The following table summarizes the estimated value of the Company’s marketable securities and the gross unrealized gains and losses as of September 30, 2017 (in thousands):

As of September 30, 2017, the contractual maturity of the available-for-sale marketable securities is less than one year. There was no other-than-temporary impairment recognized during the nine months ended September 30, 2017.

Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventories consist of the following (in thousands):

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, scrap, shrinkage and expired inventories totaled approximately $15,000 and $57,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $25,000 and $94,000 for the nine months ended September 30, 2017 and 2016, respectively.

Property and equipment, net consist of the following (in thousands):

Depreciation expense totaled approximately $21,000 and $9,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $57,000 and $30,000 for the nine months ended September 30, 2017 and 2016, respectively.

Accrued expenses and other current liabilities consisted of the following (in thousands):

As of September 30, 2017, there are no notes outstanding. BelowWarrants - Set forth below is a historytable of previous notesactivity of warrants for common stock and the related weighted average exercise price per warrant.

Lincoln Park Capital stock purchase agreement - On March 29, 2021, the Company and Lincoln Park Capital Fund, LLC (Lincoln Park) entered into a purchase agreement (the Purchase Agreement) and a registration rights agreement (the Registration Rights Agreement), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $20 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the Offering). As consideration for entering into the Purchase Agreement, the Company agreed to issue to Lincoln Park 75,000 shares of common stock as commitment shares. In addition, the Company agreed to issue to Lincoln Park up to an aggregate of 50,000 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued and converted.to Lincoln Park under the Purchase Agreement.

In May 2015, BioCardia Lifesciences entered into note agreements with various stockholders of BioCardia Lifesciences and other lenders for a total of $7.2 million, orPursuant to the 2015 Notes. The 2015 Notes accrued 8% annual simple interest, matured 18 months from the issue date and were callable after the maturity date by written demand of a majority of the holders of the outstanding note principle. If BioCardia Lifesciences closed an effective registration statement filed under the Securities Act of 1933, as amended, covering the sale of BioCardia Lifesciences common stock (an IPO) prior to maturity, the outstanding principle and accrued interest would have automatically converted intoPurchase Agreement, Lincoln Park purchased 373,832 shares of common stock, at 80%a price of $5.35 per share, for a total gross purchase price of $2 million (the Initial Purchase) and the Company issued 80,000 shares of common stock as commitment shares, which included 5,000 commitment shares issued on a pro rata basis for the initial $2 million purchase. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2 million, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a Regular Purchase). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an Accelerated Purchase to purchase an additional amount of common stock that may not exceed the lesser of (i) 300% of the number of shares purchased pursuant to the corresponding Regular Purchase in multiple Accelerated Purchases on the same trading day or (ii) 30% of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple Accelerated Purchases on the same trading day.

The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the note holder’s option, orCompany’s sole discretion, except that during the Optional Conversion Right,36 months after the outstanding principle and interest may have been converted into sharesdate of the preferredPurchase Agreement (subject to certain exceptions) the Company may not enter into any agreement to effect the issuance of its common stock or common stock equivalents in any “equity line of credit” or other similar continuous offering in which the Company may offer, issue or sell common stock or common stock equivalents at a conversionfuture determined price, equalother than in connection with common stock issued pursuant to 80%an “at-the-market offering” by the Company exclusively through a registered broker-dealer acting as agent of the price of the preferred shares sold in such financing, plus preferred stock warrant coverage equalCompany pursuant to 8% with an exercise price equal to the purchase price of the preferred stock sold in such financing. If the notes were held to maturity, subject to BioCardia Lifesciences authorizing sufficient shares of a new class of preferred stock, or the Maturity Date Preferred Stock, the holder would have had the option to convert the outstanding principle and interest to this new class of Maturity Date Preferred Stock at an exercise price of $0.07 per share, plus 8% warrant coverage.

In August 2016,written agreement between the Company and the holdersregistered broker-dealer. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.

As of June 30, 2021, the 2015 Notes amended the 2015 Notes, pursuant to which the outstanding principal amount and all accrued interest through August 31, 2016 automatically converted into sharesCompany had not made any sales of BioCardia Lifesciences common stock at 80% ofto Lincoln Park under the conversion price ofPurchase Agreement other than the convertible notes issued in October 2016. In addition, the amendment eliminated the payment of interest for the period subsequent to August 31, 2016, and through the date of the closing of the Merger. Upon the completion of the Merger, the 2015 Notes and accrued interest converted into shares of BioCardia Lifesciences common stock, which were then exchanged at the Exchange Ratio into 67,443,988 shares of the Company’s common stock (approximately 5,620,332 shares after giving effect to the Company’s reverse stock split).Initial Purchase.

