | |||
|
2020 |
630 | |||
|
2021 |
649 | |||
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Total |
$ | 1,891 |
(7) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
(8) Stockholders’ Equity
Public Offering on Form S-1 Registration Statement - In April 2019, the Company submitted a Form S-1 Registration Statement (S-1) to the Securities and Exchange Commission (SEC), which was subsequently amended. On August 2, 2019, the Company entered into an underwriting agreement with Maxim Group LLC, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1, of 1,666,667 units consisting of one share of common stock, par value of $0.001 per share, and a warrant to purchase one share of common stock. The offering price to the public was $6.00 per unit. The warrants, which are equity classified, are immediately exercisable for shares of common stock at a price of $6.30 per share and expire five years from the date of issuance. In addition, the underwriters were granted 11,958 warrants exercisable at a per warrant exercise price of $6.60 as part of their compensation. The underwriters were granted a 45-day option to purchase up to 250,000 additional shares of common stock, and/or 250,000 additional warrants to cover over-allotments, if any. The closing of the offering occurred on August 6, 2019. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $8.84 million. On September 4, 2019, the underwriters exercised the over-allotment and purchased 75,000 shares of common stock and 250,000 warrants for net proceeds of approximately $420,000, after deducting underwriting discounts of approximately $32,000.
Up List to Nasdaq - On August 2, 2019 the Company’s common stock and warrants to purchase common stock began trading on the Nasdaq Capital Market. Previously the common stock was quoted on the OTCQB Marketplace (OTCQB) under the symbol, “BCDA”. “BCDA” and “BCDAW” are the trading symbols for the Company’s common stock and warrants to purchase common stock, respectively, on the Nasdaq Capital Market.
Convertible Note Financing - On July 5, 2019, BioCardia entered into a note purchase agreement pursuant to which the Company issued on such date $625,000 in aggregate principal amount of convertible promissory notes to accredited investors, a portion of which were certain of the Company’s officers and directors and a principal stockholder (or their respective affiliates). The notes accrued 14.0% simple interest and mature six months from the issue date, on January 5, 2020. If at any time prior to the maturity date, the Company closes a public stock offering for the purpose of raising capital in which the Company’s common stock is listed or quoted on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, the outstanding principle and interest would automatically convert into the securities offered in the financing at a unit price equal to a 50% discount to the qualified financing price. The convertible notes conversion features were determined to be an embedded derivative requiring bifurcation and separate accounting at estimated fair value. The fair value of the derivative was treated as a discount on the notes, which is subject to accretion over the term of the note. The change in fair value of the derivative liability was approximately $52,000. The loss on extinguishment of the convertible notes approximated $521,000. Interest expense on the notes for the three and nine months ended September 31, 2019, totaled $112,000 and included $104,000 of accretion of the discount.
Upon the closing of the Company’s public offering of units on August 6, 2019 the unpaid principal and interest on the convertible notes totaling approximately $633,000, converted into 210,887 units, each unit consisting of one share of common stock and a warrant to purchase one share of common stock, at a conversion price of $3.00 per unit. Holders of the convertible notes had the option of converting the notes into units of one share of common stock and a warrant at a unit price of $8.00 prior to the automatic conversion in the Company’s public offering. The warrants have the same terms, including exercise price and expiration date, as the warrants issued in the public offering.
Reverse Stock Split - On June 6, 2019 the Company effected a 1-for-9 reverse stock split of the Company’s common stock. Neither the par value nor the authorized number of shares was adjusted as a result of the reverse stock split. All issued and outstanding common stock, warrants, stock options, restricted stock units and per share amounts contained in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.
Warrants for Common Stock - On December 24, 2018, the Company issued 296,296 warrants (as adjusted for the reverse stock split described above) to purchase the Company’s common stock in connection with the sale of an aggregate of 592,592 shares (as adjusted) of the Company’s common stock at a purchase price of $6.75 per share (as adjusted) for aggregate proceeds of $3.8 million, net of $200,000 in expenses. The warrants are exercisable immediately for cash and, since six months have passed, are also exercisable on a cashless basis until an effective registration statement has been filed registering the resale of the shares issuable upon exercise of the warrants. Warrants can be settled in unregistered shares. The warrants have an exercise price of $6.75 per share and will expire on December 24, 2023. The issued warrants are standalone financial instruments and were equity classified in accordance with US GAAP. Set forth below is a table of activity of warrants for common stock and the related weighted average exercise price per warrant.
