UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
| For the quarterly period ended March 31, 2003 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
| For the transition period from to . |
Commission File Number: 0-22419
CARDIMA, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
94-3177883 | |||
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
47266 Benicia Street
Fremont, CA 94538-7330
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (510) 354-0300
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 12, 2003, there were 62,931,248 shares of Registrant’s Common Stock outstanding.
TABLE OF CONTENTS
PART I. Financial Information
| Description |
Page | |||
| Item 1. |
1 | |||
| Condensed Balance Sheets for the Three Months Ended March 31, 2003 and 2002 |
1 | |||
| Condensed Statements of Operations for the Three Months Ended March 31, 2003 and 2002 |
2 | |||
| Condensed Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | ||
| 15 | ||||
| Item 3. |
29 | |||
| Item 4. |
29 | |||
| PART II. Other Information |
||||
| Description |
Page | |||
| Item 2. |
29 | |||
| Item 6. |
30 | |||
| 31 | ||||
| 32 | ||||
Item 1. Financial Statements
CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
| ASSETS |
March 31, 2003 (Unaudited) |
December 31, 2002 (1) |
||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
2,827 |
|
$ |
3,385 |
| ||
| Accounts receivable, net of allowances for doubtful accounts of $80 at March 31, 2003 and $79 at December 31, 2002 |
|
420 |
|
|
318 |
| ||
| Inventories |
|
1,061 |
|
|
1,226 |
| ||
| Other current assets |
|
427 |
|
|
622 |
| ||
| Total current assets |
|
4,735 |
|
|
5,551 |
| ||
| Property and equipment, net |
|
891 |
|
|
1,030 |
| ||
| Notes receivable from officers |
|
603 |
|
|
595 |
| ||
| Other assets |
|
89 |
|
|
89 |
| ||
| $ |
6,318 |
|
$ |
7,265 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
1,191 |
|
$ |
2,029 |
| ||
| Accrued compensation |
|
1,099 |
|
|
1,238 |
| ||
| Other current liabilities |
|
617 |
|
|
276 |
| ||
| Capital lease obligation—current portion |
|
43 |
|
|
142 |
| ||
| Total current liabilities |
|
2,950 |
|
|
3,685 |
| ||
| Deferred rent |
|
16 |
|
|
4 |
| ||
| Capital lease obligation—noncurrent portion |
|
98 |
|
|
26 |
| ||
| Commitments |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized, 58,472,803 shares issued and outstanding at March 31, 2003; 54,394,264 as of December 31, 2002; at amount paid in |
|
96,928 |
|
|
94,003 |
| ||
| Accumulated deficit |
|
(93,674 |
) |
|
(90,453 |
) | ||
| Total stockholders’ equity |
|
3,254 |
|
|
3,550 |
| ||
| $ |
6,318 |
|
$ |
7,265 |
| |||
| (1) | The balance sheet as of December 31, 2002 was derived from the audited financial statements included in the Company’s 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
See accompanying notes to condensed financial statements
1
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Net sales |
$ |
638 |
|
$ |
766 |
| ||
| Cost of goods sold |
|
1,085 |
|
|
890 |
| ||
| Gross margin |
|
(447 |
) |
|
(124 |
) | ||
| Operating expenses: |
||||||||
| Research and development |
|
950 |
|
|
833 |
| ||
| Selling, general and administrative |
|
1,834 |
|
|
1,633 |
| ||
| Total operating expenses |
|
2,784 |
|
|
2,466 |
| ||
| Operating loss |
|
(3,231 |
) |
|
(2,590 |
) | ||
| Interest and other income |
|
12 |
|
|
28 |
| ||
| Interest expense |
|
(2 |
) |
|
(8 |
) | ||
| Net loss |
$ |
(3,221 |
) |
$ |
(2,570 |
) | ||
| Basic and diluted net loss per share |
$ |
(0.06 |
) |
$ |
(0.06 |
) | ||
| Shares used in computing basic and diluted net loss per share |
|
55,344 |
|
|
42,641 |
| ||
See accompanying notes to financial statements
2
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net loss |
$ |
(3,221 |
) |
$ |
(2,570 |
) | ||
| Adjustments to reconcile net loss to net cash provided by operations: |
||||||||
| Depreciation and amortization |
|
220 |
|
|
247 |
| ||
| Reversal of stock-based compensation |
|
— |
|
|
(122 |
) | ||
| Loss on disposal of assets |
|
7 |
|
|
6 |
| ||
| Non-cash interest income on notes receivable from officers |
|
(8 |
) |
|
(7 |
) | ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
(102 |
) |
|
(230 |
) | ||
| Inventories |
|
165 |
|
|
(21 |
) | ||
| Other current assets |
|
153 |
|
|
3 |
| ||
| Other assets |
|
42 |
|
|
105 |
| ||
| Accounts payable |
|
(838 |
) |
|
(229 |
) | ||
| Accrued employee compensation |
|
(139 |
) |
|
(274 |
) | ||
| Other current liabilities |
|
341 |
|
|
4 |
| ||
| Deferred rent |
|
12 |
|
|
(6 |
) | ||
| Net cash used in operating activities |
|
(3,368 |
) |
|
(3,094 |
) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Capital expenditures |
|
(88 |
) |
|
(390 |
) | ||
| Net cash used in investing activities |
|
(88 |
) |
|
(390 |
) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Principal payments under capital leases |
|
(27 |
) |
|
(114 |
) | ||
| Net proceeds from sale of common stock |
|
2,925 |
|
|
67 |
| ||
| Net cash provided by (used in) financing activities |
|
2,898 |
|
|
(47 |
) | ||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
$ |
(558 |
) |
|
(3,531 |
) | ||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
$ |
3,385 |
|
$ |
7,542 |
| ||
| CASH AND CASH EQUIVALENTS END OF PERIOD |
$ |
2,827 |
|
$ |
4,011 |
| ||
3
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by the Company according to the rules and regulations of the Securities and Exchange Commission for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the financial information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.
The operating results for the three month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2003 or for future operating results. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The accompanying balance sheet at December 31, 2002 has been derived from these audited financial statements.
2. MANAGEMENT’S PLANS
As of March 31, 2003, the Company had approximately $2,827,000 in cash and cash equivalents, working capital of $1,785,000 and an accumulated deficit of $93,673,000. Management expects to continue to incur additional losses in the foreseeable future as the Company completes its key clinical trial in the United States, commercialization of the REVELATION® Tx in the United States and the commercialization of the REVELATION® Helix in Europe. Management believes that the Company’s cash balances will be sufficient to fund planned expenditures through September 30, 2003. Although management recognizes the need to raise funds in the near future, there can be no assurance that the Company will be successful in consummating any such transaction, or, if such a transaction is consummated, that the terms and conditions of such financing will not be unfavorable to us. Any failure by management to obtain additional funding will have a material effect upon us and will likely result in our inability to continue as a going concern.
The Company continues to initiate relationships with new distributors worldwide. As of March 31, 2003, the Company had distributors in place in eight countries that provide service and sales support in twelve countries, consultants and sales agents in place in two countries that provide service and sales support in five countries and a European distribution center in place which provides service and sales support to an additional nine European countries. The Company is currently seeking regulatory approval of all its therapeutic products in China, but cannot predict if its products will ultimately be approved for sale in that region. In addition, the Company cannot predict whether or not it will be successful in marketing and selling its diagnostic and therapeutic products in China and other Asian countries. Recent foreign regulatory approval developments affecting the Company’s product registrations include the
4
acceptance by Turkey of the CE Mark already in place in Europe for the Company’s diagnostic and therapeutic products and the ratification of an agreement between the EU and Switzerland, granting approval to market and sell CE Mark products in that country.
3. PRIVATE PLACEMENTS
On December 31, 2002 and January 22, 2003, we sold by means of a private placement an aggregate of 5,333,319 shares of our common stock at a price per share of $0.74955 for an aggregate net proceeds of approximately $3.5 million. In addition, we issued to the investors warrants to purchase 2,400,000 shares of our common stock at an exercise price of $0.8245 per share. The warrants became exercisable on March 1, 2003 and March 23, 2003, respectively, and will be reduced on a share-for-share basis to the extent that an investor sells our common stock or other securities during the sixty (60) day period between each of the closings and March 1, 2003 and March 23, 2003, respectively. The warrants allow for a “cashless exercise” whereby the exercising party may use shares issuable upon exercise of the warrant in payment of the exercise price. We may not redeem the warrants and the warrants are subject to a mandatory exchange or termination in the case of certain reorganizations, mergers, or divestitures. We paid to the party which acted as finder in connection with this private placement a fee of $25,000 in cash plus 66,667 shares of our common stock upon execution of a letter agreement. Upon the closing of the transactions, we also paid to the finder a total of $300,000 in cash and issued to the finder warrants to purchase 533,331 shares of our common stock at an exercise price of $0.82