UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30March 31, 20172018
or
☐ | 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)
Delaware |
| |
| 23-2753988 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
125 Shoreway Road, Suite B
San Carlos, California 94070
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☐ |
| |||
|
|
|
| |||
|
|
|
| |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company |
| ☐ | ||
Emerging growth company | ☐ |
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 ☒
Indicate the number of shares outstanding of each of the issuer’sissuer’s classes of common stock, as of the latest practicable date.
There were 38,220,14138,241,244 shares of the registrant’s Common Stock issued and outstanding as of November 8, 2017.May 7, 2018.
Part I. FINANCIAL INFORMATION |
| 4 | ||
Item 1. | Unaudited Condensed Consolidated Financial Statements | 4 | ||
Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 | 4 | |||
Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 | 5 | |||
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 | 6 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 | ||
Item 4. | Controls and Procedures | 20 | ||
Part II. OTHER INFORMATION | 21 | |||
|
|
| ||
Item 1. |
|
| ||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
| ||
|
|
| ||
|
|
| ||
|
| |||
| Legal Proceedings |
| 21 | |
Item 1A. | Risk Factors | 21 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| 21 | |
Item 3. | Defaults Upon Senior Securities | 21 | ||
Item 4. | Mine Safety Disclosures | 21 | ||
Item 5. | Other Information | 21 | ||
Item 6. | Exhibits |
| 21 | |
|
|
| ||
SIGNATURES | 22 | |||
EXHIBIT INDEX | 23 |
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q, or report,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,“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 Annual Report on Form 10-K and elsewhere in this report. You should carefully consider these risks, in addition to the other information in this Reportreport and in our other filings with the SEC. TheseAll forward-looking statements represent our estimates and assumptions onlyreasons why results may differ included in this report are made as of the date of this report, regardless of the time of delivery of this report, and such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Except as required by law, we undertake no obligation to update any such forward-looking statement or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise reason why such results might differafter the date of this report.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)
| September 30, 2017 | December 31, 2016 | March 31, | December 31, | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 13,326 | $ | 21,352 | $ | 9,653 | $ | 12,689 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $3 and $2 at September 30, 2017 and December 31, 2016, respectively | 90 | 74 | ||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $6 at March 31, 2018 and December 31, 2017, respectively | 127 | 95 | ||||||||||||||
Inventory | 240 | 135 | 148 | 191 | ||||||||||||
Short-term investments | 1,799 | — | ||||||||||||||
Prepaid expenses | 188 | 356 | 277 | 340 | ||||||||||||
Total current assets | 15,643 | 21,917 | 10,205 | 13,315 | ||||||||||||
Property and equipment, net | 163 | 111 | 152 | 169 | ||||||||||||
Other assets | 54 | 54 | 54 | 54 | ||||||||||||
Total assets | $ | 15,860 | $ | 22,082 | $ | 10,411 | $ | 13,538 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 447 | $ | 525 | $ | 738 | $ | 902 | ||||||||
Accrued expenses and other current liabilities | 1,393 | 848 | 1,323 | 1,263 | ||||||||||||
Deferred revenue | 160 | 71 | 60 | 167 | ||||||||||||
Total current liabilities | 2,000 | 1,444 | 2,121 | 2,332 | ||||||||||||
Deferred rent | 75 | 56 | 83 | 81 | ||||||||||||
Total liabilities | 2,075 | 1,500 | 2,204 | 2,413 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016 | ||||||||||||||||
Common stock, $0.001 par value, 750,000,000 shares authorized as of September 30, 2017 and December 31, 2016 respectively; 38,151,548 shares and 38,131,303 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 38 | 38 | ||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Preferred stock, $0.001 par value, 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2018 and December 31, 2017 | — | — | ||||||||||||||