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Number of Common Stock Warrants |
Weighted Average Exercise Price |
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Balance, December 31, 2018 |
296,296 | $ | 6.75 | |||||
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Warrants for common stock sold |
2,139,512 | $ | 6.30 | |||||
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Warrants for common stock exercised |
- | |||||||
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Balance, September 30,2018 |
2,435,808 | $ | 6.36 | |||||
(9) Share-Based Compensation
The share-based compensation expense is recorded in cost of goods sold, research and development, and selling, general and administrative expenses based on the employee's or non-employee’s respective function. No share-based compensation was capitalized during the periods presented. Share-based compensation expense for the three and nine months ended September 30, 2019 and 2018 was recorded as follows (in thousands):
The following table summarizes the activity of stock options and related information:
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Options outstanding |
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Number of shares |
Weighted average exercise price |
|||||||
|
Balance, December 31, 2018 |
608,485 | $ | 25.16 | |||||
|
Stock options granted |
254,785 | 5.28 | ||||||
|
Stock options exercised |
— | - | ||||||
|
Stock options canceled |
(15,122 |
) |
14.16 | |||||
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Balance, September 30, 2019 |
848,148 | $ | 18.90 | |||||
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Exercisable and vested, September 30, 2019 |
390,199 | $ | 24.17 | |||||
Unrecognized share-based compensation for employee and nonemployee options granted through September 30, 2019 is approximately $4.0 million to be recognized over a remaining weighted average service period of 2.3 years.
Share-Based Compensation (RSUs)
The following summarizes the activity of non-vested RSUs:
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Weighted |
||||||||
|
average |
||||||||
|
grant date |
||||||||
|
Number of |
fair value |
|||||||
|
Shares |
per share |
|||||||
|
Balance, December 31, 2018 |
29,694 | $ | 25.56 | |||||
|
RSUs granted |
34,713 | $ | 4.75 | |||||
|
RSUs vested |
(2,272 |
) |
$ | 99.36 | ||||
|
RSUs forfeited |
- | - | ||||||
|
Balance, September 30, 2019 |
62,135 | $ | 10.55 | |||||
Unrecognized share-based compensation for RSUs granted through September 30, 2019 is approximately $230,000 to be recognized over a remaining weighted average service period of 0.3 years.
(10) Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding since the effects of potentially dilutive securities are antidilutive due to its net loss position.
The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:
|
2018 |
||||||||
|
Stock options to purchase common stock |
848,148 | 616,567 | ||||||
|
Unvested restricted stock units |
62,135 | 29,706 | ||||||
|
Common stock warrants |
2,435,808 | - | ||||||
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Total |
3,346,091 | 646,273 | ||||||
(11) Income Taxes
During the three and nine months ended September 30, 2019 and 2018, there was no income tax expense or benefit for federal or state income taxes in the accompanying condensed consolidated statement of operations due to the Company’s net loss and a full valuation allowance on the resulting deferred tax assets.
As of September 30, 2019, the Company retains a full valuation allowance on its deferred tax assets in all jurisdictions. The realization of its deferred tax assets depends primarily on its ability to generate future taxable income which is uncertain. The Company does not believe that its deferred tax assets are realizable on a more-likely-than-not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance.
(12) Related Party Transactions
BioCardia, Inc. (the “Company”) and OPKO Health, Inc. (“OPKO”) previously entered into a consulting agreement dated August 19, 2016, between the Company and OPKO (the “Consulting Agreement”). The chairman and chief executive officer of OPKO is a beneficial owner of more than 5% of the outstanding shares of the Company’s common stock.
Pursuant to the terms of the Consulting Agreement, OPKO was to provide advisory services to the Company in support of strategic transactions, financings and other matters as agreed between the parties from time to time. Also, in August 2016, the Company granted OPKO a ten-year option to purchase 46,553 shares of common stock, with a 4-year vesting period and an exercise price of $16.20 per share, to OPKO as consideration for consulting services to be provided under the Consulting Agreement. The term of the Consulting Agreement was initially for 4 years and was to have been automatically renewed for successive one-year periods.
