BioCardia (BCDA) 10-Q 2019 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

 (Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-21419

BioCardia, Inc.

(Exact name of registrant as specified in its charter)

Delaware	23-2753988
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

125 Shoreway Road, Suite B 

San Carlos, California 94070

(Address of principal executive offices including zip code)

(650) 226-0120

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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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) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There were 43,631,684 shares of the registrant’s Common Stock issued and outstanding as of May 10, 2019.

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Part I.   FINANCIAL INFORMATION		4
Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	4
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2019 and 2018	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
Part II.  OTHER INFORMATION		24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
EXHIBIT INDEX		25
SIGNATURES		26

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q, or report, contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks and uncertainties. Certain statements contained in this report are not purely historical including, without limitation, statements regarding our expectations, beliefs, intentions, anticipations, commitments or strategies regarding the future that are forward-looking. These statements include those discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including “Critical Accounting Policies and Estimates,” “Results of Operations,” “Liquidity and Capital Resources,” and “Future Funding Requirements,” and elsewhere in this report.

In this report, the words “may,” “could,” “would,” “might,” “will,” “should,” “plan,” “ forecast,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “predict,” “potential,” “continue,” “future,” “moving toward” or the negative of these terms or other similar expressions also identify forward-looking statements. Our actual results could differ materially from those forward-looking statements contained in this report as a result of a number of risk factors including, but not limited to, those listed in our Annual Report on Form 10-K for the year ended December 31, 2018, and elsewhere in this report. You should carefully consider these risks, in addition to the other information in this report and in our other filings with the SEC. All forward-looking statements and reasons why results may differ included in this report are made as of the date of this report, and we undertake no obligation to update any such forward-looking statement or reason why such results might differ after the date of this Quarterly Report on Form 10-Q, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BIOCARDIA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	March 31,			December 31,
	2019			2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,838		$	5,358
Accounts receivable, net of allowance for doubtful accounts of $14 and $9 at March 31, 2019 and December 31, 2018		287			274
Inventory		118			141
Prepaid expenses and other current assets		285			445
Total current assets		3,528			6,218
Property and equipment, net		175			145
Operating lease right-of-use asset, net		1,400			—
Other assets		54			54
Total assets	$	5,157		$	6,417
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,139		$	1,020
Accrued expenses and other current liabilities		1,715			1,528
Operating lease liability - current		469			—
Total current liabilities		3,323			2,548
Operating lease liability - noncurrent		1,016			—
Deferred rent		—			77
Total liabilities		4,339			2,625
Stockholders’ equity:
Preferred stock, $0.001 par value, 25,000,000 shares authorized as of March 31, 2019 and December 31, 2018; no shares issued and outstanding as of March 31, 2019 and December 31, 2018		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized as of March 31, 2019 and December 31, 2018; 43,631,684 and 43,611,240 shares issued and outstanding as of March 31, 2019 and December 31, 2018		44			43
Additional paid-in capital		90,800			90,110
Accumulated deficit		(90,026	)		(86,361	)
Total stockholders’ equity		818			3,792
Total liabilities and stockholders’ equity	$	5,157		$	6,417

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(unaudited)

	Three months ended March 31,
	2019			2018
Revenue:
Net product revenue	$	76		$	82
Collaboration agreement revenue		140			117
Total revenue		216			199
Costs and expenses:
Cost of goods sold		106			157
Research and development		2,166			1,955
Selling, general and administrative		1,631			1,707
Total costs and expenses		3,903			3,819
Operating loss		(3,687	)		(3,620	)
Other income (expense):
Interest income		23			36
Other expense		(1	)		—
Total other income, net		22			36
Net loss	$	(3,665	)	$	(3,584	)
Net loss per share, basic and diluted	$	(0.08	)	$	(0.09	)
Weighted-average shares used in computing net loss per share, basic and diluted		43,628,958			38,236,056

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(unaudited)

	Common stock				Additional		Accumulated
	Shares		Cost		paid in capital		deficit			Total
Balance at December 31, 2018		43,611,240	$	43	$	90,110	$	(86,361	)	$	3,792
Restricted stock units vested and issued		20,444		1		—		—			1
Share-based compensation		—		—		690		—			690
Net loss		—		—		—		(3,665	)		(3,665	)
Balance at March 31, 2019		43,631,684	$	44	$	90,800	$	(90,026	)	$	818
Balance at December 31, 2017		38,218,660	$	38	$	83,537	$	(72,450	)	$	11,125
Adjustments to opening balance for change in accounting principle		—		—		—		46			46
Restricted stock units vested and issued		20,444		—		—		—			—
Exercise of stock options		2,140		—		5		—			5
Share-based compensation		—		—		615		—			615
Net loss		—		—		—		(3,584	)		(3,584	)
Balance at March 31, 2018		38,241,244	$	38	$	84,157	$	(75,988	)	$	8,207

See accompanying notes to condensed consolidated financial statements.

