As filed with the Securities and Exchange Commission on July 3, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
CARDIMA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3177883
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
47266 Benicia Street
Fremont, California 94538
(510) 354-0300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
GABRIEL B. VEGH
Chief Executive Officer Copies to:
Cardima, Inc. THOMAS E. SPARKS, JR.
47266 Benicia Street CAMEO F. JONES
Fremont, California 94538 Pillsbury Winthrop LLP
(510) 354-0300 50 Fremont Street
(Name, address, including zip code, San Francisco, California 94105
and telephone number, including area (415) 983-1000
code, of agent for service)
____________________
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
[_] _____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[_] _____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
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Title of each class Proposed maximum
of securities to be Proposed maximum offering aggregate offering Amount of
registered Amount to be registered price per share(1) price(1) registration fee
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Common Stock, $.001
par value(2) 18,795,092 Shares $1.175 $22,084,233 $5,521.06
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices
of the Registrant's Common Stock on the Nasdaq SmallCap Market on June 28,
2001.
(2) Includes 7,048,176 shares of Common Stock exercisable pursuant to the
issuance of warrants.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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Subject to Completion, Dated July 3, 2001
PROSPECTUS
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CARDIMA, INC.
18,795,092 Shares
Common Stock
______________________
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission, which will be used by the selling
stockholders to sell up to 18,795,092 shares of our common stock. This means:
. The selling stockholders may sell their shares of common stock from time
to time.
. For information on the methods of sale of the common stock, you should
refer to the section entitled "Plan of Distribution" on page 15. We will
not receive any portion of the proceeds from the sale of this common
stock.
. You should read this prospectus and any prospectus supplement carefully
before you invest.
Our common stock is currently listed on the Nasdaq SmallCap Market under
the symbol "CRDM." On July 2, 2001, the last bid price for our common stock on
the Nasdaq SmallCap Market was $1.23.
______________________
Investing in our common stock involves a high degree of risk. You should
carefully read and consider the "Risk Factors" beginning on page 2.
______________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
______________________
The date of this prospectus is ____________ __, 2001
This information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
TABLE OF CONTENTS
Page
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About Cardima......................................... 1
Risk Factors.......................................... 2
Additional or Updated Risk Factors.................... 13
Cautionary Note On Forward-Looking Information........ 13
Use of Proceeds....................................... 13
Issuance of Common Stock to the Selling Stockholders.. 13
Income Tax Considerations............................. 14
Selling Stockholders.................................. 14
Plan of Distribution.................................. 15
Legal Matters......................................... 16
Experts............................................... 16
Where You Can Find More Information................... 16
Information Incorporated by Reference................. 17
ABOUT CARDIMA
Since our inception, we have focused on the diagnosis and treatment of
cardiac arrhythmias. Arrhythmias are abnormal electrical heart rhythms, which
create fast heartbeats. Arrhythmias break down into several categories, with the
most common being atrial fibrillation, or AF, and ventricular tachycardia, or
VT. We design, develop and manufacture microcatheter-based systems to diagnose
and treat AF and VT. While, we produce and sell microcatheters for the
diagnosis of VT, our current efforts focus on our microcatheters designed to
treat AF.
The principal clinical goal in the treatment of AF is effective, less
destructive ablation of arrhythmia-causing tissue with thin linear lesions.
Ablation involves the destruction of arrhythmia-causing tissue through the
application of various forms of energy. To achieve this goal, doctors must be
able to treat areas of the heart that are currently inaccessible with existing
catheter technology, using techniques that are easy to perform and that do not
increase trauma to the patient.
We design our microcatheters to offer the following perceived advantages
over existing, standard catheters:
. Our microcatheters are about one-third to one-fourth the size of other
existing catheters. Smaller size allows our microcatheters to create
thin, linear lesions.
. We incorporate a variable stiffness technology, using a central core
guidewire and atraumatic, highly flexible tip, in our microcatheters.
This variable stiffness allows our microcatheters to conform to the
surfaces of the heart's atrial wall for diagnosing and treating AF.
. Our microcatheters contain flexible, coiled electrodes arranged in a
linear fashion. This design permits the doctor to create long, thin
linear lesions, or lines of block, mimicking the "maze" procedure, an
open chest, open heart surgical procedure where a surgeon creates an
anatomical scar pattern on the heart tissue.
. Our microcatheters preserve a greater amount of atrial tissue following
an ablation procedure, as demonstrated in animal studies, by typically
delivering less radio frequency energy and creating thinner lesions than
standard catheters.
. We design our ablation microcatheters with temperature-sensing bands
between each electrode, so that the temperature bands are in direct
contact with the atrial tissue. This design provides doctors with a more
accurate temperature reading during ablation.
Furthermore, our therapeutic microcatheters, including the Revelation Tx
and the Revelation T-Flex, for the treatment of AF, are capable of both
precisely locating the arrhythmia-causing tissue, called mapping, and ablating.
By using microcatheters that can map, as well as ablate, we believe doctors will
need to access the arrhythmia-causing tissue only once, in order to map it,
verify that it is causing the arrhythmia and then, using the same device, ablate
the tissue. We believe this single microcatheter, dual function characteristic
of our microcatheter systems will decrease procedure times and improve treatment
of AF. Our Revelation Tx microcatheter is currently in Phase III clinical trial
in the United States for the treatment of AF.
Additionally, we have developed our microcatheters to be disposable,
single-use products that can be adapted to and used with virtually all existing
signal display systems and most radio frequency generators available today.
Therefore, physicians can use our products without having to make any additional
capital equipment expenditures. While we market microcatheters for mapping
worldwide, to date, we only have received regulatory approvals to sell our
ablation products in Europe.
Our Strategy
Our strategy is to successfully diagnose and ultimately cure patients with
AF using our microcatheter systems. We intend to establish our Revelation Tx
microcatheter as the first United States' Food and Drug
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Administration, or FDA, approved device in the United States for both mapping
and ablating of AF. We are accomplishing this strategy by:
. developing state-of-the-art microcatheter systems,
. using unique proprietary technology to provide disposable dual purpose
microcatheters with flexible, coiled electrodes designed to interface
with existing lab equipment systems,
. proving the clinical utility of these products for the treatment of AF,
and
. marketing these products throughout the world.
Once we have completed our phase III AF trial, we plan to proceed with our
efforts to develop and commercialize our products for the treatment of VT,
including our Therastream microcatheter.
Our Operations
Cardima, Inc. was incorporated in the State of Delaware in November 1992.
Our principal executive offices are located at 47266 Benicia Street, Fremont,
California 94538-7330 and our telephone number is 510-354-0300. As of March 31,
2001, we had 52 full-time employees. We carry out our operations in 44,674
square foot facility containing clean room production, research and development,
and administrative offices. We recently sublet 16,674 square feet of this
facility to a subtenant.