Effective August 29, 2019, the Company and OPKO mutually agreed to terminate the Consulting Agreement without penalty or payment of any kind as the services under the Consulting Agreement were no longer necessary. In connection with the termination of the Consulting Agreement, OPKO’s option grant was amended such that it is unaffected by the termination of the Consulting Agreement and will continue to vest and remain outstanding for the remainder of its ten-year term unless earlier exercised. As a result of this modification of the option grant, all future unrecognized stock-based compensation expense was accelerated and recognized in August 2019. BioCardia recorded approximately $116,000 and $160,000 as share-based compensation expense related to the OPKO stock option in selling, general and administrative expense during the three and nine months ended September 30, 2019, respectively. BioCardia recorded approximately $59,000 and $121,000 as share-based compensation expense related to the OPKO stock option in selling, general and administrative expense during the three and nine months ended September 30, 2018, respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any and all statements contained in this Annual Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Quarterly Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of our cell therapy systems and our clinical trials, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our ability to raise additional capital, (iv) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC and (vi) the assumptions underlying or relating to any statement described in points (i) – (iv) above. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and elsewhere in this Quarterly Report on Form 10-Q and those listed in our Annual Report on Form 10-K. Historical results are not necessarily indicative of future results. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
Overview
We are a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Our lead therapeutic candidate is the investigational CardiAMP Cell Therapy System, which provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of two clinical indications: heart failure that develops after a heart attack and chronic myocardial ischemia.
To date, we have devoted substantially all our resources to research and development efforts relating to our therapeutic candidates and biotherapeutic delivery systems, including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting our intellectual property. We have also generated modest revenues from sales of our approved products. We have funded our operations primarily through the sales of equity and convertible debt securities, and certain government and private grants.
We have incurred net losses in each year since our inception. Our net losses were approximately $3.8 million and $3.5 million for the three months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had an accumulated deficit of approximately $97.6 million. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs, clinical trials, intellectual property matters, building our manufacturing and sales capabilities, and from general and administrative costs associated with our operations. As discussed in more detail under “Liquidity and Capital Resources”, there is substantial doubt about our ability to continue as a going concern within one year after the date this Quarterly Report on Form 10-Q is filed with the SEC, and we plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. There can be no assurances as to the availability of capital or the terms on which capital will be available, if at all.
CardiAMP Cell Therapy System
The CardiAMP Heart Failure Trial is a Phase III, multi-center, randomized, double-blinded, sham-controlled study of up to 260 patients at 40 centers nationwide, which includes a 10-patient roll-in cohort. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System. The trial’s primary endpoint is a clinical composite of six minute walk distance and major adverse cardiac and cerebrovascular events. Based on the results achieved in the Phase II trial, our Phase III pivotal trial is designed to have more than 95% probability of achieving a positive result with statistical significance.
The ongoing CardiAMP Heart Failure Trial is enrolling today at 24 clinical sites. The independent Data Safety Monitoring Board (DSMB) completed a prespecified data review in September 2019, which included the safety follow-up results on 35 patients at and all additional data available on the 50 patients randomized in the trial as of August 31, 2019. The DSMB indicated there were no safety concerns with the study results and recommended that the trial continue as planned.
Because there have been no safety concerns in the CardiAMP Heart Failure Trial, enrollment remains our primary focus and challenge. The trial investigators have enrolled 58 patients to date. We anticipate a DSMB interim readout from the trial in the fourth quarter of 2020 on 60 patients at one year follow-up that will include all patients enrolled at that time point. This fourth quarter of 2020 event is anticipated to be the first randomized efficacy data set including the primary endpoint reviewed by the DSMB.
We have recently addressed two barriers for patients to participate in the trial. The first of these is that the patients in the trial are all interested in receiving therapy and less interested in being in the control arm that does not have a path to receive therapy. Secondly, the requirement for patient out of pocket copays in our Medicare reimbursed trial appears to be a barrier to patient enrollment. To address these barriers to patient participation, we submitted an Investigational Device Exemption (IDE) supplement to the FDA with changes to enable patients in the control arm to “Cross Over” to therapy after certain follow-up visits in the trial have been completed, which assures the trial control arm patients early access to therapy if the trial meets its primary endpoint and is deemed appropriate for the patients by their physicians, and to enable BioCardia to cover the costs of all patient co-pays so that participation in the investigational trial is free for insured patients. The FDA has recently approved this IDE supplement. These changes, coupled with site specific plans intended to further accelerate enrollment, are being actively rolled out. We need a significant uptick in the rate of enrollment to complete this phase of the trial in 2020. We expect to have more clarity on target trial completion once these initiatives are in place.