The 2015 Notes had redemption features that were determined to be a compound embedded derivative requiring bifurcationshare-based compensation expense is recorded in research and separate accounting at estimated fair value. The changes in the estimated value are reflected in the change in fair value of convertible shareholder notes derivative liability in the consolidated statements of operations. We estimated the fair value of the compound embedded derivative utilizing a Monte Carlo simulation model. The inputs used to determine the estimated fair value of the compound embedded derivative instrument include the probability of an underlying event triggering the redemption eventdevelopment, and its timing prior to the maturity date of the 2015 Notes. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjectiveselling, general and involve significant management judgment. Immediately prior to the closing of the Merger, the compound embedded derivative was remeasuredadministrative expenses based on the settlement value ofemployee's or non-employee’s respective function. No share-based compensation was capitalized during the common stock exchanged for the notes, and we reclassified the balance of the convertible shareholder notes derivative liability to additional paid-in capital.

The Company recognized interest expense, including amortization of the debt discount of $0 and $520,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $0 and $1.6 million for the nine months ended September 30, 2017 and 2016, respectively. 

BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2002 Stock Plan in 2002, or the 2002 Plan, and the Company assumed the 2002 Plan in the Merger. The Company will not grant any additional awards under the 2002 Plan following the Merger. In 2016, BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2016 Equity Incentive Plan, or the 2016 Plan, and the Company assumed the 2016 Plan in the Merger. The Company will grant awards, including incentive stock options and nonstatutory stock options, under the 2016 Plan following the Merger.

Stock compensation attributable to manufacturing operations was not significant and was expensed directly to cost of goods sold in the condensed consolidated statements of operations.periods presented. Share-based compensation expense for the three and ninesix months ended SeptemberJune 30, 2017 2021 and 20162020 was recorded as follows (in thousands):

On January 29, 2020 (the repricing date), the Company’s Board of Directors repriced certain previously granted and still outstanding vested and unvested stock option awards held by employees, executives and certain service providers of the Company; as a result, the exercise price was lowered to $5.32 per share. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 515,036 vested and unvested stock options outstanding with original exercise prices ranging from $10.05 to $97.21, were repriced.

The repricing on January 29, 2020 resulted in incremental stock-based compensation expense of $569,000, of which $412,000 related to vested employee stock option awards and was expensed on the repricing date, and $157,000 related to unvested stock option awards is being amortized on a straight-line basis over the approximately three year remaining weighted average vesting period of those awards. 

The following table summarizes the activity of stock options and related information:

The weighted average grant-date fair value of options granted during the nine months ended September 30, 2017 was $6.44 per share.

Employee Share-Based Compensation (Stock Options)

During the nine months ended September 30, 2017, the Company granted stock options to certain non-employee directors and employees to purchase 542,631 shares of common stock. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the weighted average assumptions in the table below:  

Unrecognized share-based compensation for employee and nonemployee options granted through SeptemberJune 30, 2017 2021 is approximately $4.7$3.3 million to be recognized over a remaining weighted average service period of 3.02.9 years.

Non-Employee DirectorShare-Based Compensation (RSUs)

During the nine months ended September 30, 2017, the Company granted to certain non-employee directors 97,996 restricted stock units, or RSUs. The fair value of each RSU is estimated on the closing market price on the grant date.  

The following summarizes the activity of non-vested RSUs:

Unrecognized share-based compensation for employee and nonemployee RSUs granted through SeptemberJune 30, 2017 2021 is approximately $642,000$67,000 to be recognized over a remaining weighted average service period of 2.00.6 years.

Nonemployee Share-Based Compensation

During the nine months ended September 30, 2017, the Company granted options to purchase 162,315 shares of common stock to consultants. These options were granted in exchange for consulting services to be rendered and vest over the term specified in the grant, which correlates to the period the services are rendered. The Company recorded approximately $188,000 and $20,000 for the three months ended September 30, 2017 and 2016, respectively, and approximately $698,000 and $21,000 for the nine months ended September 30, 2017 and 2016, respectively, as nonemployee share-based compensation expense.

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 nine months ended September 30, 2017:

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Since we were in a loss position for all periods presented, dilutedDiluted net loss per share is computed by dividing the same as basic net loss perby the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For all periods aspresented, there is no difference in the inclusionnumber of all potential commonshares used to calculate basic and diluted shares outstanding would have been anti-dilutive.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:

During the ninethree and six months ended SeptemberJune 30, 2017 2021 and 2016,2020, there was no0 income tax expense or benefit for federal or state income taxes in the accompanying condensed consolidated statementstatements of operations due to the Company’s net loss and a full valuation allowance on the resulting deferred tax assets.

As of SeptemberJune 30, 2017, 2021, the Company retains a full valuation allowance on its deferred tax assets in all jurisdictions. The realization of the Company’sits 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-notmore-likely-than-not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance.