The "Cardima" logo (used above and with our name) and "Vueport" are
registered trade names of Cardima, Inc. "Revelation," "Revelation Tx,"
"Revelation T-Flex," "Pathfinder," "Pathfinder Mini," "Tracer," "Therastream,"
"Venaport," "Naviport," "EP Select," and "Tx Select" are trademarks of Cardima,
Inc. All other trade names and trademarks appearing in this prospectus are the
property of their respective holders.
RISK FACTORS
We have sold a limited number of our microcatheter products, and we will
continue to incur substantial costs in bringing our microcatheter products to
market
We have sold only a limited number of our microcatheter systems. In
addition, we will continue to incur substantial losses into the foreseeable
future because of research and product development, clinical trials,
manufacturing, sales, marketing and other expenses as we seek to bring our
microcatheters to market. Since our inception, we have experienced losses, and
we expect to experience substantial net losses into the foreseeable future.
Our net losses were approximately $7.8 million, $14.0 million and $16.2
million for 2000, 1999 and 1998, respectively. As of March 31, 2001, our
accumulated deficit was approximately $67.8 million. Our limited sales history
makes it difficult to assess our future results. We cannot be certain that we
will ever generate substantial revenue or achieve profitability. Our failure to
generate substantial revenues would harm our business.
We will need to raise capital in the future that could have a dilutive effect on
your investment
In order to commercialize our products, we will need to raise additional
capital. One possibility for raising additional capital would be the public or
private sale of our shares of stock. On May 3, 2001, we received net proceeds of
approximately $6.2 million from certain investors in a private placement of
11,746,916 shares of our common stock. Additionally, we issued redeemble
warrants to purchase up to an aggregate of 5,873,458 shares of our common stock
at an exercise price per share of $0.87. Any sale by us of additional shares of
stock will further dilute your percentage ownership in us.
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Our failure to raise additional capital to develop and market our microcatheter
systems will cause our business to fail
We will need to raise additional capital in order to complete the clinical
trials for, and market, our microcatheter systems. In addition, we may have to
spend additional funds if unforeseen difficulties arise in the course of
developing our products, performing clinical trials, obtaining necessary
regulatory clearances and approvals or performing other aspects of our business.
We cannot be certain that additional funding will be available to us when
needed, if at all, or, if available, on terms attractive to us. Our inability to
obtain sufficient funds may require us to delay, scale back or eliminate some or
all of our research and product development programs, to limit the marketing of
our microcatheter products, or to license to third parties the rights to
commercialize products or technologies that we would otherwise try to develop
and market ourselves. Our failure to raise this additional capital when needed
could cause us to cease our operations. Debt financing, if available, may
involve restrictive covenants. We have financed our operations to date primarily
through private sales of equity securities, proceeds from our initial public
offering in June 1997, loan-facilities and the sale of certain of our patents
and other intellectual property. As of March 31, 2001, cash, cash equivalents,
short-term investments and long-term restricted cash totaled approximately $1.7
million. On May 3, 2001, we received net proceeds of approximately $6.2 million
from a private placement. We believe that our existing cash, cash equivalents
and short-term investments, along with cash generated from the sale of a portion
of our intellectual property to Medtronic, as well as sales of our products and
from financings, will be sufficient to fund our operating expenses, debt
obligations and capital requirements through December 2001.
We rely on our contractual rights to access third-party data. Our inability to
either access this data, or the FDA's refusal to accept it in a filing, will
delay the commercialization of our products and cause our business results to
suffer
We often rely on our contractual rights to access data collected by others
in phases of our clinical trials. We depend on the continued performance by
these third parties of their contractual obligations to provide access and
cooperate with us in completing filings with the FDA. We cannot be certain that
the FDA will permit our reliance on these third parties. If we are unable to
rely on clinical data collected by others, or if these third parties do not
perform their contractual duties, the FDA may require us to repeat clinical
trials. Either of these scenarios could significantly delay commercialization
of our products, require us to spend more money on our clinical trials and cause
our business results to suffer.
We cannot assure the safety or effectiveness of our products. We are in an early
stage of our product development
To date, we have received 510(k) pre-market clearances from the FDA with
respect to our Pathfinder and Pathfinder Mini microcatheter systems for venous
mapping of VT, and our Revelation microcatheter system for mapping the atria of
the heart. We also received FDA 510(k) clearance for our Venaport, Vueport and
Naviport deflectable-tip guiding catheters and our Tracer microcatheter for
mapping VT.
We are in the final stages of developing, testing and obtaining regulatory
approval for our Revelation Tx microcatheter systems designed for ablation of
AF. We completed the mapping phase of this feasibility study in August 1997 and
the AF ablation feasibility study in December 1998. We received approval of an
IDE supplement in December 1998 allowing us to expand the AF study. In October
2000, we received permission to expand the clinical trial to Phase III. The
Phase III trial requires 80 patients to be treated, in up to 20 centers. We
also received approval for an IDE to begin clinical testing of our Therastream
microcatheter system for VT ablation in December 1999 and approval to expand
that trial in 2000. We have postponed the clinical feasibility trial for the
Therastream microcatheter system for ablation of VT, to focus on completing our
AF Phase III clinical trials.
We must complete the AF Phase III clinical trial in order to gather data
for the completion of our pre-market approval, or PMA, application to the FDA
for our AF ablation product. Currently, we anticipate completing our Phase III
trial in the fourth quarter of this year. Further, we anticipate filing our
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completed PMA application in the first half of 2002. We have no estimate as to
when, or if, we will resume the clinical trial for our Therastream microcatheter
system. We must receive PMA approval before marketing our products for ablation
in the United States. Clinical trials of our microcatheter systems will require
substantial financial and management resources. In addition, if we resume the
clinical trial for our Therastream microcatheter system, the completion of this
clinical trial could take several years. For the Therastream clinical trial,
there can be no assurance that:
. necessary IDEs will be granted by the FDA,
. human clinical trials will be completed,
. human clinical studies will validate the results of our pre-clinical
studies, or
. human clinical trials will demonstrate that our products are safe and
effective.
In addition, the clinical trials may identify significant technical or
other obstacles that we will have to overcome before obtaining the necessary
regulatory approvals or market acceptance. Our failure to complete our clinical
trials, demonstrate product safety and clinical effectiveness, and obtain
regulatory approval for the use of our microcatheter system for the ablation of
AF would have a material adverse effect on our business, financial condition and
results of operations.
Our microcatheter products and their related procedures are novel to the market
and will require the special training of physicians. If the market does not
accept our products and procedures, our revenues will decline
Our microcatheter systems represent a novel approach to diagnosing and
treating AF and VT. Acceptance of our products and procedures by physicians,
patients and health care payors will be necessary in order for us to be
successful. If the market does not accept our products and the procedures in
which they are used, our business could be harmed and our revenues would
decline.
