BioCardia(BCDA) - 2020 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for Q1 2020 reflect a significant decline in cash, a shift to a stockholders' deficit, and a widening net loss, raising substantial doubt about going concern Condensed Consolidated Balance Sheets As of March 31, 2020, total assets significantly decreased to $4.4 million, leading to a $1.3 million stockholders' deficit from a prior equity position | Financial Metric | March 31, 2020 (unaudited, in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,587 | $5,585 | | Total current assets | $3,219 | $6,378 | | Total assets | $4,384 | $7,678 | | Liabilities & Equity | | | | Total current liabilities | $4,510 | $4,003 | | Total liabilities | $5,667 | $5,308 | | Total stockholders' (deficit) equity | $(1,283) | $2,370 | Condensed Consolidated Statements of Operations For Q1 2020, the company's net loss widened to $4.6 million from $3.7 million year-over-year, driven by sharply reduced revenue and increased operating expenses | Metric (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Total revenue | $38 | $216 | | Research and development | $2,786 | $2,166 | | Selling, general and administrative | $1,857 | $1,631 | | Operating loss | $(4,609) | $(3,687) | | Net loss | $(4,594) | $(3,665) | | Net loss per share | $(0.67) | $(0.86) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) Stockholders' equity shifted from a $2.4 million positive balance to a $1.3 million deficit in Q1 2020, primarily due to the $4.6 million net loss - The company's equity position shifted from a positive balance of $2,370 thousand at the end of 2019 to a deficit of $(1,283) thousand by March 31, 2020, driven by the quarterly net loss of $4,594 thousand[15] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $3.0 million in Q1 2020, leading to a $3.0 million decrease in cash and equivalents, ending the quarter at $2.6 million | Cash Flow Activity (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,993) | $(2,465) | | Net cash used in investing activities | $(5) | $(55) | | Net cash provided by financing activities | $0 | $0 | | Net change in cash | $(2,998) | $(2,520) | | Cash at end of period | $2,587 | $2,838 | Notes to Unaudited Condensed Consolidated Financial Statements Notes describe the company's clinical-stage focus, express substantial doubt about its going concern due to insufficient cash, and detail impacts from COVID-19 and a subsequent PPP loan - The company is a clinical-stage regenerative medicine company focused on developing therapeutics for cardiovascular diseases, with its lead candidates being the CardiAMP® and CardiALLO™ cell therapy systems[19] - Management has concluded there is substantial doubt about the company's ability to continue as a going concern beyond Q2 2020, as its cash of $2.6 million is insufficient to fund operations. The company plans to raise additional capital to continue development[27][28] - On January 29, 2020, the company repriced 515,036 stock options, lowering the exercise price to $5.32 per share. This resulted in an incremental stock-based compensation expense of $569,000[56][57] - On April 9, 2020, the company entered into a non-recourse Litigation Funding Agreement with an entity controlled by a board member to fund its legal proceedings against Boston Scientific Corp[65][66] - Subsequent to the quarter end, on May 1, 2020, a subsidiary of the company received a loan of $506,413 under the Paycheck Protection Program (PPP)[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage focus, highlights significant revenue decline and increased R&D, and discloses critical liquidity issues, including insufficient cash and a Nasdaq delisting notice - The company is advancing its CardiAMP cell therapy in a Phase III trial for heart failure (BCDA-01) and a pivotal trial for chronic myocardial ischemia (BCDA-02). It is also developing its allogeneic CardiALLO cell therapy for heart failure (BCDA-03) and intends to file an IND for its use in COVID-19 related ARDS (BCDA-04)[76][80][88] - The COVID-19 pandemic is impacting clinical trial enrollment, as elective procedures are being postponed at clinical centers. The company is taking steps to address protocol deviations in alignment with FDA guidance[83] - Revenue for Q1 2020 decreased to $38,000 from $216,000 in Q1 2019 due to lower commercial catheter sales and reduced partnering activities[101] - R&D expenses increased by $620,000 in Q1 2020 compared to Q1 2019, driven by the CardiAMP Heart Failure Trial and development of the CardiALLO system[103] - The company's cash and cash equivalents of $2.6 million as of March 31, 2020, are not sufficient to fund operations beyond the second quarter of 2020, raising substantial doubt about its ability to continue as a going concern[114][117] - On April 15, 2020, the company received a delisting notice from Nasdaq for failing to meet the minimum stockholders' equity requirement of $2.5 million[119] Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure is limited, primarily to short-term cash and equivalents, with insignificant interest rate or foreign currency exchange risk - Market risk is primarily limited to cash and cash equivalents, which have maturities of less than three months[126] - The company does not believe an increase in market interest rates would have a material negative impact on its portfolio value due to the short-term nature of its holdings[126][128] - Exposure to foreign currency exchange risk is not significant, and the company does not currently use hedging instruments[129] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2020, due to a material weakness in internal control over financial reporting, with remediation underway - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of March 31, 2020[130] - A material weakness persists from 2019, stemming from a lack of sufficient technical resources to account for complex non-routine transactions[131] - Remediation efforts include enhancing review processes for non-routine transactions and engaging external consultants for expertise[132] Part II. OTHER INFORMATION Legal Proceedings The company is engaged in a legal proceeding with Boston Scientific Corp. over intellectual property, alleging improper patent assignment and seeking damages, with litigation costs covered by a funding agreement - The company is engaged in litigation with Boston Scientific Corp. (Case No. 3:19-05645-VC) over a patent and patent applications filed by a former employee, Ms. Surbhi Sarna[136] - BioCardia filed a counterclaim against Boston Scientific and Ms. Sarna for breach of contract, misappropriation of trade secrets, and correction of inventorship[136] - To fund the litigation, the company entered into a Litigation Funding Agreement with BSLF, L.L.C., an entity controlled by board member Andrew Blank[136] Risk Factors The primary risk factor is the potential delisting from Nasdaq due to non-compliance with the minimum stockholders' equity requirement, which could negatively impact liquidity and capital raising - The company received a notice from Nasdaq on April 15, 2020, for being non-compliant with the $2.5 million minimum stockholders' equity requirement for continued listing[138][139] - BioCardia has until June 1, 2020, to submit a plan to Nasdaq to regain compliance, and if accepted, may be granted an extension of up to 180 days[139] - A potential delisting could negatively affect the stock's liquidity and price, investor confidence, and the company's ability to secure financing[140] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[142] Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[142] Mine Safety Disclosures This item is not applicable to the company - Not applicable[142] Other Information No other information was reported for the period - None[142] Exhibits This section lists key exhibits filed with the Form 10-Q, including the Litigation Funding Agreement, PPP loan note, and officer certifications - Key exhibits filed include the Litigation Funding Agreement (10.1), the PPP loan note (10.2), and CEO/CFO certifications (31.1, 31.2, 32.1, 32.2)[143]