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BIOCARDIA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Three months ended March 31,
	2019			2018
Operating activities:
Net loss	$	(3,665	)	$	(3,584	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		23			22
Amortization of right-of-use asset		105			—
Share-based compensation		690			615
Changes in operating assets and liabilities:
Accounts receivable		(13	)		(32	)
Inventory		23			43
Prepaid expenses and other current assets		160			63
Accounts payable		122			(164	)
Accrued expenses and other current liabilities		(36	)		34
Deferred revenue		—			(35	)
Deferred rent		—			2
Operating lease liability - noncurrent		126			—
Net cash used in operating activities		(2,465	)		(3,036	)
Investing activities:
Purchase of property and equipment		(55	)		(5	)
Net cash used in investing activities		(55	)		(5	)
Financing activities:
Proceeds from the exercise of common stock options		—			5
Net cash provided by financing activities		—			5
Net change in cash and cash equivalents		(2,520	)		(3,036	)
Cash and cash equivalents at beginning of period		5,358			12,689
Cash and cash equivalents at end of period	$	2,838		$	9,653

See accompanying notes to condensed consolidated financial statements.

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(1) Summary of Business and Basis of Presentation

(a)	Description of Business
	BioCardia, Inc., (BioCardia or the Company), is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. The Company’s 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 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 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. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

(2) Significant Accounting Policies

(a)	Basis of Preparation
	The accompanying condensed consolidated balance sheets, statements of operations, shareholders equity, and cash flows as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 are unaudited. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information and on a basis consistent with the annual financial statements and, in the opinion of management, reflect all adjustments which include only normal recurring adjustments, necessary to present fairly its financial position as of March 31, 2019, results of operations for the three months ended March 31, 2019 and 2018, and cash flows for the three months ended March 31, 2019 and 2018. The results for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other interim period or for any other future year.
	These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on April 2, 2019.

(b)	Liquidity
	The Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit of $90.0 million as of March 31, 2019. Management expects operating losses and negative cash flows to continue through the next several years. Based on management’s current plans, management believes cash and cash equivalents of $2.8 million as of March 31, 2019 are not sufficient to fund the Company beyond the second quarter of 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
	The Company’s ability to continue as a going concern and to continue further development of its lead therapeutic candidate, the CardiAMP cell therapy system, and its second therapeutic candidate, the CardiALLO cell therapy system, through and beyond the second quarter of 2019, will require it to raise additional capital. The Company plans to raise additional capital, potentially including debt and equity arrangements, to finance its future operations. See Note 13 of the condensed consolidated financial statements. If adequate funds are not available, BioCardia may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require it to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations. While the Company believes it has a viable strategy to raise additional funds, there can be no assurances that it will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund its operating needs.

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(c)

Use of Estimates

The preparation of the financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include share-based compensation, the useful lives of property and equipment, allowances for doubtful accounts and sales returns, incremental borrowing rate, and inventory valuation.

(d)	Principles of Consolidation
	The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated during the consolidation process.

(e)

Changes to Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in its Annual Report on Form 10-K filed for the year ended December 31, 2018. Apart from the adoption of ASU No. 2018-07, Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting on January 1, 2019, which led to an amended stock-based compensation policy, and the adoption of ASU No. 2016-02, Leases (Topic 842), which led to an amended lease policy as described in the following paragraphs, there have been no changes to those policies. Measurement of nonemployee awards - The measurement of equity-classified nonemployee awards is fixed at the grant date, and the Company may use the expected term to measure nonemployee options or elect to use the contractual term as the expected term, on an award-by-award basis. This differs from the guidance in ASC 505-50 that requires the use of the contractual term. Forfeitures of nonemployee awards will be recognized as they occur.   Operating lease right-of-use asset and liabilities - The Company will determine if an arrangement is a lease at the inception of the arrangement. All leases are assessed for classification as an operating lease or finance lease. The Company will recognize a lease liability and a ROU asset for all leases, including operating leases, with a term greater than 12 months. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.   The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Variable lease payments are expensed as incurred and are not included the computation of the lease liability. The lease liability discount rate is generally the Company’s incremental borrowing rate unless the lessor’s rate implicit in the lease is readily determinable, in which case the lessor’s implicit rate is used.   The Company's ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor, if any. The Company amortizes a right-of-use (ROU) asset, and the periodic amortization is the difference between the straight-line total lease cost for the period (including amortization of initial direct costs) and the periodic accretion of the lease liability using the effective interest method.   The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise any such options. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term. The Company’s lease contracts often include lease and non-lease components. The Company has elected the practical expedient offered by the standard to not separate lease from non-lease components and accounts for them as a single lease component. The Company has elected not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

(f) Recently Adopted Accounting Pronouncement   In February 2016, the FASB amended its guidance related to lease accounting. The amended guidance required lessees to recognize a majority of their leases on the balance sheet as a ROU asset and a lease liability. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, or ASU No. 2018-11. In issuing ASU No. 2018-11, the FASB is permitting another transition method for ASU 2016-02, which allows the transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected this available transition method.