The FDA has approved a second IDE for the randomized controlled pivotal trial of the CardiAMP Cell Therapy System in patients with refractory chronic myocardial ischemia for up to 343 patients at up to 40 clinical sites in the United States. This therapeutic approach uses many of the same novel aspects as the CardiAMP Heart Failure Trial and is expected to leverage our experience and investment in the heart failure trial. We anticipate that many of the investigators and sites will be the same for both the heart failure and chronic myocardial ischemia indications. This trial has not yet been initiated as we are sensitive to efforts that could impact the ongoing heart failure program, although it is expected this second pivotal trial will benefit significantly from all of the experience we have gained from the heart failure program.
The Department of Health & Human Services Centers for Medicare & Medicaid Services, or CMS, has designated that both the CardiAMP Heart Failure Trial and the CardiAMP Chronic Myocardial Ischemia Trial qualify for Medicare national coverage. Covered costs include patient screening, the CardiAMP Cell Therapy System and procedure, and clinical follow-up at one and two years after the procedure. Private insurance plans covering 50 million insured Americans follow this CMS reimbursement policy and are similarly anticipated to cover these costs. This coverage significantly reduces the Company’s cost of conducting these pivotal trials.
CardiALLO Cell Therapy System
Our second therapeutic candidate is the CardiALLO Cell Therapy System, an investigational culture expanded bone marrow derived “off the shelf” mesenchymal stem cell therapy. CardiALLO cell therapy cells are expanded from Neurokinin-1 receptor positive bone marrow cells. While these cells are being advanced to treat heart failure, they have potential for numerous therapeutic applications as these are anticipated to be the cells that respond to the release of Substance P. Substance P (“SP”) is a neuropeptide released from sensory nerves and is associated with the inflammatory processes and pain. SP is believed to be a key first responder to most noxious/extreme stimuli (stressors), i.e., those with a potential to compromise biological integrity. SP is thus regarded as an immediate defense, stress, repair survival system. The endogenous receptor for SP is the Neurokinin-1 receptor, which is distributed over cytoplasmic membranes of many cell types (for example neurons, glia, endothelia of capillaries and lymphatics, fibroblasts, stem cells, and white blood cells) in many tissues and organs. SP amplifies or excites most cellular processes. Elevation of serum, plasma, or tissue SP and/or its receptor Neurokinin-1 has been associated with many diseases: sickle cell crisis, inflammatory bowel disease, major depression and related disorders, fibromyalgia rheumatological, and infections such as HIV/AIDS and respiratory syncytial virus, as well as in cancer.
Our CardiALLO Neurokinin-1 positive derived cells are believed to be an important subset of the cells that we have delivered in our previous preclinical and clinical mesenchymal stem cell studies. We believe this therapy presents the advantages of an "off the shelf" therapy that does not require tissue harvesting or cell processing. We have completed manufacturing validation runs of these cells at BioCardia to support future clinical studies. We are working to obtain FDA acceptance of an Investigational New Drug (“IND”) application for the Phase I/II trial for CardiALLO Cell Therapy System for the treatment of ischemic systolic heart failure in the second quarter of 2020.
The subset of patients we are targeting initially for the CardiALLO Heart Failure Trial are those that have been excluded from our ongoing CardiAMP Heart Failure Trial due to their lower cell potency assay scores. If the CardiAMP trial is successful there is the potential for the CardiALLO therapy indication to be designated as an orphan indication.
Helix™ Biotherapeutic Delivery System
BioCardia’s Helix Biotherapeutic Delivery System or “Helix” is believed to be the leading percutaneous catheter delivery system for cardiovascular regenerative medicine. It enables investigational studies of local delivery of cell and gene-based therapies, including CardiAMP and CardiALLO cell therapies to treat cardiovascular indications. Helix is in use or has potential to be used to treat many cardiac diseases including heart failure with reduced ejection fraction, heart failure with preserved ejection fraction, obstructive hypertrophic cardiomyopathy, myocardial infarction, chronic myocardial ischemia, and cardiac conduction disorders. The Helix’s small hollow, distal helical needle is advanced, similar to an angioplasty catheter, and is passed over the aortic arch and across the aortic valve through the Company’s Morph guide catheter or “Morph”. The Helix is then advanced from within the Morph, and its helical needle is rotated into the heart tissue to provide active fixation during therapeutic delivery, similar to the active fixation electrodes used in cardiac pacing. This fixation to the beating heart wall provides for stability and control during the delivery procedure. It uses simplified fluoroscopic imaging, crosses the aortic arch and valve over a guide wire, and provides the operator with three degrees of freedom to maximize operator control. The Helix is approved in Europe with CE Mark and is under investigational use in the United States and is being used in pre-clinical and clinical investigations of cell, gene, and protein therapies.