Our microcatheter products must be safe, effective and cost efficient in order
for them to effectively compete against more established treatments. If we
cannot compete with these treatments, our revenues will decline
The market for catheters to diagnose or treat AF and VT is highly
competitive. Our microcatheter systems for the mapping and ablation of AF and VT
are new technologies. Safety, cost efficiency and effectiveness are the primary
competitive elements in our market. In addition, the length of time required for
products to be developed and to receive regulatory approval and, in some cases,
reimbursement approval are important competitive factors. Existing treatments
with which we must compete include:
. drugs,
. external electrical shock to restore normal heart rhythms and
defibrillation,
. implantable defibrillators,
. purposeful destruction of the atrio-ventricular, or AV, node followed by
implantation of a pacemaker, and
. Open-heart surgery known as the "maze" procedure.
Physicians will not recommend the use of our microcatheter systems unless
they can conclude that our systems provide a safe, effective and cost-efficient
alternative to current technologies for the mapping and ablation of AF or VT. If
our clinical data and other studies do not show that our products are safe and
effective, the FDA will not approve our products for sale. If our products are
not approved, we will not effectively compete against establish treatments or
gain market acceptance. If we cannot effectively compete with established
treatments, our revenues will decline.
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None of our ablation products has received regulatory approval in the United
States. Our failure to receive these approvals will harm our business and cause
the value of your investment to decline
None of our products, currently in development for the ablation of AF or
VT, has received regulatory approval in the United States. If we cannot gain
U.S. regulatory approval, our business will be harmed. Even if our ablation
products are successfully developed and we obtain the required regulatory
approvals, we cannot be certain that our products and their associated
procedures will ultimately gain any significant degree of market acceptance.
Since our sole product focus is to design and market microcatheter systems to
map and ablate AF and, at an undetermined future date, VT, our failure to
successfully commercialize these systems would harm our business and cause the
value of your investment to decline.
Reuse of our single-use products could cause our revenues to decline
Although we label all of our microcatheter systems for single-use only, we
are aware that some physicians are potentially reusing these products. Reuse of
our microcatheter systems could reduce revenues from product sales and could
cause our revenues to decline.
We must obtain governmental approvals or clearances before we can sell our
products
Our products are considered to be medical devices and are subject to
extensive regulation in the United States and internationally. These regulations
are wide ranging and govern, among other things:
. product design and development,
. product testing,
. product labeling,
. product storage,
. premarket clearance and approval,
. advertising and promotion, and
. product sales and distribution.
Before we can market any of our products in the United States or Europe, we
must demonstrate that our products are safe and effective and obtain approval or
clearance from applicable governmental authorities, which we cannot guarantee.
In the United States, we must obtain 510(k) pre-market notification clearance or
a PMA from the FDA in order to market a product. We have received 510(k) pre-
market notification clearances for our Pathfinder, Pathfinder Mini and Tracer
microcatheter systems for mapping VT and for the Revelation microcatheter system
for mapping AF. Currently, the timing to receive 510(k) clearance is
approximately 120 days and PMA approval is six to 12 months, but timing can be
uncertain and the actual process may be significantly longer. We cannot
guarantee either the timing or receipt of approval or clearance for any of our
products in development. These products may require a PMA, and the FDA may
request extensive clinical data to support either 510(k) clearance or a PMA.
We are required to seek a PMA for our ablation products, including the
Revelation Tx microcatheter. The process of obtaining a PMA is much more
expensive, lengthy and uncertain than the 510(k) pre-market notification
clearance process. In order to complete our PMA application, we will be required
to complete clinical trials to demonstrate the safety and effectiveness of these
products. In December 1997, the FDA approved a 10-patient AF feasibility study
for mapping and ablation with the Revelation Tx. In June 2000, we received
conditional approval from the FDA and full approval in August 2000 for our Phase
III pivotal study. We filed an additional feasibility IDE application for the
Therastream microcatheter system in December 1998 and received permission to
expand that trial in July 2000. We have postponed the Therastream clinical
trial, while we focus on completing our AF Phase III clinical trial. There can
be no assurance that any additional clinical studies that we may propose will be
permitted by the FDA, will be completed or, if completed, will provide data and
information that supports a PMA. Furthermore, we cannot assure you that our
Phase III trial for AF ablation will provide us with data and information that
supports a PMA.
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In March 2001, the FDA allowed us to file a modular PMA for our Revelation
Tx in Phase III trial. Under the modular PMA submission, we will file five
separate segments of the PMA with the FDA, all of which together will comprise
our PMA application. At this time, we have filed the first three modules. No
assurance can be given that we will ever be able to obtain a PMA for any of our
ablation products. Our failure to complete clinical testing or to obtain timely
a PMA would have a material adverse effect on our business, financial condition
and results of operations.
Regulatory agencies may limit the indications for which they approve or
clear any of our products. Further, the FDA may restrict or withdraw approval or
clearance of a product if additional information becomes available to support
such action. Delays in the approval or clearance process, limitation of our
labeling claims or denial of our applications or notifications would cause our
business to be materially and adversely affected.
Pre-clinical and clinical trials are inherently unpredictable. If we do not
successfully conduct these trials, we may be unable to market our products and
our revenues may decline
Through pre-clinical studies and clinical trials, we must demonstrate that
our products are safe and effective for their indicated uses. Results from pre-
clinical studies and early clinical trials may not allow us to predict results
in later-stage testing. We cannot be certain that our future clinical trials
will demonstrate the safety and effectiveness of any of our products or will
result in approval to market our products. As a result, if we are unable to
commence clinical trials as planned, complete clinical trials or demonstrate the
safety and effectiveness of our products, our business will be harmed. We also
cannot be certain that we can begin any future clinical trials or successfully
complete these trials once started. In addition, we may never meet our
development schedule for any of our products in development. Even if a product
is successfully developed and clinically tested, we cannot be certain that it
will be approved by the FDA on a timely basis or at all. If the FDA does not
approve our products for commercial sales, our business will be harmed.
Delays in enrolling patients in our trials could increase our expenses and harm
our business
The rate at which we may complete our pre-clinical and clinical trials is
dependent upon the rate of patient enrollment. Patient enrollment depends on
many factors, including the size of the patient population, the nature of the
procedure, how close patients reside to clinical sites and the eligibility
criteria for the study. Delays in planned patient enrollment may result in
increased costs and delays, which could cause our business results to suffer.
After obtaining approvals or clearances, we must continue to comply with
applicable laws and regulations. If we do not comply, our business results may
suffer
After approval or clearance, we will continue to be subject to extensive
regulatory requirements. Our failure to comply with applicable regulatory
requirements can result in enforcement actions by the FDA, including, but not
limited to:
. fines,
. injunctions,
. recall or seizure of products,
. withdrawal of marketing approvals or clearances,
. refusal of the FDA to grant clearances or approvals, and
. civil and criminal penalties.
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We also are required to demonstrate and maintain compliance with the
Quality System Regulations, or QSR, for all of our products. The FDA enforces
the QSR through periodic inspections, including a preapproval inspection for PMA
products. The QSR relates to product testing and quality assurance, as well as
the maintenance of records and documentation. If we or any third-party
manufacturer of our products does not conform to the QSR and cannot be brought
up to such a standard, we will be required to find alternative manufacturers
that do conform. Identifying and qualifying alternative manufacturers may be a
long and difficult process. We also are required to provide information to the
FDA on deaths or serious injuries alleged to have been associated with the use
of our medical devices, as well as product malfunctions that could contribute to
death or serious injury. If we fail to comply with these applicable laws, our
business results may suffer.