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The Company adopted the new standard using the cumulative-effect method on January 1, 2019. The Company's adoption included lease codification improvements that were issued by the FASB through March 2019.

The FASB made available several practical expedients in adopting the amended lease accounting guidance. The Company elected the package of practical expedients permitted under the transition guidance, which among other things, allowed registrants to carry forward historical lease classification, its assessment on whether a contract is or contains a lease, and its initial direct costs for any leases that exist prior to adoption of the new standard. BioCardia also elected to keep leases with an initial term of 12 months or less off the consolidated balance sheet, and to recognize the associated lease payments in the statements of operations on a straight-line basis over the lease term.

The most significant impact was the recognition of ROU assets and related lease liabilities for operating leases on the Condensed Consolidated Balance Sheet. The Company recognized ROU assets and related lease liabilities of $1,505,000 and $1,593,000 respectively, related to operating lease commitments, as of January 1, 2019. The operating lease ROU asset represents the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received. The amended guidance did not have a material impact on the Company's cash flows or results of operations. See Note 6 of the condensed consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. ASU 2018-07 expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. No longer will nonemployee awards be marked-to-market every reporting period, nor will the expected term be required to be the contractual term. However, forfeitures will continue to be recognized when incurred. ASU 2018-07 supersedes Subtopic 505-50, Equity-Based Payments to Non-Employees. The Company adopted ASU 2018-07 effective January 1, 2019 using the cumulative-effect method for equity-classified nonemployee awards which have not been settled as of the adoption date. The cumulative effect did not have a material impact on the condensed consolidated balance sheet, statement of operations or statement of cash flows.

(g)	Recently Issued Accounting Pronouncements
	Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures.

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(3)     Fair Value Measurement

The fair value of financial instruments reflects the amounts that the Company estimates 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 follows 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 liabilities

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 liabilities

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 following table sets forth the fair value of its financial assets measured on a recurring basis as of March 31, 2019 and December 31, 2018 and indicates the fair value hierarchy utilized to determine such fair value (in thousands).

	As of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,838	$	—	$	—	$	2,838

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	5,358	$	—	$	—	$	5,358

(4)      Inventories

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

	March 31,		December 31,
	2019		2018
Raw materials	$	82	$	79
Work in process		27		39
Finished goods		9		23
Total	$	118	$	141

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, reserve adjustments, scrap, shrinkage and expired inventories totaled approximately $2,000, and $2,000 for the three months ended March 31, 2019 and 2018, respectively.

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(5)      Property and Equipment, Net

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

	March 31,			December 31,
	2019			2018
Computer equipment and software	$	121			119
Laboratory and manufacturing equipment		532			481
Furniture and fixtures		55			55
Leasehold improvements		332			332
Construction in progress		3			3
Property and equipment, gross		1,043			990
Less accumulated depreciation		(868	)		(845	)
Property and equipment, net	$	175			145

Depreciation expense totaled approximately $23,000 and $22,000 for the three months ended March 31, 2019 and 2018, respectively.

(6)     Operating Lease Right-of-Use Asset, Net

The Company adopted the new lease standard on January 1, 2019 using the cumulative-effect method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

The Company determines 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. The Company’s operating lease is primarily related to a property lease for its laboratory and corporate offices. BioCardia’s lease agreement does not contain any material residual guarantees or material restrictive covenants, nor does it contain an additional lease extension.

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. The Company 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. The net lease asset was adjusted for deferred rent, lease incentives, and prepaid rent. 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. The Company has no finance leases. The new lease standard did not materially impact its condensed consolidated statements of operations.