Morph Deflectable Guide and Sheaths Product
BioCardia’s Morph catheter is designed to enable physicians to navigate through tortuous anatomy, customize the shape of the catheter to the patient's anatomy and their clinical needs during the procedure, and to have stellar back up support once positioned. Morph catheters enable all Helix procedures and have been commercially available to treat more than ten thousand patients. A number of Morph guides and sheaths are approved for commercial sale in the United States, including the Morph AVANCE™ which received FDA clearance in May 2019 and was first used commercially in September 2019. Certain Morph catheter systems are approved in Europe with CE Mark.
Financial Overview
Revenue
We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue.
Cost of Goods Sold
Cost of goods sold includes the costs of raw materials and components, manufacturing personnel and facility costs and other indirect and overhead costs associated with manufacturing our enabling and delivery products.
Research and Development Expenses
Our research and development expenses consist primarily of:
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salaries and related overhead expenses, which include share-based compensation and benefits for personnel in research and development functions; |
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fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial management and statistical compilation and analysis; |
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costs related to acquiring and manufacturing clinical trial materials; |
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costs related to compliance with regulatory requirements; and |
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payments related to licensed products and technologies. |
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress of completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are received.
We plan to increase our research and development expenses for the foreseeable future as we continue the pivotal CardiAMP Heart Failure Trial, advance the pivotal CardiAMP Chronic Myocardial Ischemia Trial, further develop the CardiAMP and CardiALLO Cell Therapy Systems, and subject to the availability of additional funding, develop other therapeutic candidates for additional indications. We typically use our employee and infrastructure resources across multiple research and development programs, and accordingly, we have not historically allocated resources specifically to our individual programs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, sales, corporate development and administrative support functions, including share-based compensation expenses and benefits. Other selling, general and administrative expenses include sales commissions, rent, accounting and legal services, obtaining and maintaining patents, the cost of consultants, occupancy costs, insurance premiums and information systems costs.
Other Income (Expense)
Other income and expense consist primarily of interest income we earn on our cash, cash equivalents and investments as well as net expenses incurred accounting for the derivative liabilities. We recorded a gain on the change in fair value of the derivative liabilities of approximately $52,000, a loss on extinguishment of convertible notes for approximately $521,000 as well as recognized interest expense of approximately $112,000, which included accretion of the debt discount of approximately $104,000.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various judgements that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Apart from the adoption of ASU No. 2018-07, Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting on January 1, 2019, which led to an amended stock-based compensation policy (see Note 2 of our Condensed Consolidated Financial Statements), there have been no changes in our critical accounting estimates or accounting policies described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K.
Results of Operations
Comparison of Three and Nine Months Ended September 30, 2019 and 2018
The following table summarizes our results of operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):
Revenue. Revenue increased to $194,000 in the third quarter of 2019 as compared to $84,000 in the third quarter of 2018. These changes are primarily due to growing partnering activities under programs with our collaborative partners. Revenues decreased to $495,000 in the nine months ended September 30, 2019 as compared to $522,000 in the nine months ended September 30, 2018. This decrease was caused by reduced volumes of commercial catheter sales, partially offset by growth in in partnering activities under programs with our collaborative partners. We expect revenues to continue to increase in the fourth quarter of 2019 and modestly year over year.
Cost of Goods Sold. Cost of goods sold decreased by approximately $85,000 and $80,000, respectively, during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018, primarily due to the decrease in net product sales volumes partially offset by an increase in inventory reserves in 2019 for raw materials related to the planned transition to the new Morph AVANCE™ product family. We expect cost of goods sold to continue to decrease in the fourth quarter of 2019 as compared to the fourth quarter of 2018 and decrease moderately year over year.