If we do not comply with foreign regulatory requirements to market our
products outside the United States, our business will be harmed. Sales of
medical devices outside the United States are subject to international
regulatory requirements that vary from country to country. The time required for
approval varies from country to country and may be longer or shorter than the
time required in the United States. In order to market any of our devices in the
member countries of the European Union, we are required to obtain CE mark
certification. CE mark certification is an international symbol of adherence to
quality assurance standards and compliance with the European Medical Device
Directives. We have received CE mark certification to sell our Pathfinder,
Pathfinder Mini, Revelation, Revelation Tx and Tracer for mapping in the
European Union. We have received CE mark certification to sell our Venaport,
Vueport and Naviport guiding catheters in the European Union. We also received
approval to sell our Pathfinder, Pathfinder Mini, Revelation, and Tracer in
Japan and Australia, and to sell our Pathfinder, Tracer, Venaport, Vueport and
Naviport in Canada. We also received CE mark certification in August 1998,
December 1998, and November 1999, to sell our Revelation, Revelation Tx and
Revelation T-Flex microcatheters, respectively, for ablation of AF in the
European Union. We intend to submit data in support of additional CE mark
applications. There can be no assurance we will be successful in obtaining or
maintaining the CE mark for these products, as the case may be. Failure to
receive or maintain approval to affix the CE mark would prohibit us from selling
these products in member countries of the European Union, and would require
significant delays in obtaining individual country approvals. No assurance can
be given that we will ever obtain or maintain such approvals. If we do not
receive or maintain these approvals, our business could be harmed.
Difficulties presented by international factors could negatively affect our
business
A component of our strategy is to expand our international sales revenues.
We believe that we will face risks in doing business abroad that we do not face
domestically. Among the international risks we believe are most likely to affect
us are:
. export license requirements for our products,
. exchange rate fluctuations or currency controls,
. changes in the regulation of medical products by the European Union or
other international regulatory agencies,
. the difficulty in managing a direct sales force from abroad,
. the financial condition, expertise and performance of our international
distributors and any future international distributors,
. domestic or international trade restrictions, or
. changes in tariffs.
Any of these factors here could damage our business results.
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We derive a portion of our revenues from the sale of microcatheters in the
European Union. The adoption of the Euro presents uncertainties for our
international business
In January 1999, some European countries that are part of the European
Monetary Union, or EMU, introduced and adopted the new "Euro" currency.
Beginning in 2003, all EMU countries are expected to be operating with the Euro
as their single currency. A significant amount of uncertainty exists as to the
effect the Euro will have on the marketplace in general. In particular, as a
portion of our sales revenue is derived from sales to EMU countries, these
participating countries' adoption of a single currency may likely result in
greater price transparency, making the EMU a more competitive environment for
our microcatheter products. In addition, the EMU has not yet defined and/or
finalized some of the rules and regulations relating to the governance of the
currency. As a result, companies operating in or conducting business in Europe
will need to ensure that their financial and other software systems are capable
of processing transactions and properly handling the Euro.
We are currently assessing the effect the introduction of the Euro will
have on our internal accounting systems and the potential sales of our products.
We will take appropriate corrective actions based on the results of such
assessment. We have not yet determined the costs related to addressing this
issue. This issue and its related costs could have a material adverse effect on
our business, financial condition and results of operations.
We may be unable to successfully commercialize our microcatheter products, as
the industry for them is highly competitive
The market for catheters to map and/or ablate AF and VT is highly
competitive. Several of our competitors are developing different approaches and
products for these procedures. These approaches include mapping systems using
contact mapping, single-point spatial mapping and non-contact, multi-site
electrical mapping technologies, and ablation systems using radio frequency,
ultrasound, microwave, laser and freezing technologies. Other companies are also
developing surgical procedures that physicians could potentially use to perform
the open-heart surgical maze procedure for the treatment of AF in a minimally
invasive manner. If any of these new approaches or products proves to be safe,
effective and cost effective, our products could be rendered noncompetitive or
obsolete, which would cause our business results to suffer.
Many of our competitors have an established presence in the field of
interventional cardiology and electrophysiology, or the study of the electrical
system of the heart. These competitors include Boston Scientific, through its EP
Technologies division, C.R. Bard, Inc., Johnson & Johnson, through its Biosense-
Webster division, St. Jude Medical, Inc., through its Daig division, and
Medtronic, Inc. These competitors have substantially greater financial and other
resources than we do, including larger research and development staffs and
greater experience and capabilities in conducting research and development
activities, testing products in clinical trials, obtaining regulatory approvals,
and manufacturing, marketing and distributing products. In addition, other
companies are developing proprietary systems for the diagnosis and treatment of
cardiac arrhythmias. These companies include Biosense-Webster, a division of
Johnson & Johnson, Cardiac Pathways, Inc., and Endocardial Solutions, Inc. Other
companies develop, market and sell alternative approaches to the treatment of AF
and VT. These companies include Guidant Corporation, Medtronic, Inc., and St.
Jude Medical, Inc., manufacturers of implantable defibrillators. We cannot be
certain that we will succeed in developing and marketing technologies and
products that are safer, more clinically effective and cost-effective than the
more established treatments or the new approaches and products being developed
and marketed by our competitors. Furthermore, there can be no assurance that we
will succeed in developing new technologies and products that are available
before our competitors' products. Our failure to demonstrate the competitive
advantages and achieve market acceptance of our products would harm our
business.
-8-
We license portions of our product technology. In particular, our microcatheter
products rely on a license granted by Target Therapeutics. The termination of
any of these licenses would harm our business
We rely on license agreements for some of our product technology. A license
from Target Therapeutics, Inc., a subsidiary of Boston Scientific, is the
technological basis for our microcatheter systems for mapping and ablation.
Under the Target license agreement, we have an exclusive license under specific
issued United States patents. The exclusive license from Target covers the
diagnosis and treatment of electrophysiological disorders in areas other than
the central nervous system. In addition, we have obtained a non-exclusive
license to use Target's technology, provided we have made a substantial
improvement of such technology, for the diagnosis or treatment of diseases of
the heart, other than by balloon angioplasty. The license will terminate upon
the expiration or invalidation of all claims under the underlying patents. In
addition, this license may terminate if we fail to comply with various
commercialization, sublicensing, insurance, royalty, product liability,
indemnification, non-competition and other obligations. Also, either party can
terminate the license if a material breach remains uncured for thirty days or if
either party ceases to be actively engaged in its present business for a period
of twelve months. The loss of our exclusive rights to the Target-based
microcatheter technology would harm our business.
In December 2000, we sold certain patents and related intellectual property
pertaining to intravascular sensing and signal detection to Medtronic, Inc. We
received a perpetual, worldwide license at no cost from Medtronic, Inc. to use
these patents and related intellectual property in our products for mapping and
ablation of arrhythmia-causing tissue. We have also licensed a proprietary
surface coating material used on certain of our microcatheters.