The impact of the new lease standard on the March 31, 2019 was as follows (in thousands, except years and percentages):

	March 31, 2019
Straight-line rent expense recognized for operating lease	$	150
Variable rent expense recognized for operating lease		75
Total lease cost	$	225
Weighted average remaining lease term (in years)		2.75
Weighted average discount rate		12.05	%

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Supplemental cash flow information related to the operating lease was as follows (in thousands):

	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	153
Cash lease expense (imputed interest expense component of net income)		45

Future minimum lease payments under the operating lease as of March 31, 2019 are as follows (in thousands):

	Operating lease
	March 31, 2019
2019 (excluding the three months ended March 31, 2019)	$	459
2020		630
2021		649
Total undiscounted lease payments	$	1,738
Less: imputed interest		253
Total operating lease liabilities	$	1,485

Rent expense under the operating lease was $150,000 and $153,000 for the three months ended March 31, 2019 and 2018, respectively. Prior to the Company’s adoption of the new leases standard, future minimum lease payments as of December 31, 2018, which were undiscounted, were as follows (in thousands):

 

Years ending December 31:
2019	$	612
2020		630
2021		649
Total	$	1,891

(7)    Accrued Expenses and Other Current Liabilities

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

	March 31,		December 31,
	2019		2018
Accrued expenses	$	596	$	495
Accrued clinical trial costs		363		276
Grant liability		638		645
Customer deposits		118		112
Total	$	1,715	$	1,528

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(8)   Warrants for Common Stock

On December 24, 2018, the Company issued 2,666,666 warrants to purchase the Company’s common stock in connection with the sale of an aggregate of 5,333,332 shares of the Company’s common stock at a purchase price of $0.75 per share for aggregate proceeds of $3.8 million, net of $200,000 expenses. The warrants are exercisable immediately for cash and after six months will also be exercisable on a cashless basis if there is no effective registration statement registering the resale of the warrants. Warrants can be settled in unregistered shares. The warrants have an exercise price of $0.75 per share and will expire on December 24, 2023. The issued warrants are standalone financial instruments and were equity classified in accordance with US GAAP.

(9)   Share-Based Compensation

The share-based compensation expense is recorded in cost of goods sold, research and development, and selling, general and administrative expenses based on the employee's respective function. No share-based compensation was capitalized during the periods presented. Share-based compensation expense for the three months ended March 31, 2019 and 2018 was recorded as follows (in thousands):

	Three months ended March 31,
	2019		2018
Cost of goods sold	$	46	$	30
Research and development		242		197
Selling, general and administrative		402		388
Share-based compensation expense	$	690	$	615

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

	Options outstanding
	Number of shares		Weighted average exercise price
Balance, December 31, 2018		5,477,364	$	2.80
Stock options granted		—		—
Stock options exercised		—		—
Stock options canceled		—		—
Balance, March 31, 2019		5,477,364	$	2.80
Exercisable and vested, March 31, 2019		2,961,574	$	2.71

Unrecognized share-based compensation for employee and nonemployee options granted through March 31, 2019 is approximately $5.2 million to be recognized over a remaining weighted average service period of 2.2 years.

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Non-Employee Director Share-Based Compensation (RSUs)

The following summarizes the activity of non-vested RSUs:  

				Weighted
				average
				grant date
	Number of			fair value
	shares			per share
Balance, December 31, 2018		267,359		$	2.84
RSUs granted		-			-
RSUs vested		(20,444	)	$	11.04
RSUs forfeited		-			-
Balance, March 31, 2019		246,915		$	2.16

Unrecognized share-based compensation for employee RSUs granted through March 31, 2019 is approximately $235,000 to be recognized over a remaining weighted average service period of 0.8 years.

(10)  Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. 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 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:

	March 31,
	2019		2018
Stock options to purchase common stock		5,477,364		3,816,927
Unvested restricted stock units		246,915		61,333
Common stock warrants		2,666,666		-
Total		8,390,945		3,878,260

(11)    Income Taxes

During the three months ended March 31, 2019 and 2018, there was no income tax expense or benefit for federal or state income taxes in the accompanying condensed consolidated statement of operations due to the Company’s net loss and a full valuation allowance on the resulting deferred tax assets.

As of March 31, 2019, the Company retains a full valuation allowance on its deferred tax assets in all jurisdictions. The realization of its 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. 

(12)    Related Party Transactions

In August 2016, the Company granted an option to purchase 418,977 shares of common stock, with a 4-year vesting period and an exercise price of $1.80 per share, to OPKO Health, Inc. (“OPKO”) as consideration for consulting services to be provided by OPKO. BioCardia recorded approximately $22,000 (as adjusted for the adoption of ASU 2018-07) and $37,000 as share-based compensation expense related to the OPKO stock option during the three months ended March 31, 2019 and 2018, respectively. The estimated grant-date fair value of the option was $5.3 million. The term of the consulting agreement is 4 years and will be automatically renewed for successive one year periods. The chairman and chief executive officer of OPKO is a beneficial owner of more than 5% of the outstanding shares of the Company’s common stock. 