In August 2016, On April 9, 2020, the Company grantedentered into a Litigation Funding Agreement (the Funding Agreement) with BSLF, L.L.C. (the Funder), an optionentity owned and controlled by Andrew Blank, Chair of BioCardia’s board of directors, for the purpose of funding the Company’s legal proceedings and any and all claims, actions and/or proceedings relating to purchase 5,027,726 sharesor arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No.3:19-05645-VC, U.S.D.C., N. D. Cal (the Litigation). BioCardia sought imposition of common stock (418,977 sharesconstructive 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.

Under the terms of the Funding Agreement, the Funder agreed to fund the legal fees and costs incurred by the Company in connection with the Litigation on and after givingMarch 1, 2020 on a non-recourse basis. The Company agreed to repay the Funder from any proceeds arising from the Litigation (the Litigation Proceeds), (i) any taxes paid by or imposed upon Funder (other than taxes imposed upon Funder as a consequence of Funder’s income) with respect to the claims, the litigation proceeds or as a consequence of any settlement in connection with the Litigation, if any, plus (ii) an amount, without reduction, set-off or counterclaim, equal to the amount actually paid by the Funder pursuant to the Funding Agreement (the Actual Funding Amount) plus (iii) the greater of:

(a) 50% of the remaining Litigation Proceeds, up to three times the Actual Funding Amount; or

(b) 30% of the remaining Litigation Proceeds.

Although the Company is required under the terms of the Funding Agreement to consult with the Funder regarding any settlement in connection with the Litigation and to allow Funder to participate in any real-time settlement negotiations, the Company has the sole and exclusive right to settle on whatever terms it deems acceptable. 

On April 12, 2021, all parties to the Litigation entered into a confidential settlement agreement. All claims in the Litigation have been dismissed. The settlement did not result in any material benefit or liability to the Company. The Company expects to conclude the Funding Agreement once all remaining matters thereunder are addressed.

Contingencies - The Company may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management is not aware of any current legal or administrative proceedings that are likely to have an adverse effect on the Company’s business, financial position, results of operations, or cash flows.

Uncertainties - The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future year, particularly in light of the novel coronavirus pandemic, or COVID-19, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and/or experience a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities and are continuing to adapt to these changing actions and guidelines.

The extent to which the coronavirus pandemic will continue to impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of the Company’s common stock. coronavirus and its mutations, the progress made on administering the vaccines or other emerging treatments, the continuing impact on local and global economic conditions, workforce capacity and the ongoing government responses, including stay-at-home orders and other restrictions that may be imposed.

ITEM 2. MANAGEMENT’S’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 involve riskare 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 uncertainties.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 therapies 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 and elsewhere in this report.for the year ended December 31, 2020. Historical results are not necessarily indicative of future results.

Special Note Regarding Smaller Reporting Company Status

We are filing 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 as a “smaller reporting company” (as definedto conform these statements to actual results or to changes in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act) based on our public float (the aggregate market value of our common equity held by non-affiliates of the Company) as of the last business day of our second fiscal quarter of 2016. As a result of being a smaller reporting company, we are allowed and have elected to omit certain information, including tabular disclosure of contractual obligations, from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate and necessary.expectations.

Overview

We are a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular and pulmonary diseases with large unmet medical needs. We are committed to applying our expertise in the fields of autologous and allogeneic cell-based therapies to improve the lives of patients with cardiovascular and pulmonary conditions. Our lead therapeutic candidate is the CardiAMP Cell Therapy System, or CardiAMPcell therapy platform provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of heart failure. We initiated our U.S. Food and Drug Administration, or FDA, accepted Phase III pivotal trial for CardiAMP in ischemic systolictwo clinical indications: heart failure that develops after a heart attack (BCDA-01) and chronic myocardial ischemia (BCDA-02). Our allogeneic mesenchymal stem cell therapy platform, derived from donor cells and intended to be provided “off the shelf,” is also being advanced for two indications, heart failure (BCDA-03) and for the pulmonary indication of acute respiratory distress that has developed from COVID-19 (BCDA-04).

Our Helix™ Biotherapeutic Delivery System platform, or Helix, delivers therapeutics into the heart muscle. It enables local delivery of cell, gene and protein-based therapies, including our own cell therapies to treat cardiac indications. The Helix system is CE marked in December 2016. Europe and under investigational use in the United States. We selectively partner with firms developing other therapies.

Our AVANCE™ product offering for transseptal cardiac procedures has begun early commercialization activities in the United States through commission-only 1099 sales representatives. 

CardiAMP Cell Therapy for Heart Failure and Chronic Myocardial Ischemia

The Company’s lead platform, CardiAMP cell therapy, is an autologous cell therapy being advanced for two indications in pivotal clinical trials: heart failure and chronic myocardial ischemia.

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 endpointPhase III pivotal trial is an improvement in six minute walking distance at 12 months post-treatment. In addition,designed to provide the primary endpoint analysis incorporatessupport for the impactsafety and efficacy of major adverse cardiac eventsthe CardiAMP Cell Therapy for heart failure which develops after a patient has a heart attack (BCDA-01). The trial is active at 24 clinical sites and other clinically meaningful events.