We cannot be certain that these licenses will continue to be available to
us or will be available to us on reasonable terms. The loss of or inability to
maintain any of these licenses could result in delays in commercial shipments
until we could internally develop or identify, license and integrate equivalent
technology. These delays would have a material adverse effect on our business,
financial condition and results of operations.
We may not be able to commercialize our products under development if they
infringe existing patents or patents that have not yet issued
We have conducted searches to determine whether our patent applications
interfere with existing patents. Based upon these searches, we believe that our
patent applications and products do not interfere with existing patents.
However, we cannot be sure that relevant patents have not been issued that could
block our ability to obtain patents or commercialize our products. Moreover,
since U.S. patent applications are not a matter of public record, a patent
application could currently be on file that would stand in our way of obtaining
a patent issuance. In addition, U.S. Congress recently amended the United States
patent laws to exempt physicians, other health care professionals and affiliated
entities from infringement liability for medical and surgical procedures
performed on patients. The issuance of any potentially competing patent could
harm our business.
Although we have not received any letters from others threatening to
enforce intellectual property rights against us, we cannot be certain that we
will not become subject to patent infringement claims or litigation,
interference proceedings in the U.S. Patent and Trademark Office to determine
the priority of inventions, or oppositions to patent grants in foreign
countries. An adverse determination in litigation, interference or opposition
proceedings could subject us to significant liabilities to third parties,
require us to cease using such technology, or require us to license disputed
rights from third parties. However, we are not certain that any licenses will be
available to us at all, or if available, on commercially reasonable terms. Our
inability to license any disputed technology could delay the commercialization
of our products and harm our business. Under our license with Target, Target
does not indemnify us against claims brought by third parties alleging
infringement of patent rights. Consequently, we could bear the liability
resulting from such claims. We cannot be certain that we will have the financial
resources to protect and defend our intellectual property, as such defense is
often costly and time-consuming. Our failure to protect our patent rights, trade
secrets, know-how or other intellectual property would harm our business.
-9-
If healthcare providers do not receive adequate reimbursement for procedures
using our products, the market may not accept our products and our revenues may
decline
U. S. healthcare providers, including hospitals and physicians, that
purchase microcatheter products generally rely on third-party payors,
principally federal Medicare, state Medicaid and private health insurance plans,
to reimburse all or a part of the costs and fees associated with the procedures
performed using our products. The success of our products will depend upon the
ability of health care providers to obtain satisfactory reimbursement for
medical procedures in which our microcatheter systems are used. If these health
care providers are unable to obtain reimbursement from third-party payors, the
market may not accept our products and our revenues may decline.
Third-party payors may deny reimbursement if they determine that a
prescribed device (1) has not received appropriate regulatory clearances or
approvals, (2) is not used in accordance with cost-effective treatment methods
as determined by the payor, or (3) is experimental, unnecessary or
inappropriate. If we receive FDA clearance or approval, third-party
reimbursement would also depend upon decisions by the United States Health Care
Financing Administration for Medicare, as well as by individual health
maintenance organizations, private insurers and other payers. Reimbursement
systems in international markets vary significantly by country and by region
within some countries, and reimbursement approvals may be obtained on a country-
by-country basis. Many international markets have government-managed health care
systems that control reimbursement for new devices and procedures. In most
markets, there are private insurance systems as well as government-managed
systems. There can be no assurance that (1) reimbursement for our products will
be available domestically or internationally, (2) if available, that such
reimbursement will be available in sufficient amounts in the United States or in
international markets under either government or private reimbursement systems,
or (3) that physicians will support and advocate reimbursement for procedures
using our products. Failure by hospitals and other users of our products to
obtain reimbursement from third-party payors or changes in government and
private third-party payor policies toward reimbursement for procedures employing
our products would have a material adverse effect on our business, financial
condition and results of operations. Moreover, we are unable to predict what
additional legislation or regulation, if any, relating to the heath care
industry or third-party coverage and reimbursement may be enacted in the future,
or what effect such legislation or regulation would have on our business.
In March 2001, the U. S. Congress enacted, retroactive to January 2001, and
we received, pass-through reimbursement allowance on all of our U.S. approved
diagnostic and guiding catheter products, including the Pathfinder, Pathfinder
Mini, Revelation, Tracer, Naviport, Vueport and Venaport. Pass-through
reimbursement allows for the direct charging of a specific product for
reimbursement.
We cannot be certain that we will be able to manufacture our products in high
volumes at commercially reasonable costs
We currently manufacture our microcatheter systems in limited quantities
for United States and international sales and for pre-clinical and clinical
trials. However, we have no experience manufacturing our products in the amounts
necessary to achieve significant commercial sales. We currently believe that our
manufacturing capacity will be sufficient through December 2001. We expect that,
if U.S. sales for the Pathfinder and Revelation microcatheter systems increase
or if we receive FDA clearance or approvals for other products, we will need to
expend significant capital resources and develop additional manufacturing
expertise to establish large-scale manufacturing capabilities. However, we could
encounter problems related to:
. capacity constraints,
. production yields,
. quality control, and
. shortages of qualified personnel.
-10-
Such problems could affect our ability to adequately scale-up production of
our products and fulfill customer orders on a timely basis, which could harm our
business.
Our manufacturing facilities are subject to periodic inspection by
regulatory authorities. Our operations must either undergo QSR compliance
inspections conducted by the FDA or receive an FDA exemption from such
compliance inspections in order for the FDA to permit us to produce products for
sale in the United States. Our facilities and manufacturing processes are
subject to inspections from time to time by the FDA, State of California and
European Notified Bodies. We have demonstrated compliance with ISO 9001 (EN
46001) quality standards, as well as compliance with 93/42/EEC, the Medical
Device Directive. We comply with procedures to produce products for sale in
Europe. Any failure by us to comply with QSR requirements or to maintain our
compliance with ISO 9001 (EN 46001) standards and 93/42/EEC, the Medical Device
Directive, will require us to take corrective actions, such as modification of
our policies and procedures. In addition, we may be required to cease all or
part of our operations for some period of time until we can demonstrate that
appropriate steps have been taken to comply with QSR or ISO 9001 (EN 46001)
standards. There can be no assurance that we will be found in compliance with
QSR by regulatory authorities, or that we will maintain compliance with ISO 9001
(EN 46001) standards in future audits. Our failure to comply with state or FDA
QSR requirements, maintain compliance with ISO 9001 (EN 46001) standards, or
develop our manufacturing capability in compliance with such standards, would
have a material adverse effect on our business, financial condition and results
of operations.
Our facilities and manufacturing processes have recently undergone a
successful annual recertification inspection by the European Notified Body in
August 2000. In November 2000, the FDA conducted a QSIT-Audit of our quality
system, which we successfully passed. There is no assurance that our
manufacturing facilities will continue to meet such compliance audits and will
maintain such compliance standards.