Common stock, $0.001 par value, 100,000,000 shares authorized as of March 31, 2018 and December 31, 2017 respectively; 38,241,244 and 38,218,660 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 38 | 38 | ||||||||||||||
Additional paid-in capital | 82,711 | 80,686 | 84,157 | 83,537 | ||||||||||||
Accumulated deficit | (68,964 | ) | (60,142 | ) | (75,988 | ) | (72,450 | ) | ||||||||
Total stockholders’ equity | 13,785 | 20,582 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 15,860 | $ | 22,082 | ||||||||||||
Total stockholders’ equity | 8,207 | 11,125 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,411 | $ | 13,538 |
See accompanying notes to condensed consolidated financial statements. |
BIOCARDIA, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(unaudited)
Three Months ended September 30, | Nine Months ended September 30, | Three months ended March 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Net product revenue | $ | 88 | $ | 100 | $ | 298 | $ | 406 | $ | 82 | $ | 109 | ||||||||||||
Collaboration agreement revenue | 42 | 17 | 81 | 33 | 117 | 28 | ||||||||||||||||||
Total revenue | 130 | 117 | 379 | 439 | 199 | 137 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Cost of goods sold | 147 | 196 | 525 | 578 | 157 | 175 | ||||||||||||||||||
Research and development | 1,700 | 684 | 4,028 | 1,622 | 1,955 | 1,033 | ||||||||||||||||||
Selling, general and administrative | 1,322 | 919 | 4,708 | 2,375 | 1,707 | 1,804 | ||||||||||||||||||
Total costs and expenses | 3,169 | 1,799 | 9,261 | 4,575 | 3,819 | 3,012 | ||||||||||||||||||
Operating loss | (3,039 | ) | (1,682 | ) | (8,882 | ) | (4,136 | ) | (3,620 | ) | (2,875 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest income | 35 | — | 58 | — | 36 | — | ||||||||||||||||||
Interest expense | — | (520 | ) | — | (1,627 | ) | ||||||||||||||||||
Change in fair value of convertible preferred stock warrant liability | — | 30 | — | 250 | ||||||||||||||||||||
Change in fair value of maturity date preferred stock warrant liability | — | 3 | — | 10 | ||||||||||||||||||||
Change in fair value of convertible shareholder notes derivative liability | — | (1,085 | ) | — | (1,224 | ) | ||||||||||||||||||
Other expense | 3 | — | 2 | (1 | ) | |||||||||||||||||||
Other expense, net | — | (1 | ) | |||||||||||||||||||||
Total other income (expense), net | 38 | (1,572 | ) | 60 | (2,592 | ) | 36 | (1 | ) | |||||||||||||||
Net loss | $ | (3,001 | ) | $ | (3,254 | ) | $ | (8,822 | ) | $ | (6,728 | ) | $ | (3,584 | ) | $ | (2,876 | ) | ||||||
Net loss per share, basic and diluted | $ | (0.08 | ) | $ | (2.06 | ) | $ | (0.23 | ) | $ | (4.26 | ) | $ | (0.09 | ) | $ | (0.08 | ) | ||||||
Weighted-average shares used in computing net loss per share, basic and diluted | 38,146,751 | 1,579,852 | 38,141,654 | 1,579,264 | 38,236,056 | 38,137,881 |
See accompanying notes to condensed consolidated financial statements. |
BIOCARDIA, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months ended September 30, | Three months ended March 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | $ | (8,822 | ) | $ | (6,728 | ) | $ | (3,584 | ) | $ | (2,876 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 57 | 30 | 22 | 13 | ||||||||||||
Change in fair value of convertible preferred stock warrant liability | — | (250 | ) | |||||||||||||
Change in fair value of maturity date preferred stock warrant liability | — | (10 | ) | |||||||||||||
Change in fair value of convertible shareholder notes derivative liability | — | 1,224 | ||||||||||||||
Stock based compensation | 1,999 | 145 | ||||||||||||||
Non-cash interest expense on convertible shareholder notes | — | 1,627 | ||||||||||||||
Share-based compensation | 615 | 622 | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (16 | ) | 45 | (32 | ) | (47 | ) | |||||||||
Inventory | (105 | ) | 44 | 43 | (9 | ) | ||||||||||
Prepaid expenses and other current assets | 168 | 111 | ||||||||||||||
Prepaid expenses | 63 | 104 | ||||||||||||||
Accounts payable | (80 | ) | 505 | (164 | ) | (249 | ) | |||||||||
Accrued liabilities excluding accrued interest on convertible note | 545 | 235 | ||||||||||||||
Accrued liabilities | 34 | 157 | ||||||||||||||
Deferred revenue | 89 | 37 | (35 | ) | 1 | |||||||||||
Deferred rent | 19 | (22 | ) | 2 | 6 | |||||||||||
Net cash used in operating activities | (6,146 | ) | (3,007 | ) | (3,036 | ) | (2,278 | ) | ||||||||
Investing activities: | ||||||||||||||||
