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Table of Contents
 
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 September 30, 2002
 
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
(State or Other Jurisdiction
of Incorporation or Organization)
  
94-3177883
(I.R.S. Employer
Identification No.)
 
47266 Benicia Street, Fremont, CA
(Address of Principal Executive Offices)
  
94538-7330
(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  ¨
 
As of November 11, 2002, there were 49,909,902 shares of Registrant’s Common Stock outstanding.
 

Table of Contents
 
CARDIMA, INC.
 
INDEX
 
  
3
      
3
          
3
          
4
          
5
          
6
      
9
          
12
          
14
          
15
      
29
      
29
PART II.     OTHER INFORMATION
   
30
   
ITEM 1.   LEGAL PROCEEDINGS
  
30
      
30
      
31
      
31
   
ITEM 5.   OTHER INFORMATION
   
31
      
32
  
33
  
34

2

Table of Contents
PART I.
 
ITEM 1.     FINANCIAL STATEMENTS
 
CARDIMA, INC.
 
CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
    
September 30,
2002
     
December 31,
2001
  
    
(Unaudited)
     
(See Note 1)
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
2,887
 
   
$
7,542
 
Accounts receivable, net of allowances for doubtful accounts of $65 at September 30, 2002 and $75 at December 31, 2001
   
 
248
 
   
 
301
 
Inventories
   
 
1,293
 
   
 
1,564
 
Other current assets
   
 
616
 
   
 
327
 
    
  
Total current assets
   
 
5,044
 
   
 
9,734
 
Property and equipment, net
   
 
1,124
 
   
 
1,323
 
Notes receivable from officers
   
 
588
 
   
 
565
 
Other assets
   
 
102
 
   
 
196
 
    
  
    
$
6,858
 
   
$
11,818
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
1,240
 
   
$
1,563
 
Accrued compensation
   
 
896
 
   
 
1,094
 
Other current liabilities
   
 
504
 
   
 
42
 
    
  
Capital lease obligation—current portion
   
 
50
 
   
 
279
 
    
  
Total current liabilities
   
 
2,690
 
   
 
2,978
 
Deferred rent
   
 
2
 
   
 
19
 
Capital lease obligation—noncurrent portion
   
 
37
 
   
 
64
 
Commitments
                  
Stockholders’ equity:
                  
Common stock, $0.001 par value; 75,000,000 shares authorized, 49,866,485 shares issued and outstanding at September 30, 2002; 42,528,143 as of December 31, 2001; at amount paid in
   
 
91,051
 
   
 
86,583
 
    
  
Accumulated deficit
   
 
(86,922
)
   
 
(77,826
)
    
  
Total stockholders’ equity
   
 
4,130
 
   
 
8,757
 
    
  
    
$
6,858
 
   
$
11,818
 
    
  
 
 
See accompanying notes to condensed financial statements

3

Table of Contents
CARDIMA, INC.
 
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(Unaudited)
     
(Unaudited)(1)
  
Net sales
   
$
444
 
   
$
465
 
   
$
1,633
 
   
$
1,477
 
Cost of goods sold
   
 
1,074
 
   
 
949
 
   
 
2,667
 
   
 
2,868
 
    
  
  
  
Gross profit (loss)
   
 
(630
)
   
 
(484
)
   
 
(1,034
)
   
 
(1,391
)
Operating expenses:
                                    
Research and development
   
 
1,200
 
   
 
1,091
 
   
 
3,246
 
   
 
3,738
 
Selling, general and administrative
   
 
1,544
 
   
 
1,538
 
   
 
4,865
 
   
 
4,639
 
    
  
  
  
Total operating expenses
   
 
2,744
 
   
 
2,629
 
   
 
8,111
 
   
 
8,377
 
    
  
  
  
Operating loss
   
 
(3,374
)
   
 
(3,113
)
   
 
(9,145
)
   
 
(9,768
)
Interest and other income
   
 
19
 
   
 
37
 
   
 
66
 
   
 
93
 
Interest expense
   
 
(3
)
   
 
(14
)
   
 
(17
)
   
 
(49
)
Gain on sale of intellectual property(1)
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
4,000
 
    
  
  
  
Net income (loss)
   
$
(3,358
)
   
$
(3,090
)
   
$
(9,096
)
   
$
(5,724
)
    
  
  
  
Basic and diluted net loss per share
   
$
(0.07
)
   
$
(0.09
)
   
$
(0.21
)
   
$
(0.20
)
    
  
  
  
Shares used in computing basic and diluted net loss per share
   
 
47,072
 
   
 
34,641
 
   
 
44,139
 
   
 
28,469
 
    
  
  
  
(1)
 
In January 2001, we received $4,000,000 from Medtronic, Inc., representing the final payment on the transaction initiated in December 2000, whereby we sold a portion of our patent portfolio and related intellectual property pertaining to intravascular sensing and signal detection and certain guiding catheters. See our Annual Report on Form 10-K filed with the SEC on April 1, 2002 for more information.
 
 
 
See accompanying notes to financial statements

4

Table of Contents
CARDIMA, INC.
 
STATEMENTS OF CASH FLOWS
(In thousands)
 
    
Nine months ended
September 30,
  
    
2002
     
2001
  
    
(Unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net loss
   
$
(9,096
)
   
$
(5,724
)
Adjustments to reconcile net loss to net cash provided by operations:
                  
Depreciation and amortization
   
 
745
 
   
 
655
 
Stock-based compensation
   
 
(405
)
   
 
26
 
Loss on disposal of assets
   
 
6
 
   
 
30
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
53
 
   
 
(55
)
Inventories
   
 
271
 
   
 
305
 
Other current assets
   
 
(289
)
   
 
(151
)
Notes receivable
   
 
(23
)
   
 
(44
)
Other assets
   
 
94
 
   
 
(82
)
Accounts payable
   
 
(323
)
   
 
260
 
Accrued employee compensation
   
 
(198
)
   
 
(252
)
Other current liabilities
   
 
462
 
   
 
29
 
Deferred rent
   
 
(18
)
   
 
0
 
    
  
Net cash used in operating activities
   
 
(8,721
)
   
 
(5,003
)
CASH FLOWS FROM INVESTING ACTIVITIES
                  
Capital expenditures
   
 
(551
)
   
 
(252
)
    
  
Net cash used in investing activities
   
 
(551
)
   
 
(252
)
CASH FLOWS FROM FINANCING ACTIVITIES
                  
Principal payments under capital leases
   
 
(256
)
   
 
(293
)
Net proceeds from sale of common stock
   
 
4,873
 
   
 
10,250
 
    
  
Net cash provided by (used in) financing activities
   
 
4,617
 
   
 
9,957
 
    
  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
$
(4,655
)
   
$
4,702
 
    
  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
$
7,542
 
   
$
1,324
 
    
  
CASH AND CASH EQUIVALENTS END OF PERIOD
   
$
2,887
 
   
$
6,026
 
    
  

5

Table of Contents
CARDIMA, INC.
 
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2002
(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- and nine-month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2002 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, 2001. The accompanying balance sheet at December 31, 2001 has been derived from these audited financial statements.
 
2.    MANAGEMENT’S PLANS
 
As of September 30, 2002, the Company had approximately $2,887,000 in cash and cash equivalents, working capital of $2,354,000 and an a