If our sole-source suppliers are unable to meet our demands, our business
results will suffer
We purchase certain key components for some of our products, from sole,
single or limited source suppliers. For some of these components, there are
relatively few alternative sources of supply. Establishing additional or
replacement suppliers for any of the numerous components used in our products,
if required, may not be accomplished quickly and could involve significant
additional costs. Any supply interruption from vendors or failure to obtain
alternative vendors for any of the numerous components used to manufacture our
products would limit our ability to manufacture our products. Any such
limitation on our ability to manufacture our products would cause our business
results to suffer.
We have limited sales and limited experience in the sale, marketing and
distribution of our products. Our failure to establish an effective direct or
indirect sales and marketing force will cause our revenues to decline
We have only limited experience marketing and selling our products in
commercial quantities. As of June 1, 2001, our three-year distribution agreement
with St. Jude's Daig Division terminated by mutual consent. Therefore, we will
be solely responsible for marketing and distributing our products in the United
States. Expanding our marketing and sales capability to support sales in
commercial quantities adequately will require substantial effort and require
significant management and financial resources. Our failure to establish an
effective sales and marketing force will cause our revenues to decline.
We also have terminated several distribution arrangements in Europe. Our
ability to operate a remote sales force effectively will require additional
resources, time and expense, which could have a material adverse effect on our
business, financial condition and results of operations. We cannot be certain
that we will be able to build a European direct business, that it will be cost-
effective or that its efforts will be successful. Failure to establish an
adequate business in Europe would harm our business.
Currently, sales and marketing of our Pathfinder, Pathfinder Mini,
Revelation and Tracer microcatheter systems is conducted through a number of
exclusive distributors in certain European countries and Japan and a small
direct sales force in Europe. We have sold only a limited number of
-11-
Pathfinder, Pathfinder Mini, Revelation, and Tracer microcatheter systems
through these distributors. We also have approval to sell the Revelation,
Revelation Tx and Revelation T-Flex in the European Union. Because we do not
have written agreements with certain of our exclusive distributors, the terms of
such arrangements, such as length of arrangements and minimum purchase
obligations, are uncertain. In addition, the laws in certain international
jurisdictions may make it difficult and costly for us to terminate such
distribution arrangements without specific written termination terms. We cannot
be certain that we will be able to enter into written distribution agreements
with these distributors or that these distributors will be able to effectively
market and sell our products in these markets. In addition, we can not assure
you that we will be able to enter into additional agreements with desired
distributors on a timely basis or at all, or that these distributors will devote
adequate resources to selling our products. Our failure to establish and
maintain appropriate distribution relationships would harm our business.
We are dependent upon our key personnel and will need to hire additional key
personnel in the future
Our ability to operate successfully depends in significant part upon the
continued service of certain key scientific, technical, clinical, regulatory and
managerial personnel, and our continuing ability to attract and retain
additional highly qualified personnel in these areas. Competition for such
personnel is intense, especially in the San Francisco Bay Area. We cannot be
certain that we can retain such personnel or that we can attract or retain other
highly qualified scientific, technical, clinical, regulatory and managerial
personnel in the future, including key sales and marketing personnel.
We may face product liability claims related to the use or misuse of our
products
We face an inherent business risk of product liability claims in the event
that the use or misuse of our products results in personal injury or death. In
2000, we settled two claims, which were filed against us in 1999, for an
aggregate amount of $32,500. We cannot be certain, in particular after
commercial introduction of our products, that we will not experience losses due
to product liability claims. We currently have general liability insurance with
coverage in the amount of $1.0 million per occurrence, subject to a $2.0 million
annual limitation. We have product liability insurance with coverage in the
amount of $5.0 million per occurrence, subject to a $5.0 million annual
limitation. We cannot be certain that coverage will continue to be available to
us on reasonable terms, if at all. In addition, there can be no assurance that
all of the activities encompassed within our business are or will be covered
under our policies. Although we label our microcatheter products for single-use
only, we are aware that some physicians are reusing such products. Moreover,
despite labeling our microcatheters for diagnostic use only, we believe that
physicians are using such mapping microcatheters for ablation. Multiple use or
"off-label" use of our microcatheters could subject us to increased exposure to
product liability claims, which could have a material adverse effect on our
business, financial condition and results of operations. We may require
additional product liability coverage if we significantly expand
commercialization of our products. Such additional coverage is expensive,
difficult to obtain and may not be available in the future on acceptable terms,
if at all. Any claims or series of claims against us, regardless of their merit
or eventual outcome, could have a material adverse effect on our business,
financial condition and results of operations.
We may experience power blackouts and higher electricity prices because of
California's current energy crisis, which could disrupt our operations and
increase our expenses
California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. We rely on the major Northern California
public utility, Pacific Gas & Electric Company, or PG&E, to supply electric
power to our facilities. Due to problems associated with the de-regulation of
the power industry in California and shortages in wholesale electricity
supplies, customers of PG&E have been faced with increased electricity prices,
power shortages and, in some cases, rolling blackouts. If blackouts interrupt
our power supply, we may be temporarily unable to continue our operations at our
facilities. Any such interruption in our ability to continue operations at our
facilities could delay our ability to develop or provide our products, which
could damage our reputation and result in lost revenue, either of which could
substantially harm our business and results of operations.
-12-
We do not intend to pay cash dividends on our stock
We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future. Instead, we intend
to retain future earnings for reinvestment in our business.
Our stock may become subject to penny stock rules, which may make it more
difficult for you to sell your shares
Currently, our common stock trades on the Nasdaq SmallCap Market. During
the past year, our stock, at times, traded below $1.00 per share and the NASD
advised us that beginning on April 9, our common stock would no longer be listed
on the Nasdaq SmallCap Market. We appealed the NASD's decision, met the
continued listing requirements and on June 7, 2001, the NASD notified us that
our common stock would continue to trade on the Nasdaq SmallCap Market.
If we were to be delisted from the Nasdaq SmallCap Market, our common stock
would be considered a penny stock under regulations of the Securities and
Exchange Commission and would therefore be subject to rules that impose
additional sales practice requirements on broker-dealers who sell our
securities. The additional burdens imposed upon broker-dealers by these
requirements could discourage broker-dealers from effecting transactions in our
common stock, which could severely limit the market liquidity of the common
stock and your ability to sell our securities in the secondary market. We cannot
assure you that we will be able to maintain our listing on the Nasdaq SmallCap
Market.
ADDITIONAL OR UPDATED RISK FACTORS
Prior to making an investment decision with respect to the common stock
offered under this prospectus, prospective investors should also carefully
consider any specific factors set forth under a caption "risk factors" in the
applicable prospectus supplement, if any, together with all of the other
information appearing in this prospectus or the prospectus supplement or
incorporated by reference into this prospectus.
CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION
This prospectus and the documents referred to in this prospectus contain
forward-looking statements that are based on our current expectations and are
subject to substantial risks and uncertainties, some of which are beyond our
control. You can identify these forward-looking statements by words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates"
and similar words. You should read statements that contain these words
carefully because they: (1) discuss our future expectations; (2) contain
projections of our future results of operations or financial condition; and (3)
state other "forward-looking" information. These statements are not guarantees
of further performance. There may be events in the future that we are not able
to predict accurately or over which we have no control. For a discussion of
some of these risks, see "Risk Factors." These forward-looking statements speak
only as of the date of this prospectus. We urge you not to rely on these
forward-looking statements. You are advised, however, to consult any further
disclosures we make on related subjects in our current reports on Form 8-K,
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
USE OF PROCEEDS
While we may receive proceeds from the exercise of warrants issued to the
selling stockholders, we will not receive any proceeds from the sale of common
stock by the selling stockholders. All proceeds from the sale of the common
stock under this prospectus will be for the account of the selling stockholders,
as described below. See "Selling Stockholders" and "Plan of Distribution"
below.
ISSUANCE OF COMMON STOCK TO THE SELLING STOCKHOLDERS
On May 3, 2001, we entered into agreements with investors to sell an
aggregate of 11,746,916 shares of our common stock at a price of $0.58 per
share, for an aggregate purchase price of $6,813,211. In addition, we issued
-13-
warrants to purchase 5,873,485 shares of our common stock at an exercise price
of $0.87 per share. We issued these shares and warrants to the investors on
that date. The warrants will be exercisable beginning on November 3, 2001 and
will be reduced on a share-by-share basis to the extent that an investor sells
our common stock or other of our securities during the six-month period between
May 3, 2001 and November 3, 2001. We may redeem the warrants for a price of
$0.001 per share of common stock if the average closing price per share of our
common stock has been at least $1.16 (as adjusted for subsequent stock splits
and the like) for fifteen consecutive trading days. The shares issued under the
agreements were offered through a placement agent, AmeriCal Securities, Inc.,
for which services we paid to the placement agent a fee of $510,988 and a
warrant to acquire 1,174,691 shares of our common stock at an exercise price of
$0.638 per share. This prospectus covers the resale by the selling stockholders
of up to 18,795,092 shares, which includes the number of shares of our common
stock underlying the warrants issued pursuant to the agreements and to the
placement agent.
We issued all of the securities under an exemption from the registration
requirements of the Securities Act of 1933. All of these securities are
restricted until we register them under this prospectus. We agreed to file a
registration statement with the Securities and Exchange Commission covering the
resale of the shares issued or issuable to each selling stockholder. Our
agreement requires us to cause this registration statement to remain effective
until the earlier of (a) May 3, 2003, (b) the date on which each selling
stockholder's shares could be sold in a single three-month period under Rule 144
of the Securities Act of 1933 or (c) such time as all the common stock offered
by this prospectus have been sold. We also agreed to indemnify each selling
stockholder for claims made against them arising out of, among other things,
statements made in this registration statement.
INCOME TAX CONSIDERATIONS
You should consult your own tax advisor about the income tax issues and the
consequences of holding and disposing of our common stock.
SELLING STOCKHOLDERS
The following table sets forth information as of the date of this
prospectus, with respect to the number of shares of common stock owned by each
of our stockholders selling under this prospectus. Other than AmeriCal
Securities, Inc. which served as placement agent, none of the selling
stockholders has had a material relationship with us within the past three
years, other than as a result of the ownership of shares or other securities.
No estimate can be given as to the amount of shares that will be held by the
selling stockholders after completion of this offering because the selling
stockholders may offer some or all of the shares and because there are currently
no agreements, arrangements or understandings with respect to the sale of any of
the shares.
Percentage of
Shares of Common Common Stock
Stock Beneficially Number of Held Before
Owned As of the Warrant Shares Sale of
Selling Stockholder Date Hereof Beneficially Owned(1) Common Stock
- ----------------------------------------------- -------------------- ------------------------ ----------------------
Active Site Partners, L.P...................... 344,828 172,414 1.03%
Band & Co...................................... 2,187,931 1,093,966 6.55%
Biotechnology Development Fund II, L.P......... 862,069 431,035 2.58%
Clarion Capital Corporation.................... 344,900 172,450 1.03%
EDJ Limited.................................... 172,414 86,207 *
Charles Engelberg (2).......................... 86,207 547,710 (3) *
Claire Engelberg............................... 86,207 43,103 *
Exchange Bank Trustee Redwood Regional Medical
Group PSP FBO Allan Fishbein.................. 86,200 43,100 *
Herbert C. V. Feinstein........................ 43,103 21,552 *
Jacob Feinstein Trustee for the Jacob and 43,103 21,552 *
Gloria Feinstein Revocable Living Trust A
Dated 09-18-92................................
Richard F. Gaston.............................. 86,207 366,508(3) *
Mark Adam Gelman and Ingrid E. Gelman.......... 43,103 21,552 *
-14-
Percentage of
Shares of Common Common Stock
Stock Beneficially Number of Held Before
Owned As of the Warrant Shares Sale of
Selling Stockholder Date Hereof Beneficially Owned(1) Common Stock
- ----------------------------------------------- -------------------- ------------------------ -------------------
Hollis Capital Partners........................ 172,414 86,207 *
John R. Hillsman............................... 86,207 43,103 *
Katz Family Trust, Daniel S. Katz, Trustee..... 86,207 43,103 *
Rose Krans..................................... 0 50,000 (3) *
Daniel Lee..................................... 172,414 86,207 *
Victor S. Lee.................................. 258,621 129,310 *
Nai Ping Leung................................. 0 96,679 (3) *
Marksman Partners, L.P......................... 344,828 172,414 1.03%
Bernard McDermott Roth IRA..................... 671,034 215,517 2.01%
Joyce McDermott Roth IRA....................... 672,134 215,517 2.01%
Qing Mei....................................... 0 50,000 (3) *
Nelson Capital Corporation..................... 172,414 86,207 *
The Leonard and Dena Oppenheim Revocable Trust
dated 1/6/00.................................. 344,828 172,414 1.03%
Orion BioMedical Fund, LP...................... 1,699,655 849,828 5.09%
Orion BioMedical Offshore Fund, LP............. 369,310 184,655 1.11%
Patriot Group, L.P............................. 197,414 86,207 *
Porter Partners, L.P........................... 172,414 86,207 *
Richtime Management Limited.................... 2,188,143 1,094,072 6.55%
Willie Tan..................................... 0 50,000 (3) *
Tryphon Fund, Inc.............................. 172,500 86,250 *
Michael Kit Yap................................ 0 100,000 (3) *
Kenneth S. Yamamoto MD Target Benefit Pension
Plan.......................................... 86,207 43,103 *
* Represents less than one percent.
(1) Represents shares underlying unexercised warrants to acquire our common
stock at a price per share of $0.87. The warrants will not be exercisable
until November 3, 2001 and therefore will not be deemed beneficially owned
within the rules of the Securities and Exchange Commission until September
3, 2001.
(2) Includes 504,607 shares held by Charles and Becky Engelberg, as to which
Mr. Engelberg has shared investment and voting power.
