BIOCARDIA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

BIOCARDIA, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(unaudited)

BIOCARDIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity 

(In thousands, except share amounts)

(unaudited)

See accompanying notes to the unaudited condensed consolidated financial statements.

BIOCARDIA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

BioCardia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

BioCardia, Inc. (we, us, our, BioCardia or the Company), is a clinical-stage company focused on developing cellular and cell-derived therapeutics for the treatment of cardiovascular and pulmonary diseases with significant unmet medical needs. The Company’s lead therapeutic candidates are based on the CardiAMP Cell Therapy System, a platform which provides an autologous bone marrow derived cell therapy for treatment in two clinical indications: ischemic heart failure and refractory angina resulting from chronic myocardial ischemia. The Company’s second therapeutic platform is an investigational bone marrow derived allogeneic “off the shelf” Neurokinin-1 Receptor Positive mesenchymal stem cell therapy for the treatment of cardiac and pulmonary disease. 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.

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 vascular access product line, or Morph. We manage our operations as a single segment for the purposes of assessing performance and making operating decisions.

There were no other material impacts to our condensed consolidated financial statements as a result of adopting this updated standard.

The fair value of financial instruments reflects the amounts that the Company estimateswe estimate 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 followsWe follow 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 liabilitiesliabilities.

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 liabilitiesliabilities.

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 Company’s money market instruments are classified as Level 2 because they are valued using observable inputs other than quoted market prices. The Company’s marketable securities consist of available-for-sale securities and are classified as Level 2 because their value is based on valuation using significant inputs derived from or corroborated by observable market data.

The following table sets forth the fair value of ourits financial assets measured on a recurring basis as of September 30, 20172022 and indicates the fair value hierarchy utilized to determine such fair value (in thousands):

The following table sets forth the fair value of our financial assets measured on a recurring basis as of December 31, 20162021 and indicates the fair value hierarchy utilized to determine such fair value (in thousands):

As discussed in Note 8, in 2015, the Company issued warrants to purchase preferred stock in connection with the note agreements to various shareholders as described below. Upon the completion of the Merger, the Company exchanged 20% and 10% of outstanding Series D and Series F convertible preferred stock warrants for 81,460 and 48,223 shares of the Company’s common stock (approximately 6,788 and 4,018 shares after giving effect to the Company’s reverse stock split effected on November 3, 2017), respectively, and cancelled the remaining convertible preferred stock warrants pursuant to the Merger Agreement. Hence no warrants are outstanding as of September 30, 2017 and December 31, 2016. The warrant liabilities were recorded at the fair value on the date of issuance and were remeasured each subsequent balance sheet date and as of the warrant exercise date, with fair value changes recognized as income (decrease in fair value) or expense (increase in fair value) in other income (expense) in the consolidated statements of operations.

In May 2015, the Company entered into note agreements with various stockholders of the Company and other lenders for a total of $7.2 million, or the 2015 Notes. Upon the completion of the Merger, the 2015 Notes and related accrued interest converted 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 effected on November 3, 2017). Hence no notes are outstanding as of September 30, 2017 and December 31, 2016. As discussed more fully in Note 8, the 2015 Notes included embedded derivative features that were determined to be a compound embedded derivative requiring bifurcation and separate accounting at estimated fair value. The Company estimated the fair value of the compound embedded derivative utilizing a Monte Carlo simulation model from inception through September 30, 2016. 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 event 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 subjective and involve significant management judgment. Upon the completion of the Merger, the valuation of the compound embedded derivative was determined based on the settlement value of the common stock exchanged for the notes on October 24, 2016. 

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 consistconsisted of the following (in thousands):

Depreciation expense totaled approximately $21,000$29,000 and $9,000$61,000 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, 20172022, respectively. Depreciation expense totaled $15,000 and 2016,$45,000 for the three and nine months ended September 30, 2021, respectively.