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(13)    Subsequent Events

In April 2019, the Company submitted a Form S-1 Registration Statement (S-1) to the Securities and Exchange Commission in order to offer for sale units consisting of shares of common stock or some combination of common stock and warrants to purchase shares of common stock. Proposed maximum aggregate offering is approximately $18,000,000. The net cash realized by the Company will be less than the maximum aggregate offering due to offering expenses, underwriting discounts and commissions. The S-1 has not yet been declared effective by the Securities and Exchange Commission.

ITEM 2. MANAGEMENT’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 are 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 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, and (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. Historical results are not necessarily indicative of future results. 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 to conform these statements to actual results or to changes in our expectations.

Overview

We are a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Our lead therapeutic candidate is the investigational CardiAMP Cell Therapy System, which provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of two clinical indications: heart failure that develops after a heart attack and chronic myocardial ischemia.

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. We have 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.

We have incurred net losses in each year since our inception. Our net losses were approximately $3.7 million and $3.6 million for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, we had an accumulated deficit of approximately $90.0 million. Substantially all 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”, there is substantial doubt about our ability to continue as a going concern within one year after the date this Quarterly Report on Form 10-Q is filed with the SEC, and we plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. There can be no assurances as to the availability of capital or the terms on which capital will be available, if at all.

CardiAMP Cell Therapy System

We initiated our U.S. Food and Drug Administration, or FDA, accepted Phase III pivotal trial for CardiAMP Cell Therapy in ischemic systolic heart failure, in December 2016. 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 Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System. The trial’s primary endpoint is a clinical composite of six minute walk distance and major adverse cardiac and cerebrovascular events. Based on the results achieved in the Phase II trial, our Phase III pivotal trial is designed to have more than 95% probability of achieving a positive result with statistical significance.

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The Data Safety Monitoring Board (DSMB) safety review of the 10-patient roll-in cohort treated at three clinical sites was completed successfully in the third quarter of 2017, and efficacy data from the primary endpoint in the open label roll-in cohort was presented at the American Heart Association Scientific Sessions in 2018. At the primary endpoint of exercise capacity at 12 months, the 10-patient roll-in cohort of the trial showed clinically meaningful improvement, walking an average of 46.4 meters more than baseline, although the improvement was not considered statistically significant (p=0.06). Eight of the 10 patients experienced improvement in their exercise capacity based on the distance they were able to walk above their baseline. This improvement is more than triple the average improvement over baseline reported in the CardiAMP-treated arm of the Phase II TAC-HFT-MNC trial, and greater than the average improvement seen in a number of pivotal trials for implantable pacemakers to treat heart failure. In the secondary efficacy endpoint of quality of life, patients showed a clinically meaningful improvement of 9.8 points relative to baseline, which was not statistically significant (p=0.33) in the small cohort.  Seven of the 10 patients reported better quality of life after CardiAMP treatment. This was a greater improvement over baseline than was seen in the Phase II TAC-HFT-MNC trial of CardiAMP therapy.

The secondary efficacy endpoints of superiority relative to major adverse cardiac events (MACE) and survival were not possible to assess in this roll-in cohort as there is no control arm specific to this cohort. There were no treatment emergent major adverse cardiac events (MACE) in this group at 30 days, while there was one MACE event due to a hospitalization at nine months. All patients from this cohort were alive and out of the hospital at 12 months.

The CardiAMP Heart Failure Trial is actively enrolling today at 21 clinical sites, which have enrolled 37 patients in the trial to date. The rate of enrollment is increasing, which we believe is due to additional data presented from the roll-in cohort, the addition of world class centers to the trial, and the completion of competitive clinical programs. We anticipate a first interim readout from the trial in Q3 2019, a second interim readout in Q3 2020, that trial enrollment will be completed in Q3 2020 and that top line data will be available in Q3 2021.

In January 2018, the FDA approved a second investigational device exemption (IDE) for the randomized controlled pivotal trial of autologous bone marrow mononuclear cells using the CardiAMP Cell Therapy System in patients with refractory chronic myocardial ischemia for up to 343 patients at up to 40 clinical sites in the United States. This therapeutic approach uses many of the same novel aspects as the CardiAMP Heart Failure Trial and leverages our experience and investment in the heart failure trial. We anticipate that many of the investigators and sites will be the same for both the heart failure and chronic myocardial ischemia indications.

The Department of Health & Human Services Centers for Medicare & Medicaid Services, or CMS, has designated that both the CardiAMP Heart Failure Trial and the CardiAMP Chronic Myocardial Ischemia Trial qualify for Medicare national coverage. Covered costs are anticipated to include patient screening, the CardiAMP Cell Therapy System and procedure, and clinical follow-up at one and two years after the procedure.  Private insurance plans covering 50 million insured Americans follow this CMS reimbursement policy, and are similarly anticipated to cover these costs.   