Research and Development Expenses. Research and development expenses decreased by approximately $255,000 and increased by $144,000, respectively, during the three months and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018. Discretionary research and development expenses in the three months ended September 30, 2019 were reduced, where this could be done without adversely impacting the projects, until the successful financing event occurred in the quarter. Clinical trial activities for the nine months ended September 30, 2019 were overall higher than those in the same period of 2018 because the number of sites and patients treated increased year over year. We expect research and development expenses to increase modestly as we advance the CardiAMP Heart Failure Trial and we further develop the CardiAMP and CardiALLO platforms.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and nine months ended September 30, 2019 increased by approximately $107,000 and $145,000, respectively, compared to the three and nine months ended September 30, 2018, primarily due to expenses associated with the reverse stock split, the up listing to the Nasdaq Capital Market and additional staffing and consultants for finance and administrative operations. We expect selling, general and administrative expenses to be relatively consistent in the fourth quarter of 2019 with the fourth quarter of 2018 and increase modestly year over year.
Other income and expense. Other income and expense consists primarily of interest income we earn on our cash, cash equivalents and investments as well as net expenses incurred accounting for the derivative liabilities. We recorded a gain on the change in fair value of the derivative liabilities of approximately $52,000, a loss on extinguishment of convertible notes for approximately $521,000 and recognized interest expense of approximately $112,000 on the convertible notes, which included accretion of the debt discount of approximately $104,000 for the three and nine months ended September 30, 2019.
Liquidity and Capital Resources
We have incurred net losses each year since our inception and as of September 30, 2019, we had an accumulated deficit of approximately $97.6 million. We anticipate that we will continue to incur net losses for the next several years.
We have funded our operations principally through the sales of equity and convertible debt securities as well as the cash acquired through our reverse merger transaction that was completed on October 24, 2016, $3.8 million raised from the sale of unregistered securities on December 24, 2018, the $625,000 raised from convertible notes that converted in July 2019 and the $9.27 million in net proceeds raised from the sale of common stock and warrants in August and September 2019. As of September 30, 2019, we had cash and cash equivalents of approximately $8.9 million.
The following table shows a summary of our cash flows for the periods indicated (in thousands):
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Nine Months Ending September 30, |
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2018 |
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Net cash provided by (used in): |
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Operating activities |
$ | (6,189 |
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(7,823 |
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Investing activities |
(144 |
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(51 |
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Financing activities |
9,885 | 5 | ||||||
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Net decrease in cash and cash equivalents |
$ | (3,552 |
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$ | (7,869 |
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Cash Flows from Operating Activities. The decrease in overall spending for operating activities of $1.6 million in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 related primarily to increases in noncurrent customer deposits and deferred revenue, and board cash compensation that was deferred during the nine months ended September 30, 2019 coupled with 2018 management bonuses settled in equity in 2019 instead of cash. We expect spending to increase modestly as we advance the CardiAMP Heart Failure Trial, further develop the CardiAMP and CardiALLO cell therapy systems and continue to strengthen and enhance the supporting organization.
Cash Flows from Investing Activities. Net cash used in investing activities of $144,000 during the nine months ended September 30, 2019 consisted primarily of purchases of lab equipment and clean room environmental systems. Net cash used in investing activities of $51,000 during the nine months ended September 30, 2018 consisted primarily of purchases of lab equipment.
Cash Flows from Financing Activities. Net cash provided by financing activities during the nine months ended September 30, 2019 consisted of proceeds from the sales of stock and warrants in August and September 2019 and proceeds from convertible notes received in July 2019 that converted in August 2019. Net cash provided by financing activities of $5,000 during the nine months ended September 30, 2018 consisted of the proceeds from the exercise of stock options.
Future Funding Requirements
To date, we have generated modest revenue from sales of our approved products. We do not know when, or if, we will generate any revenue from our development stage biotherapeutic programs. We do not expect to generate any revenue from sales of our CardiAMP or CardiALLO therapeutic candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. In addition, subject to obtaining regulatory approval for any of our therapeutic candidates and companion diagnostic, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations.
Based upon our current operating plan, we believe that the cash and cash equivalents of $8.9 million as of September 30, 2019 is not sufficient to fund our operations for one year from the date these financial statements are issued. In order to continue to further the development of our lead therapeutic candidates, the CardiAMP Cell Therapy System, and our second therapeutic candidate, the CardiALLO Cell Therapy System, beyond one year from the date these financial statements are issued, we will need to raise additional capital. We plan to raise additional capital, potentially including debt and equity arrangements as well as selling off rights to certain non-core assets, to finance our future operations, but there can be no assurances as to the availability of capital or the terms on which capital will be available, if at all. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.