Our operating lease related to a property lease for our laboratory and corporate offices expired in December 2021, and we entered into a new lease which expires in January 2027, with an option for us to extend a further 36 months after expiration. Our lease agreements do not contain any material residual guarantees or material restrictive covenants. We determine 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.

Right-of-use (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. We 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. 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. We have no finance leases.

Our lease expense for the three and nine months ended September 30, 2022 was $121,000 and $362,000, respectively. Our lease expense for the three and nine months ended September 30, 2021 was $150,000 and $451,000, respectively. The cash paid under the operating lease for base rent for the three and nine months ended September 30, 2022 was $114,000 and $287,000, respectively. The cash paid under the operating lease during the three and nine months ended September 30, 2021 was $162,000 and $486,000, respectively. On September 30, 2022, the weighted average remaining lease term was 4.34 years, and the weighted average discount rate was 10.74%.

Future minimum lease payments under the operating lease as of September 30, 2022 were as follows (in thousands):

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

Warrants - Set forth below is a table of activity 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).

Pursuant to the Purchase Agreement, in March 2021, Lincoln Park purchased 373,832 shares of common stock, at 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.

As of September 30, 2017, there are no notes outstanding. Below is a history of previous notes issued and converted.2022, the Company had not sold any common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.

In May 2015, BioCardia LifesciencesCantor Fitzgerald Sales agreement - On April 12, 2022, the Company entered into note agreementsa sales agreement (the Sales Agreement) with various stockholders of BioCardia Lifesciences and other lenders for a total of $7.2 million, orCantor Fitzgerald & Co. (Cantor) as 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 into shares of common stock at 80% of the price of the shares of common stock purchased in the IPO. If at any time prior to the maturity date, the Company closed a private placement of the Company’s preferred stock for aggregate sales proceeds of at least $5.0 million excluding note conversions, at the note holder’s option, or the Optional Conversion Right, the outstanding principle and interest may have been converted into shares of the preferred stock at a conversion price equal to 80% of the price of the preferred shares sold in such financing, plus preferred stock warrant coverage equal 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, the Company and the holders of the 2015 Notes amended the 2015 Notes,agent, pursuant to which the outstanding principal amountCompany may offer and all accrued interestsell, from time to time, through August 31, 2016 automatically converted intoCantor, shares of BioCardia Lifesciencesits common stock at 80%having an aggregate offering price of up to $10.5 million (the ATM Offering). The Company is not obligated to sell any common stock shares pursuant to the Sales Agreement. Under the terms of the conversion priceSales Agreement, the Company pays Cantor a commission of 3% of the convertible notes issued in October 2016. In addition,aggregate proceeds from the amendment eliminated the paymentsale of interest for the period subsequent to August 31, 2016,shares 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).reimburses certain legal fees.

The 2015 Notes had redemption features that were determined to be a compound embedded derivative requiring bifurcation 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 event 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 subjective and involve significant management judgment. Immediately prior to the closing of the Merger, the compound embedded derivative was remeasured based on the settlement value of 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 forDuring the three months ended September 30, 2017 and 2016, respectively, and approximately $0 and $1.6 million2022, the Company sold 66,704 shares of common stock under the ATM Offering at then-market prices for total gross proceeds of $139,000, with a net refund of issuance costs of $1,000. During the nine months ended September 30, 2017 and 2016, respectively. 2022, the Company sold 641,704 shares of common stock under the ATM Offering at then-market prices for total gross proceeds of approximately $1.7 million, with associated issuance costs of $231,000.