Purchase of property and equipment | (107 | ) | — | (5 | ) | (64 | ) | |||||||||
Purchase of short-term investments | (1,799 | ) | — | |||||||||||||
Net cash used in investing activities | (1,906 | ) | — | |||||||||||||
Net used in in investing activities | (5 | ) | (64 | ) | ||||||||||||
Financing activities: | ||||||||||||||||
Proceeds from the exercise of common stock options | 26 | 2 | 5 | 22 | ||||||||||||
Net cash provided by financing activities | 26 | 2 | 5 | 22 | ||||||||||||
Net decrease in cash and cash equivalents | (8,026 | ) | (3,005 | ) | (3,036 | ) | (2,320 | ) | ||||||||
Cash and cash equivalents at beginning of period | 21,352 | 3,557 | 12,689 | 21,352 | ||||||||||||
Cash and cash equivalents at end of period | $ | 13,326 | $ | 552 | $ | 9,653 | $ | 19,032 | ||||||||
Supplemental disclosures for noncash investing activity: | ||||||||||||||||
Supplemental disclosure of noncash investing activity: | ||||||||||||||||
Accounts payable recognized for the purchase of equipment | $ | 2 | $ | — | $ | — | $ | 15 |
See accompanying notes to condensed consolidated financial statements. |
(1) | Summary of Business and Basis of Presentation |
(a) | Description of Business | |
BioCardia, Inc., (We or the Company), is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Our lead therapeutic candidate is the CardiAMP cell therapy system and our second therapeutic candidate is the CardiALLO cell therapy system. 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 three enabling device product lines: (1) the CardiAMP cell processing system; (2) the Helix biotherapeutic delivery system, or Helix; and (3) the Morph vascular access product line, or Morph. We manage our operations as a single segment for the purposes of assessing performance and making operating decisions. |
BioCardia, Inc., or the Company, is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Its 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 of 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.
The Company has three enabling device product lines: (1) the CardiAMP cell processing system; (2) the Helix biotherapeutic delivery system, or Helix; and (3) the Morph vascular access product line, or Morph. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.
|
|
On or about September 25, 2017, the Company received written consents from holders of approximately 63.6% of the total issued and outstanding shares of voting stock of the Company excluding any holdback shares to authorize the Company’s Board of Directors to approve a 12-to-1 reverse stock split of our issued and outstanding shares of Common Stock (the Reverse Stock Split). The Company’s shares of common stock commenced trading on a split-adjusted basis on November 3, 2017.
Following the Reverse Stock Split, certain reclassifications have been made to the prior periods’ financial statements to conform to the current period's presentation. The Company adjusted stockholders’ equity to reflect the Reverse Stock Split by reclassifying an amount equal to the par value of the shares eliminated by the split from common stock to the additional paid-in capital for all periods presented in these condensed consolidated financial statements, resulting in no net impact to stockholders’ equity on the condensed consolidated balance sheets.
|
|
On August 22, 2016, the Company, its wholly-owned subsidiary, Icicle Acquisition Corp, and BioCardia Lifesciences, Inc., or BioCardia Lifesciences (at the time named, BioCardia, Inc.), entered into an Agreement and Plan of Merger, or the Merger Agreement. The transactions contemplated by the Merger Agreement closed on October 24, 2016, pursuant to which Icicle Acquisition Corp. merged with and into BioCardia Lifesciences, with BioCardia Lifesciences continuing as the surviving company, or the Merger. BioCardia Lifesciences was determined to be the accounting acquirer in the Merger based upon the terms of the Merger and other factors, including: (i) former BioCardia Lifesciences security holders owned approximately 54% of the combined company (on a fully diluted basis) immediately following the closing of the Merger, (ii) former BioCardia Lifesciences directors hold the majority of the board seats in the combined company, and (iii) former BioCardia Lifesciences management holds all of the key positions in the management of the combined company. Following the completion of the Merger, the Company changed its name to BioCardia, Inc.