CardiALLO Cell Therapy System

Our second therapeutic candidate is the CardiALLO Cell Therapy System, an investigational culture expanded bone marrow derived “off the shelf” mesenchymal stem cell therapy. CardiALLO cell therapy cells are expanded from Neurokinin-1 receptor (“NK1-receptor” or “NK1R”) positive bone marrow cells. While these cells are being advanced to treat heart failure, they have potential for numerous therapeutic applications as these are anticipated to be the cells that respond to the release of Substance P. Substance P (“SP”) is a neuropeptide released from sensory nerves and is associated with the inflammatory processes and pain. SP is believed to be a key first responder to most noxious/extreme stimuli (stressors), i.e., those with a potential to compromise biological integrity. SP is thus regarded as an immediate defense, stress, repair survival system. The endogenous receptor for SP is the NK1-receptor, which is distributed over cytoplasmic membranes of many cell types (for example neurons, glia, endothelia of capillaries and lymphatics, fibroblasts, stem cells, and white blood cells) in many tissues and organs. SP amplifies or excites most cellular processes. Elevation of serum, plasma, or tissue SP and/or its receptor NK1R has been associated with many diseases: sickle cell crisis, inflammatory bowel disease, major depression and related disorders, fibromyalgia rheumatological, and infections such as HIV/AIDS and respiratory syncytial virus, as well as in cancer.

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Our CardiALLO NK1R positive derived cells are believed to be an important subset of the cells that we have delivered in our previous preclinical and clinical mesenchymal stem cell studies. We believe this therapy presents the advantages of an "off the shelf" therapy that does not require tissue harvesting or cell processing. We have completed manufacturing validation runs of these cells at BioCardia to support future clinical studies. We are working to obtain FDA acceptance of an Investigational New Drug (“IND”) application for a Phase I/II trial for CardiALLO Cell Therapy System for the treatment of ischemic systolic heart failure in the second quarter of 2019.

The subset of patients we are targeting initially for the CardiALLO Heart Failure Trial are those that have been excluded from our ongoing CardiAMP Heart Failure Trial due to their lower cell potency assay scores. CardiALLO trial activation is anticipated to enhance enrollment in the CardiAMP Heart Failure Trial. Further, if the CardiAMP trial is successful there is the potential for the CardiALLO therapy indication to be designated as an orphan indication.

Helix™ Biotherapeutic Delivery System

BioCardia’s Helix Biotherapeutic Delivery System or “Helix” is believed to be the leading percutaneous catheter delivery system for cardiovascular regenerative medicine. It enables investigational studies of local delivery of cell and gene based therapies, including CardiAMP and CardiALLO cell therapies to treat cardiovascular indications. Helix is in use or has potential to be used to treat many cardiac diseases including heart failure with reduced ejection fraction, heart failure with preserved ejection fraction, obstructive hypertrophic cardiomyopathy, myocardial infarction, chronic myocardial ischemia, and cardiac conduction disorders. The Helix’s small hollow, distal helical needle is advanced, similar to an angioplasty catheter, and is passed over the aortic arch and across the aortic valve through the Company’s Morph guide catheter or “Morph”. The Helix is then advanced from within the Morph, and its helical needle is rotated into the heart tissue to provide active fixation during therapeutic delivery, similar to the active fixation electrodes used in cardiac pacing. This fixation to the beating heart wall provides for stability and control during the delivery procedure. It uses simplified fluoroscopic imaging, crosses the aortic arch and valve over a guide wire, and provides the operator with three degrees of freedom to maximize operator control. The Helix is under investigational use in the United States and is being used in pre-clinical and clinical investigations of cell, gene, and protein therapies.

Morph Deflectable Guide and Sheaths Product

BioCardia’s Morph catheter is designed to enable physicians to navigate through tortuous anatomy, customize the shape of the catheter to the patient's anatomy and their clinical needs during the procedure, and to have stellar back up support once positioned. Morph catheters enable all Helix procedures and have been commercially available to treat more than ten thousand patients. A number of Morph guides and sheaths are approved for commercial sale in the United States.

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Morph AVANCE™ Steerable Introducer

The AVANCE™ steerable introducer, is an investigational device designed for introducing various cardiovascular catheters into the heart, including via the left side of the heart through the interatrial septum. The AVANCE steerable introducer leverages technology from its FDA-cleared Morph steerable introducer with several enhancements for transseptal procedures, which are designed to improve upon commercially-available offerings. The device is virtually whipless around curves due to its helically arranged pull-wires, enabling greater predictability, stability and control during procedures. It is bidirectional, when most available offerings are uni-directional, allowing for better catheter conformance to patient anatomy and easier navigation through tortuous anatomy. AVANCE also offers rotating hemostasis, which helps reduce physician frustration with tangled fluid lines during a procedure.