BioCardia Lifesciences adopted,The share-based compensation expense is recorded in research and development, and selling, general and administrative expenses based on the BioCardia Lifesciences shareholders approved,employee's or non-employee’s respective function. No share-based compensation was capitalized during 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 nine months ended September 30, 20172022 and 20162021 was recorded as follows (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 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 September 30, 20172022 is approximately $4.7$2.3 million to be recognized over a remaining weighted average service period of 3.02.6 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:

RSUs vested and settled are converted into the Company’s common stock on a one-for-one basis. RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. Of the 52,799 RSUs outstanding on September 30, 2022, 50,065 RSUs are vested and have not been settled and 2,734 have not yet vested. The related compensation expense, which is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted, is recognized ratably over the period during which the vesting restrictions lapse. Unrecognized share-based compensation for employee and nonemployee RSUs granted through September 30, 20172022 is approximately $642,000$7,000 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 calculated by dividing the net loss by the weighted average number of shares of common stock outstanding and fully vested restricted stock units. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common sharesshare equivalents outstanding for the period. Since we were in a loss position forperiod determined using the treasury-stock method. Common stock equivalents are comprised of unvested restricted stock units, warrants to purchase common stock and options outstanding under the stock option plans. 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 the net loss per share is the same as basic net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.  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 three and nine months ended September 30, 20172022 and 2016,2021, there was no 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 September 30, 2017,2022, 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-not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance.

On April 9, 2020, the Company entered into a Litigation Funding Agreement (the Funding Agreement) with BSLF, L.L.C. (the Funder), an entity 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 or 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). On April 12, 2021, all parties to the Litigation entered into a confidential settlement agreement and all claims were dismissed.

In August 2016,March 2022, the Company granted an optionentered into settlement agreements with its litigation service providers and the Funder to purchase 5,027,726 sharesterminate the Funding Agreement and conclude on all remaining matters thereunder (the Litigation Funding Settlement). Under the terms of common stock (418,977 shares after giving effectthe confidential agreements, litigation and corporate counsel provided credits and refunds of legal fees totaling $688,000, which offset the amounts owed to the Company’s reverse stock split effectedCompany by the Funder under the Funding Agreement, and provided up to $300,000 in future discounts on November 3, 2017) with 4-year vesting period, to OPKO Health, Inc., or OPKO, as consideration for consulting services to be provided by OPKO in accordance withlegal services. As a result of the consulting agreement entered into betweenLitigation Funding Settlement, the Company and OPKO. The unearned portionwill remit the discounts, as received, to the Funder on a quarterly basis. As a result of the share-based compensationsettlement, accounts payable was reduced by $523,000, the $562,000 other receivable due from the related party was eliminated, and a $156,000 related party payable was included in accrued expenses and other current liabilities as of December 31, 2021. The Company remitted the $156,000 related party payable to the OPKO option was revalued at September 30, 2017, and the Company recorded $126,000 and $432,000 as expense duringFunder on March 17, 2022. During the three and nine months ended September 30, 2017, respectively.2022, the Company received discounts totaling $14,000 and $61,000, respectively, with $14,000 recorded as a related party payable in accrued expenses and other current liabilities as of September 30, 2022.

Contingencies - The termCompany 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 nine months ended September 30, 2022 are not necessarily indicative of the consulting agreement is 4 yearsresults to be expected for the year ending December 31, 2022 or for any other interim period or for any other future year, particularly in light of COVID-19 and will be automatically renewedits impact on domestic and global economies. Governmental and business reactions to the pandemic, and resulting economic disruptions, have the potential to materially impact our business and influence our business decisions. While the impact of COVID-19 did not have a material adverse effect on our financial position or results of operations for successive one year periods. The chairman and chief executive officer of OPKO is a beneficial owner of more than 5%the periods presented, the Company’s future assessment of the outstanding sharesmagnitude and duration of COVID-19 and related factors, could result in material impacts to the Company’s common stock and OPKO itself is also a beneficial owner of more than 5% of the outstanding shares of the Company’s common stock. financial statements in future reporting periods.

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 Quarterly 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 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, those listed in our Annual Report on Form 10-K and elsewhere in this report.for the year ended December 31, 2021. 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 focused on developing novelcellular and cell-derived 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 with a helical needle from within the heart. 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 cell, gene and protein therapies utilizing the Helix and other biotherapeutic delivery systems that we have developed.  

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.