Exchange Ratio
Pursuant to the Merger Agreement, each share of BioCardia Lifesciences common stock issued and outstanding prior to the Merger, including shares of common stock underlying outstanding preferred stock, convertible notes (which converted into common stock immediately prior to the Merger), and stock options were converted into the right to receive 19.3678009 shares of Company common stock (approximately 1.6139834 shares after giving effect to the Company’s reverse stock split effected November 3, 2017), or the Exchange Ratio. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the capital structure as a result of the Merger.
(2) | Significant Accounting Policies |
(a) | Basis of Preparation | |
The accompanying condensed consolidated balance sheets, statements of operations and cash flows as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 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 our financial position as of March 31, 2018, results of operations for the three months ended March 31, 2018 and 2017, and cash flows for the three months ended March 31, 2018 and 2017. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period or for any other future year. | ||
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, 2017, filed with the SEC on March 16, 2018. |
The accompanying condensed consolidated balance sheets, statements of operations and cash flows as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016 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 our financial position as of September 30, 2017, results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any other interim period or for any other future year.
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, 2016, filed with the SEC on March 30, 2017.
(b) | Liquidity | |
We have incurred net losses and negative cash flows from operations since our inception and had an accumulated deficit of $76.0 million as of March 31, 2018. Management expects operating losses and negative cash flows to continue through the next several years. Based on management’s current plans, management believes cash and cash equivalents of $9.7 million as of March 31, 2018 are sufficient to fund the Company into the fourth quarter of 2018. These factors raise substantial doubt about our ability to continue as a going concern beyond 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. | ||
Our ability to continue as a going concern and to continue further development of our lead therapeutic candidate, the CardiAMP cell therapy system, and our second therapeutic candidate, the CardiALLO cell therapy system, through and beyond the fourth quarter of 2018, will require us to raise additional capital. We plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. 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 Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit of $69.0 million as of September 30, 2017. Management expects operating losses and negative cash flows to continue through at least the next several years. Based on management’s current plans, management believes cash and cash equivalents of $13.3 million and short-term investments of $1.8 million as of September 30, 2017 are sufficient to fund the Company into the third quarter of 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our ability to continue as a going concern and to continue further development of the Company’s lead therapeutic candidate, the CardiAMP cell therapy system, and the Company’s second therapeutic candidate, the CardiALLO cell therapy system, through and beyond the third quarter of 2018, will require the Company to raise additional capital. The Company plans to raise additional capital, potentially including debt and equity arrangements, to finance its future operations. If adequate funds are not available, the Company 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 the Company 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 in the viability of its strategy to raise additional funds, there can be no assurances to that effect.
(c) | Use of Estimates |
The preparation of the financial statements in accordance with U.S. GAAP requires Company 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;equipment, allowances for doubtful accounts and sales returns;returns and inventory valuation; fair value of the convertible preferred stock warrant liability; fair value of the maturity date preferred stock warrant liability; fair value of the convertible shareholder notes derivative liability; and share-based compensation.valuation.
(d) | Principles of Consolidation |
The condensed consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned subsidiary. All intercompany accounts and transactions have been eliminated during the consolidation process.