Procedures that leverage transseptal delivery include atrial fibrillation ablation, patent foramen ovale (PFO) and atrial septal defect (ASD) repair, percutaneous mitral valve repair, left atrial appendage closure, and percutaneous left ventricular assist device placement, among others. FDA clearance of the 510(k) submitted to the FDA during the first quarter of 2019 was received in May 2019.

Financial Overview

Revenue

We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue.

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:

• salaries and related overhead expenses, which include share-based compensation and benefits for personnel in research and development functions;

• fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial management and statistical compilation and analysis;

• costs related to acquiring and manufacturing clinical trial materials;

• costs related to compliance with regulatory requirements; and

• payments related to licensed products and technologies.

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 of 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 received.

We plan to increase our research and development expenses for the foreseeable future as we continue the pivotal CardiAMP Heart Failure Trial, advance the pivotal CardiAMP Chronic Myocardial Ischemia Trial, further develop the CardiAMP and CardiALLO Cell Therapy Systems, and subject to the availability of additional funding, develop other therapeutic candidates for additional indications. 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.

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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 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.

Other Income (Expense)

Other income and expense consists primarily of interest income we earn on our cash, cash equivalents and investments.

Critical Accounting Policies and Estimates

Our management’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. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various 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 clear from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

Apart from the adoption of ASU No. 2018-07, Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting on January 1, 2019, which led to an amended stock-based compensation policy (see Note 2 of our Condensed Consolidated Financial Statements), there have been no changes in our critical accounting estimates or accounting policies described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K.

Results of Operations

Comparison of Three Months Ended March 31, 2019 and 2018

The following table summarizes our results of operations for the three months ended March 31, 2019 and 2018 (in thousands):

	Three months ended March 31,
	2019			2018
Revenue:
Net product revenue	$	76		$	82
Collaboration agreement revenue		140			117
Total revenue		216			199
Costs and expenses:
Cost of goods sold		106			157
Research and development		2,166			1,955
Selling, general and administrative		1,631			1,707
Total costs and expenses		3,903			3,819
Operating loss		(3,687	)		(3,620	)
Other income (expense):
Interest income		23			36
Other income (expense)		(1	)		—
Total other income, net		22			36
Net loss	$	(3,665	)	$	(3,584	)

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Revenue.    Revenue increased by approximately $17,000 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to increased revenue earned under programs with our collaborative partners. We expect collaboration agreement revenues to increase modestly in 2019. We expect net product revenue will be flat or increase modestly in the latter half of 2019 depending on demand for the new Morph AVANCE™ steerable introducer and subject to our ability to secure funding for marketing and production.

Cost of Goods Sold.    Cost of goods sold decreased by approximately $51,000 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to a decrease in product sales volumes. We expect cost of goods sold to increase moderately in 2019, depending on the sales volumes of Morph AVANCE™ in 2019.

Research and Development Expenses. Research and development expenses increased by approximately $211,000 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to increased expenses incurred in conducting the ongoing pivotal CardiAMP Heart Failure Trial and in the development of the CardiALLO Cell Therapy System. These expenses include fees paid to consultants and contract research organizations (CRO) and additional personnel costs. We expect research and development expenses to continue to increase as enrollment accelerates in the CardiAMP Heart Failure Trial and we further develop the CardiAMP and CardiALLO platforms.

Selling, General and Administrative Expenses.    Selling, general and administrative expenses for the three months ended March 31, 2019 totaled $1,631,000 which was a 4.5% decrease as compared to $1,707,000 for the three months ended March 31, 2018. We expect selling, general and administrative expenses for 2019 to remain relatively consistent in the latter half of 2019 compared to the same period in 2018.

Liquidity and Capital Resources

We have incurred net losses each year since our inception and as of March 31, 2019, we had an accumulated deficit of approximately $90.0 million. We anticipate that we will continue to incur net losses for the next several years.

We have funded our operations principally through the sales of equity and convertible debt securities as well as the cash acquired through our reverse merger transaction that was completed on October 24, 2016 and the $3.8 million raised from the sale of unregistered securities on December 24, 2018. As of March 31, 2019, we had cash and cash equivalents of approximately $2.8 million. 