BCDA-01 CardiAMP Autologous Cell Therapy for Ischemic Heart Failure

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 System for heart failure which develops after a patient has a heart attack (BCDA-01). The trial is active at 20 clinical sites and other clinically meaningful events.115 patients have been enrolled.  

In September 2017,January 2022, the U.S. Food and Drug Administration (FDA) granted Breakthrough Device Designation for the CardiAMP Cell Therapy System for the treatment of heart failure. This Breakthrough Device Program is designed to expedite FDA approval of certain novel devices or device-led combination products (i.e., products that combine drugs, devices or biological products) that have the potential to provide more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. It is believed that the CardiAMP Cell Therapy System is the first cardiac cell therapy to receive an FDA Breakthrough designation.   

In February 2022, Health Canada, the country’s health services agency, sent BioCardia a No Objection Letter, allowing the CardiAMP Heart Failure Trial to expand into Canada. Four world-class Canadian clinical sites are currently working through the activation process to begin enrolling patients in the near future. The first of these four new Canadian sites, the Ottawa Heart Institute is now actively enrolling in the trial. Three additional Canadian centers are expected to be activated in the coming months.

In May 2022, the Center for Medicare and Medicaid Services issued code C9782 for: “Blinded procedure for New York Heart Association (NYHA) Class II or III heart failure, or Canadian Cardiovascular Society (CCS) Class III or IV chronic refractory angina; transcatheter intramyocardial transplantation of autologous bone marrow cells (e.g., mononuclear) or placebo control, autologous bone marrow harvesting and preparation for transplantation, left heart catheterization including ventriculography, all laboratory services, and all imaging with or without guidance (e.g., transthoracic echocardiography, ultrasound, fluoroscopy), all device(s), performed in an approved Investigational Device Exemption (IDE) study.” This reimbursement is for up to $20,000 effective from April 1, 2022 and is applicable to both the CardiAMP autologous cell therapy program in ischemic heart failure and the trial in chronic myocardial ischemia.

In July 2022, the Company had its second consultation with Japan’s Pharmaceutical and Medical Device Agency regarding potential approval of the CardiAMP Cell Therapy System for the treatment of ischemic heart failure based on existing data. Throughout the third quarter, efforts developing the submission to PMDA for a third formal consultation continued and are substantially complete. BioCardia is requesting a Japanese cardiovascular society petition the Ministry of Health Labor and Welfare that this device is a much needed medical device, which may convey certain benefits to the approval and reimbursement of the CardiAMP System in Japan. This petition must be done in advance of BioCardia’s submission for approval.

On August 30, 2022, the independent Data Safety Monitoring Board (DSMB) completed a prespecified data review, including a risk-benefit assessment. Following the pre-specified interim analysis of safety outcomes forreview, the first 10 patients treated in the Phase 3 trial of its investigational CardiAMP cell therapy product. The DSMB indicated there werethat it had no significant safety concerns with the CardiAMP study results and recommended that the trialstudy continue as planned. Currently five world class centers are actively enrolling indesigned. The DSMB also recommended that the study.Company consider implementing an adaptive statistical analysis plan, which could enable an early readout for study treatment efficacy.

We anticipate filing an investigational device exemption (IDE) supplementAn adaptive statistical analysis plan is one which attempts to add an interim efficacy readoutdetermine the appropriate number of patients needed in a clinical study based on the data within the trial itself as opposed to data from a previous trial. This has the significant advantage of de-risking the trial from changes that have occurred in the fourth quartercurrent trial relative to previous trials. Subsequent trials have potential to have better results as they are informed by previous trials, but there may also be more variation in the data as trials are expanded to many clinical centers. Both of 2018these can impact the success of a clinical trial in meeting its primary endpoint. In reviewing the data during a DSMB meeting under an adaptive statistical analysis plan, the DSMB may be able to assess at certain points in the clinical trial how many patients should be enrolled in the trial to meet the primary endpoint in the trial. If a trial has already enrolled the number of patients expected to be required to show efficacy, then there is potential that the DSMB informs the sponsor that the trial enrollment might be stopped for expected success.