Our future capital requirements will depend on many factors, including:
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the progress, costs, results and timing of our CardiAMP and CardiALLO clinical trials and related development programs; |
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FDA acceptance of our CardiAMP and CardiALLO therapies for heart failure and for other potential indications; |
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the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; |
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the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities; |
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the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development; |
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the ability of our product candidates to progress through clinical development successfully; |
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our need to expand our research and development activities; |
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the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies; |
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our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; |
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the general and administrative expenses related to being a public company; |
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our need and ability to hire additional management and scientific, medical and sales personnel; |
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the effect of competing technological and market developments; and |
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our need to implement additional internal systems and infrastructure, including financial and reporting systems. |
Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stock holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stock holders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.
Our condensed consolidated financial statements as of and for the nine months ended September 30, 2019 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Due to the factors described above, there is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. Our ability to continue as a going concern will depend in a large part, on our ability to raise additional capital. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our product development programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. While we believe we have a viable strategy to raise additional funds, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our operating needs.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue as a going concern, we may be forced to liquidate assets. In such a scenario, the values received for assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the Securities and Exchange Commission.
Recent Accounting Pronouncements
See Note 2 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risks during the quarter ended September 30, 2019.
Our exposure to market risk is currently limited to our cash and cash equivalents, all of which have maturities of less than three months. The goals of our investment policy are preservation of capital, maintenance of liquidity needs, and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk or departing from our investment policy. We currently do not hedge interest rate exposure. Because of the short-term nature of our cash equivalents, we do not believe that an increase in market rates would have a material negative impact on the value of our portfolio.
Interest Rate Risk
As of September 30, 2019, based on current interest rates and total borrowings outstanding, a hypothetical 100 basis point increase or decrease in interest rates would have an immaterial pre-tax impact on our results of operations.
Foreign Currency Exchange Risks
We are a U.S. entity and our functional currency is the U.S. dollar. The vast majority of our revenues were derived from sales in the United States. We have business transactions in foreign currencies; however, we believe we do not have significant exposure to risk from changes in foreign currency exchange rates at this time. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2019, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of September 30, 2019, our disclosure controls and procedures were, in design and operation, not effective at a reasonable assurance level as a result of the material weakness described below.
Material Weakness
We identified the following material weakness in our internal control over financial reporting as of September 30, 2019:
We lacked consistent processes to appropriately perform effective and timely review of the accounting for and disclosure of non-routine transactions. Therefore, there was a risk that a potential material misstatement of the financial statements would occur without being prevented or detected on a timely basis.
We have taken certain steps to remediate this material weakness, including increasing the utilization of external technical accounting resources and designing and implementing improved processes and internal controls. However, our efforts to remediate this material weakness may not be effective or prevent any future material weakness or significant deficiency in our internal control over financial reporting. If our efforts are not successful, or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the market price of our common stock to decline.
Changes in Internal Control over Financial Reporting
Other than the material weakness described in this Item 4, there were no changes to our internal control over financial reporting identified in connection with the evaluation required by rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management does not believe that we are a party to any material legal proceedings, except as described below. We currently do not expect the proceedings described below to have a material adverse effect on our business, financial position, results of operations, or cash flows at this time. Regardless of the outcome, proceedings such as these can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not become material or have a material adverse effect on our business, financial position, results of operations, or cash flows.
On April 9, 2019, BioCardia sent a letter to Ms. Surbhi Sarna, nVision Medical and Boston Scientific based on BioCardia’s discovery in January 2019 that Ms. Sarna had assigned to a company she founded, nVision Medical, a patent and patent applications she had filed while a BioCardia employee. nVision subsequently was acquired by Boston Scientific. BioCardia made various claims, including that the patent and patent application rightfully belonged to BioCardia pursuant to Ms. Sarna’s invention assignment agreement, that the proceeds from the sale of nVision to Boston Scientific rightfully belonged to BioCardia because they were the direct result of Ms. Sarna’s breach of her obligation to assign to BioCardia the patent and patent applications, and correction of inventorship on the patents and patent applications.