The following table shows a summary of our cash flows for the periods indicated (in thousands): 

	Three months ended March 31,
	2019			2018
Net cash provided by (used in):
Operating activities	$	(2,465	)		(3,036	)
Investing activities		(55	)		(5	)
Financing activities		—			5
Net decrease in cash and cash equivalents	$	(2,520	)	$	(3,036	)

Cash Flows from Operating Activities. The decrease in overall spending for operating activities of $571,000 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018 related primarily to payment of personnel related costs in the three months ended March 31, 2018 that were not incurred during the three months ended March 31, 2019, board cash compensation that was deferred coupled with reduced professional fees during the three months ended March 31, 2019. We expect spending to increase as we continue enrolling and treating patients in the CardiAMP Heart Failure Trial, further develop the CardiAMP and CardiALLO cell therapy systems and continue to strengthen and enhance the supporting organization.

Cash Flows from Investing Activities. Net cash used in investing activities of $55,000 during the three months ended March 31, 2019 consisted primarily of purchases of lab equipment.

Cash Flows from Financing Activities. Net cash provided by financing activities of $5,000 during the three months ended March 31, 2018 consisted of the proceeds from the exercise of stock options.

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Future Funding Requirements

To date, we have generated modest revenue from sales of our approved products. We do not know when, or if, we will generate any revenue from our development stage biotherapeutic programs. We do not expect to generate any revenue from sales of our CardiAMP or CardiALLO therapeutic candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. In addition, subject to obtaining regulatory approval for any of our therapeutic candidates and companion diagnostic, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations.  

Based upon our current operating plan, we believe that the cash and cash equivalents of $2.8 million as of March 31, 2019 are not sufficient to fund our operations beyond the second quarter of 2019. In order to continue to further the development of our lead therapeutic candidates, the CardiAMP Cell Therapy System, and our second therapeutic candidate, the CardiALLO Cell Therapy System, through and beyond the second quarter of 2019, we will be required to raise additional capital. We plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations, but there can be no assurances as to the availability of capital or the terms on which capital will be available, if at all. See Note 13 of the condensed consolidated financial statements. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.

Our future capital requirements will depend on many factors, including:

• the progress, costs, results and timing of our CardiAMP and CardiALLO clinical trials and related development programs;

• FDA acceptance of our CardiAMP and CardiALLO therapies for heart failure and for other potential indications;

• the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;

• the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;

• the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;

• the ability of our product candidates to progress through clinical development successfully;

• our need to expand our research and development activities;

• the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;

• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

• the general and administrative expenses related to being a public company;

• our need and ability to hire additional management and scientific, medical and sales personnel;

• the effect of competing technological and market developments; and

• our need to implement additional internal systems and infrastructure, including financial and reporting systems.

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Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our Common Stock holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our Common Stock holders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us. 

Our condensed consolidated financial statements as of and for the three months ended March 31, 2019 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Due to the factors described above, there is substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. Our ability to continue as a going concern will depend in a large part, on our ability to raise additional capital. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our product development programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. While we believe we have a viable strategy to raise additional funds, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our operating needs.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue as a going concern, we may be forced to liquidate assets. In such a scenario, the values received for assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the Securities and Exchange Commission.

Recent Accounting Pronouncements

See Note 2 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks during the quarter ended March 31, 2019.

Our exposure to market risk is currently limited to our cash and cash equivalents, all of which have maturities of less than three months. The goals of our investment policy are preservation of capital, maintenance of liquidity needs, and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk or departing from our investment policy. We currently do not hedge interest rate exposure. Because of the short-term nature of our cash equivalents, we do not believe that an increase in market rates would have a material negative impact on the value of our portfolio.

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Interest Rate Risk

As of March 31, 2019, based on current interest rates and total borrowings outstanding, a hypothetical 100 basis point increase or decrease in interest rates would have an immaterial pre-tax impact on our results of operations.

Foreign Currency Exchange Risks

We are a U.S. entity and our functional currency is the U.S. dollar. The vast majority of our revenues were derived from sales in the United States. We have business transactions in foreign currencies, however, we believe we do not have significant exposure to risk from changes in foreign currency exchange rates at this time. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as our controls are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

In connection with the preparation of this Quarterly Report on Form 10-Q, as of March 31, 2019, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of March 31, 2019, our disclosure controls and procedures were, in design and operation, effective.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting identified in connection with the evaluation required by rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management does not believe that we are a party to any currently pending legal proceedings. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition, or future results. The risks described in this report and in our Annual Report on 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBIT INDEX

Exhibit Number	Exhibit Description
31.1*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS+	XBRL Instance Document
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.
**	Furnished herewith.
+	The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BIOCARDIA, INC. (Registrant)
Date:     May 15, 2019	By:	/s/ Peter Altman
		Peter Altman
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:     May 15, 2019	By:	/s/ David McClung
		David McClung
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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