Efforts are underway to complete an adaptive statistical analysis plan for the CardiAMP Heart Failure Trial Executive Steering Committee and expect top linethe FDA to review and comment on. In parallel, our clinical operations team is working to ensure that clinical data that the DSMB would use in such an adaptive review of the study statistics is correct through extensive monitoring of the clinical data in collaboration with our clinical partners. This is often referred to as cleaning the fourth quarterdata and is a significant effort. The next prespecified formal DSMB review is anticipated in March 2023 and based on conversations the Company has had with the intended developers of 2019. Ifthe adaptive Statistical Analysis Plan and its respected regulatory consultants, and our own efforts cleaning the data, the Company believes it is likely to be able to have the adaptive statistical analysis plan in place for the next DSMB meeting. The specific details of any potential adaptive statistical analysis plan in combination with any modifications to the DSMB Charter will dictate what happens at this next and subsequent DSMB reviews.

As the CardiAMP Cell Therapy Trial in Heart Failure was over 90% powered for success based on the Phase II data, there is potential that the trial could meet its primary efficacy endpoint on the patients that have been enrolled to date. However, when the DSMB next meets, they may also share that the trial continue per plan, be stopped for safety, or be stopped for futility if the data does not support that achieving the primary endpoint is possible.

In October 2022, at the Heart Failure Society of America annual meeting, two-year data on the ten patient roll-in cohort was presented. In this clinical trial cohort, patient demographics at study start demonstrated characteristics typical of the target population of NYHA class II and III ischemic heart failure patients with reduced ejection fraction. No serious adverse events were observed related to any of the procedures performed. Two-year survival was 100%, and all patients completed 24 months of follow-up. The changes in guideline-directed medical therapy experienced by these patients were presented as minimal during the two-year study period. Improvement in median functional capacity as measured by six-minute walk distance was observed by six months (28.5 m, P=0.01); with six-minute walk distance maintained through 24 months (31.0 m, p >0.05). In the study, 70% of patients reported improved or stable quality of life over 24 months in the standardized self- assessment questionnaire used. At 24 months, 50% of patients were improved by at least one NYHA class (n=4 at class I), 20% had unchanged NYHA class, and 30% deteriorated by one class, from class II to III. Median left ventricular ejection fraction (LVEF) as measured by the echocardiography core laboratory at Yale School of Medicine was improved at month 24 over baseline, six months, and over 12-month follow-up. Echocardiography evaluated by the core lab also showed recruitment of previously akinetic (reduced movement) left ventricular wall segments at month 24 compared to baseline, consistent with the improvements in six-minute walk distance, quality of life, and LVEF through two years follow-up. These outcomes support the potential efficacy of this autologous cell therapy currently under investigation in an ongoing multicenter controlled trial.

In October 2022, an update to www.CardiAMP.com, a website to educate patients and physicians about the clinical trial went live and was approved by a central independent Institutional Review Board. For the first time, the Company has patients who can share their experiences with other patients, which we feel has promise to enhance enrollment and awareness in the CardiAMP Heart Failure trial.

In October 2022, we also held a national clinical study site coordinators meeting to work through enrollment and clinical issues and build a best practices approach to efficient performance of the clinical trial which is ongoing.

BCDA-02 CardiAMP Autologous Cell Therapy for Chronic Myocardial Ischemia

The CardiAMP Chronic Myocardial Ischemia Trial is a Phase III, multi-center, randomized, double-blinded, controlled study of up to 343 patients at up to 40 clinical sites. The Phase III pivotal trial is successful, we believe we will bedesigned to provide the first company to reachprimary support for the market with a cell-based therapy to treat heart failure. Additionally, safety and efficacy of the Company anticipates an FDA filingCardiAMP Cell Therapy System for a second CardiAMPthe indication inof chronic myocardial ischemia (CMI)(BCDA-02). 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 2017 instead of in post myocardial infarction as previously disclosed.the heart failure trial. This program benefits from the 2022 CMS reimbursement at up to $20,000. The trial has been activated at two centers and the Company is working to activate additional centers and deliver safety results from the roll-in cohort.