Revenue Recognition Net product revenue – We currently have a portfolio of enabling and delivery products. Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Collaboration agreement revenue – Collaboration agreement revenue is income from agreements under partnering programs with corporate and academic institutions, wherein we provide biotherapeutic delivery systems and customer training and support for Revenue is recognized when control of
On January 1, 2018, we adopted Topic 606 using the cumulative effect adoption method. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The adoption of Topic 606 did not have a material impact on our financial statements. In January 2016, the FASB issued ASU No. 2016-01 (ASU 2016-01), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the update clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. In May 2017, the
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842) (ASU 2016-02), which supersedes existing guidance on accounting for leases in
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the
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 our financial assets measured on a recurring basis as of
Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventories
Write downs for excess or expired inventory are based on
Property and equipment, net
Depreciation expense totaled approximately
Accrued expenses and other current liabilities consisted of the following (in thousands):
The following table summarizes the activity of stock options and related information:
The weighted average grant-date fair value of options granted during the
Employee Share-Based Compensation (Stock Options)
During the
Unrecognized share-based compensation for employee options granted through
Non-Employee Director Share-Based Compensation (RSUs)
The following summarizes the activity of non-vested RSUs:
Unrecognized share-based compensation for employee RSUs granted through
Nonemployee Share-Based Compensation
During the
The Company accounts for share-based compensation arrangements with nonemployees, using the Black-Scholes option pricing model, based on the fair value as these instruments vest. Accordingly, at each reporting date, the Company revalues the unearned portion of the share-based compensation and the resulting change in fair value is recognized in the consolidated statements of operations over the period the related services are rendered. The following assumptions were used to value the awards for the
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period.
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:
During the
As of
In August 2016,
ITEM 2.
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 that involve risk and uncertainties. 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 listed in our Annual Report on Form 10-K and elsewhere in this report. Historical results are not necessarily indicative of future results.
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, We initiated our U.S. Food and Drug Administration, or FDA, accepted Phase III pivotal trial for CardiAMP Cell Therapy in ischemic systolic heart failure, in December 2016. 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 trial’s primary endpoint is In September 2017, the independent Data Safety Monitoring Board (DSMB) completed the pre-specified interim analysis of safety outcomes for the first 10 patients treated in the Phase
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 are anticipated to 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.
Our second therapeutic candidate is the CardiALLO Cell Therapy System,
To date, we have devoted substantially all
We have incurred net losses in each year since our inception. Our net losses were approximately
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:
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
We plan to increase our research and development expenses for the foreseeable future as we continue
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
Other Income (Expense)
Other income and expense consists primarily of interest income we earn on our cash,
Critical Accounting Policies and Estimates
Our
Apart from the adoption of ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) on January 1, 2018, which led to an amended revenue policy described below, there were no material changes during the three months ended March 31, 2018 in our critical accounting estimates or accounting policies described in
Net product revenue – We Collaboration agreement revenue – Collaboration agreement revenue is income from agreements under partnering programs with corporate and academic institutions, wherein we provide biotherapeutic delivery systems and customer training and support for Revenue is recognized when control of products and Amounts received from customers in advance of
Results of Operations
Comparison of Three Months Ended
The following table summarizes our results of operations for the three months ended
Revenue. Revenue increased by approximately
Cost of Goods Sold. Cost of goods sold decreased by approximately
Research and Development Expenses. Research and development expenses increased by approximately
Selling, General and Administrative Expenses. Selling, general and administrative expenses
Liquidity and Capital Resources
We have incurred net losses each year since our inception and as of
We have funded our operations principally through the sales of equity and convertible debt securities as well as the cash acquired through the
The following table shows a summary of our cash flows for the periods indicated (in thousands):
Cash Flows from Operating Activities. The increase in overall spending for operating activities of
Cash Flows from Investing Activities. Net cash used in investing activities of equipment.
Cash Flows from Financing Activities. Net cash provided by financing activities of
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
Our future capital requirements will depend on many factors, including:
the progress, costs, results and timing of our CardiAMP and CardiALLO clinical trials and related development programs;
FDA acceptance of our CardiAMP and CardiALLO therapies for heart failure and for other potential indications;
the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;
the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;
the ability of our product candidates to progress through clinical development successfully;
our need to expand our research and development activities;
the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;
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;
the general and administrative expenses related to being a public company;
our need and ability to hire additional management and scientific, medical and sales personnel;
the effect of competing technological and market developments; and
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
Our condensed consolidated financial statements as of and for the three
The financial statements do not include any adjustments that might result from the outcome of this
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
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
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 March 31, 2018, 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
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
In connection with the preparation of this Quarterly Report on Form 10-Q, as of
Changes in Internal Control over Financial Reporting
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
In addition to
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBIT INDEX
The exhibits listed in the Exhibit Index to this Quarterly Report on Form 10-Q are incorporated herein by reference.
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.
EXHIBIT INDEX
|