Correspondence was exchanged and possible ways to resolve BioCardia’s claims were discussed among the parties over the next few months. When it appeared that negotiations had been unsuccessful, BioCardia filed a request for arbitration against Ms. Sarna on August 6, 2019, as required by Ms. Sarna’s invention assignment agreement. On September 6, 2019, Boston Scientific Corporation, Boston Scientific Scimed Inc, and Fortis Advisors LL (the “Boston Scientific Parties”) filed a complaint against BioCardia in the United States District Court Northern District of California, Case no. 3:19-05645-VC, seeking declarations that the claims made in BioCardia’s correspondence were without basis (the “Federal Action”). Ms. Sarna filed an action in San Mateo Superior Court later that month seeking to enjoin the arbitration BioCardia initiated, and instead to require litigation of BioCardia’s claims against Ms. Sarna in state court. All parties subsequently agreed that BioCardia would withdraw its demand for arbitration, Ms. Sarna would withdraw her complaint seeking to enjoin that arbitration, and the parties would litigate all of their disputes in the Federal Action.
Pursuant to that agreement, on October 31, 2019, BioCardia filed a counterclaim in the Federal Action against the Boston Scientific Parties and Ms. Sarna for breach of contract, misappropriation of trade secrets and correction of inventorship on the patents naming Ms. Sarna as an inventor. BioCardia seeks imposition of constructive trusts both on the patents naming Ms. Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which could materially affect our business, financial condition, or future results. The risks described in this report and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 5, 2019, the Company issued $625,000 in convertible notes with an interest rate of 14.0% per year, a portion of which were issued to certain of our officers and directors and a principal stockholder (or their respective affiliates). At the closing of the Company’s public offering of units on August 6, 2019, the unpaid principal and interest converted into 210,887 units, each unit consisting of one share of common stock and a warrant to purchase one share of common stock at a conversion price of $3.00 per unit. The warrants have the same terms, including exercise price and expiration date, as the warrants issued in the public offering.
The issuance of the above notes was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act for the offer and sale of securities not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. The recipient of the securities was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
The shares issued upon conversion of the notes were issued pursuant to an exemption from registration provided by section 3(a)(9) of the Securities Act of 1933, as amended, for the shares were exchanged or issued in a transaction where no commissions or other remuneration was paid or given directly or indirectly for soliciting such exchange or issuances.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBIT INDEX
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Exhibit Number |
Exhibit Description |
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3.1(1) |
Amended and Restated Certificate of Incorporation, as amended May 6, 2019 |
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3.2(2) |
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31.1* |
Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1** |
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32.2** |
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101.INS+ |
XBRL Instance Document |
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101.SCH+ |
XBRL Taxonomy Extension Schema Document |
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101.CAL+ |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF+ |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB+ |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE+ |
XBRL Taxonomy Extension Presentation Linkbase Document |
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* |
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** |
Furnished herewith. |
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The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Securities and Exchange Commission. |
| (1) | Previously filed as Exhibit 3.1 of the Form 10-Q for the quarterly period ended June 30, 2019 filed by us on August 14, 2019. |
| (2) | Previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed by us on April 11, 2017. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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BIOCARDIA, INC. (Registrant) |
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Date: November 19, 2019 |
By: |
/s/ Peter Altman |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 19, 2019 |
By: |
/s/ David McClung |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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| 28 |
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/24/23 | ||||
| 12/31/20 | ||||
| 1/5/20 | ||||
| 12/31/19 | 10-K, 4, NT 10-K | |||
| Filed on: | 11/19/19 | SC 13D/A | ||
| 11/12/19 | ||||
| 10/31/19 | 8-K | |||
| For Period end: | 9/30/19 | NT 10-Q | ||
| 9/6/19 | ||||
| 9/4/19 | ||||
| 8/31/19 | ||||
| 8/29/19 | 8-K | |||
| 8/14/19 | 10-Q | |||
| 8/6/19 | 4 | |||
| 8/2/19 | 424B4, 8-K, EFFECT, POS EX | |||
| 7/5/19 | 4, 4/A, 8-K, S-1/A | |||
| 6/30/19 | 10-Q | |||
| 6/6/19 | 4 | |||
| 4/9/19 | S-1 | |||
| 4/2/19 | 10-K, NT 10-K | |||
| 3/31/19 | 10-Q | |||
| 1/1/19 | ||||
| 12/31/18 | 10-K, NT 10-K | |||
| 12/24/18 | 3, 4, 4/A, 8-K | |||
| 9/30/18 | 10-Q | |||
| 6/30/18 | 10-Q | |||
| 3/31/18 | 10-Q | |||
| 12/31/17 | 10-K | |||
| 4/11/17 | 8-K | |||
| 10/24/16 | 3 | |||
| 8/19/16 | ||||
| List all Filings | ||||