Allogeneic Cell Therapy for Cardiac and Pulmonary Disease (BCDA-03 and BCDA-04)

Our second therapeutic candidateplatform is the CardiALLO Cell Therapy System, or CardiALLO, which utilizesour investigational culture expanded bone marrow derived allogeneic, Neurokinin-1 Receptor Positive mesenchymal stem cells from a donor(NK1R+ MSC). This “off the shelf” mesenchymal cell therapy is being advanced for cardiac and pulmonary disease. BioCardia’s established and certified ISO 7 cleanroom has been developed to treat heart failure. manufacture its allogeneic NK1R+MSC investigational cell therapy products.

BCDA-03

We anticipate submittingare working to secure FDA acceptance of an Investigational New Drug (IND)IND application for submission to the FDA for a Phase I/II trial for CardiALLOto deliver these allogeneic cells for the treatment of ischemic systolic heart failurefailure. We have completed the manufacturing validation runs and stability testing for the Chemistry Manufacturing and Controls section of the IND. We have completed the  preclinical pharmacology toxicology animal testing with no safety issues and with trends towards therapeutic benefit. The IND application for this program was filed with FDA CBER in 2018.early November 2022.  The Company anticipates FDA approval of the IND in early December.

BCDA-04

In April 2022, the FDA approved the Company’s Investigational New Drug (IND) for a Phase I/II trial for the use of this allogeneic cell therapy for Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19 (BCDA-04). This INDallows the Company to initiate its First-in-Human Phase I/II trial in adult patients recovering from ARDS due to COVID-19, with trial initiation expected in 2022. The first part of the clinical trial will evaluate increasing dosages of the NK1R+ MSCs and the optimal dose will be taken to Phase II in a randomized study in adult patients recovering from ARDS due to COVID-19. This therapy is expectedintended to address the enormous unmet need of sustained local and systemic inflammation after a patient is taken off respirator support with goals of accelerating recovery, enhancing survival and reducing both relapse and rehospitalization. A first clinical study manufacturing run from our Sunnyvale facility has been completed with cells cryopreserved, awaiting final longer lead time test data for lot release before they are able to be shipped to centers for patients in the clinical study. This manufacturing run has potential to have improved Chemistry Manufacturing Controlssufficient cells to complete the entire Phase I portion of the Phase I/II trial as we achieve many doses with each batch. We are also in late-stage contracting, budgeting and institutional review board discussions with world class clinical centers to perform the clinical trial.

Recent Developments

COVID-19 Considerations

As a result of the COVID-19 pandemic, we have experienced significant disruption to the Company’s business and delays in the IND relativeCompany’s development programs and regulatory and commercialization timelines, including adverse impact to our previous co-sponsored investigations utilizing culture expanded bone marrow derived mesenchymal stem cells.

We are committedoperations at certain clinical sites involved in our ongoing clinical studies. The COVID-19 pandemic could continue to applyingadversely affect our expertisebusiness, results of operations, financial condition and/or liquidity in the fieldsfuture. These adverse impacts could include delayed or slowed enrollment of autologous and allogeneic cell-based therapies to improve the lives of patients with cardiovascular conditions. As we engage inour, or our collaborators’, planned or ongoing clinical trials, delayed or cancelled clinical site initiations, delayed regulatory review for regulatory approvals, delayed commercialization of one or more of our therapeuticproduct candidates, we have compensatedif approved, and intend to compensate all parties performing the trialsworkforce shortages. Our production capabilities, or studies (including all the parties identified in our Annual Report on Form 10-K) only on terms that are standard and customary in clinical study arrangements. 

To date, we have devoted substantially allthose of our resources to researchpartners or suppliers, 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 havesupply chains could 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. All convertible debt securities were converted into shares of our Common Stock in connection with the Merger.

We have incurred net losses in each year since our inception. Our net losses were approximately $3.0 million and $3.3 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $8.8 million and $6.7 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of approximately $69.0 million. Substantially all of 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”, we plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations.be adversely impacted.

Additionally, while the potential continuing economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of COVID-19 on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s liquidity and ability to raise the capital to complete its preclinical and clinical studies on a timely basis, or at all. In addition, a recession, market correction or depression resulting from the COVID-19 pandemic or the response to it, could materially affect our business and the value of our common stock.

Financial Overview

Revenue

We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue. Net product revenues include commercial sales of our Morph vascular access system in the US and EU and collaboration agreement revenues include revenue from partnering agreements with corporate and academic institutions. Under these partnering agreements, we provide our Helix biotherapeutic delivery system and customer training and support for use in preclinical and clinical studies.

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 toof 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 performed.received. 

We plan to increase our research and development expenses for the foreseeable future as we continue to developthe pivotal CardiAMP autologous cell therapy trials in heart failure and subject to the availability of additional funding, further advance the development of CardiALLOchronic myocardial ischemia, and any other therapeutic candidates for additional indications.begin our allogeneic cell therapy trials in heart failure and acute respiratory distress syndrome. 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. There are also significant synergies between these programs.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our therapeutic candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our therapeutic candidates.

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 significant 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.

We expect that our selling, general and administrative expenses will increase as we advance our Phase III pivotal heart failure trial for CardiAMP, and subject to the availability of additional funding, conduct our Phase II trial for CardiALLO and prepare for commercialization. We believe that these increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel to support product commercialization efforts and operations and increased fees for outside consultants, attorneys and accountants. We also expect to incur increased costs to comply with corporate governance, internal controls, investor relations and disclosures, and similar requirements applicable to public companies.

Other Income (Expense)

Other income and expense consistsconsist primarily of interest income we earn on our cash, and cash equivalents and investments, interest charges we incurred in periods when we have convertible debt outstanding, and changes in the fair value of our warrant and convertible shareholder note derivative liabilities in periods when we have warrants or convertible debt outstanding. Subsequent to the Merger, we have no interest charges related to the convertible debt and changes in the fair value of our warrant and convertible shareholder note derivative liabilities as such instruments were converted, cancelled or exchanged as part of the Merger. We expect our interest income to increase following the completion of the Merger as we invest our cash on hand pending its use in our operations.equivalents. 

Critical Accounting Policies and Estimates

Our management’smanagement’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, or U.S. GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported expenses during the periods presented.liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on other factorsvarious 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 readily apparentclear from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

Other than below, there were no material changesThe full extent to which the ongoing COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including revenues, expenses, reserves and allowances, manufacturing, clinical trials and research and development will depend on future developments that continue to remain highly uncertain at this time. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

We define our critical accounting policies as those that require us to make subjective estimates orand judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. Our critical accounting policies are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Item 7 in our 2016 Annual Report on Form 10-K duringfor the nine monthsyear ended September 30, 2017.

Share-Based Compensation 

We measure and recognize share-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. We use the Black-Scholes-Merton option-pricing model, or BSM, to calculate the fair value of stock options. Restricted stock units (RSUs) are measured based on the fair market values of the underlying stock on the dates of grant. Share-based compensation expense recognized in the statements of operations is based on awards at the time of grant, and is reduced for actual forfeitures at the time that the forfeitures occur. Compensation cost for employee share-based awards will be recognized over the vesting period of the applicable award on a straight-line basis. 

For options granted to nonemployees, we revalue the unearned portion of the share-based compensation and the resulting change in fair value is recognized in the statements of operations over the period the related services are rendered.

The BSM option-pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected volatility in the value of our Common Stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our share-based compensation expense could be materially different in the future. 

December 31, 2021. 

Results of Operations

Comparison of Three and Nine Months Ended September 30, 20172022 and 20162021

The following table summarizes our results of operations for the three months ended September 30, 2017 and 2016 (in thousands):