(3) AmeriCal Securities, Inc. acted as placement agent for the issuance of the
securities being offered by this prospectus and received as part of its
compensation a warrant to acquire 1,174,691 shares of our common stock at
an exercise price of $0.638 per share. AmeriCal Securities instructed us
to issue the warrant to the following individuals: Charles and Becky
Engelberg, Richard Gaston, Rose Krans, Nai Ping Leung, Qing Mei, Willie Tan
and Michael Kit Yap.
PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered and sold at
various times by the selling stockholders. The selling stockholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale. The common stock may be sold by or for the account of the
selling stockholders in transactions on the Nasdaq SmallCap Market, the over-
the-counter market, or otherwise. The sales may be made at fixed prices, at
market prices prevailing at the time, or at privately negotiated prices. The
selling stockholders may sell the common stock by means of one or more of the
following methods:
. a block trade in which the broker-dealer so engaged will attempt to sell
the common stock as agent, but may position and resell a portion of the
block as a principal to facilitate the transaction;
. purchases by brokers, dealers or underwriters as principal and resale by
those purchasers for their own accounts under this prospectus;
-15-
. ordinary brokerage transactions in which the broker solicits purchasers;
. in connection with the loan or pledge of the common stock registered
hereunder to a broker-dealer, and the sale of the common stock so loaned
or the sale of the shares so pledged upon a default;
. in connection with the writing of non-traded and exchanged-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter option;
. in privately negotiated transactions; or
. in a combination of any of the above methods.
In effecting sales, brokers or dealers engaged by the selling stockholder
may arrange for other brokers or dealers to participate in the resales.
Brokers, dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or from the purchasers,
or from both. This compensation may exceed customary commissions.
The selling stockholder and any participating brokers or dealers may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. In such event, any commission, discount or
concession these "underwriters" receive may be deemed to be underwriting
compensation.
We have agreed to bear all expenses of registration of the common stock
(other than fees and expenses, if any, of legal counsel or other advisors to the
selling stockholders). Any commissions, discounts, concessions or other fees,
if any, are payable to brokers or dealers in connection with any sale of the
common stock will be borne by the selling stockholders selling those shares.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
common stock offered in this prospectus was passed upon for us by Pillsbury
Winthrop LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2000, as set forth in their report (which contains an explanatory
paragraph describing conditions that raise substantial doubt about our ability
to continue as a going concern as described in Note 1 to the financial
statements), which is incorporated by reference in this prospectus and elsewhere
in the registration statement. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (SEC). This information
can be (1) read and copied at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C., and at the
SEC's Chicago Regional Office, 500 West Madison Street, Chicago, Illinois; and
New York Regional Office, 7 World Trade Center, New York, New York and (2)
accessed via a Web site maintained by the SEC (http://www.sec.gov). Copies of
the material can also be obtained from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms.
This prospectus is a part of a registration statement we filed with the
SEC. This registration statement relates to the common stock offered by the
selling stockholders. This prospectus does not contain all of the information
set forth in the registration statement. For more information about us and our
common stock, you should read the registration statement and its exhibits and
schedules. Copies of the registration statement, including its exhibits may be
obtained from the SEC's principal office in Washington, D.C. upon payment of the
fees prescribed by the SEC, may be examined without charge at the offices of the
SEC, or may be accessed via a web site maintained by the SEC
(http://www.sec.gov).
-16-
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
(a) Our Annual Report on Form 10-K for the year ended December 31, 2000;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001; and
(c) The description of our common stock set forth in the registration
statement on Form 8-A filed on April 23, 1997, including any
amendment thereto or report filed for the purpose of updating such
description.
Upon written or oral request, we will provide without charge to each person
to whom a copy of this prospectus is delivered a copy of the documents
incorporated by reference into this prospectus (other than exhibits to these
documents unless the exhibits are specifically incorporated by reference into
those documents). Requests should be submitted in writing or by telephone at
(510) 354-0300 to Cardima, Inc., at our principal executive offices, 47266
Benicia Street, Fremont, California 94538, Attention: Ronald E. Bourquin, Chief
Financial Officer.
-17-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by Cardima in
connection with the sale and distribution of the common stock being registered.
Selling commissions, brokerage fees and any applicable transfer taxes and fees
and disbursements of counsel for the selling stockholders are payable by the
selling stockholders. All amounts are estimated except the Securities and
Exchange Commission registration fee and the Nasdaq National Market listing fee.
Amount
-------------
SEC registration fee $ 5,521.00
Accounting fees and expenses 8,500.00
Legal fees and expenses 15,000.00
Registrar and transfer agent's fees 2,500.00
NSM listing fee 17,500.00
Miscellaneous fees and expenses 5,000.00
-------------
Total $ 54,021.06
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, the "Delaware GCL,"
permits our board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed action, suit or proceeding in which such person is made a
party by reason of his being or having been a director, officer, employee or
agent of ours, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act"). The
Delaware GCL provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article IX of our Amended and Restated Certificate of Incorporation and
Article VII, Section 6 of our Bylaws, provide for indemnification of our
directors, officers, employees and other agents to the maximum extent permitted
by law.
In addition, we have entered into separate indemnification agreements with
our directors and officers that will require us, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers to the fullest extent not prohibited
by law.
II-1
Item 16. Exhibits
Exhibit
Number Description of Document*
- ------------- ---------------------------------------------------------------
5.1 Opinion of Pillsbury Winthrop LLP regarding the legality of the
securities being registered.
10.1 Form of Stock and Warrant Purchase Agreement between Cardima,
Inc. and certain purchasers
10.2 Form of Warrant for common stock of Cardima, Inc. issued to
AmeriCal Securities, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Pillsbury Winthrop LLP (included in its opinion
filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (see page II-4).
_______________
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of ours in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
We hereby undertake:
(1) To file during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Act; (ii) to
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration
statement; and (iii) to include any material information with respect to
the plan of distribution not previously disclosed in this registration
statement or any material change to such information in this registration
statement; provided, however, that paragraphs (i) and (ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by us pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-2
(4) For purposes of determining any liability under the Act, each
filing of our annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act which is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-3, and have duly caused this registration statement to be
signed on our behalf by the undersigned, thereunto duly authorized, in the City
of Fremont, State of California, July 3, 2001.
CARDIMA, INC.
By /s/ Gabriel B. Vegh
------------------------------------
Gabriel B. Vegh
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Gabriel B. Vegh and Ronald E. Bourquin and each
of them, his true and lawful attorneys-in-fact and agents, each with full power
of substitution and re-substitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments, including post-
effective amendments, to this registration statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Gabriel B. Vegh Chief Executive Officer and July 3, 2001
- ------------------------- and Chairman of the Board
Gabriel B. Vegh of Directors (Principal
Executive Officer)
/s/ Ronald E. Bourquin Senior Vice President, Chief July 3, 2001
- ------------------------- Financial Officer and Secretary
Ronald E. Bourquin (Principal Financial and
Accounting Officer)
II-4
Signature Title Date
- --------- ----- ----
/s/ Jesse D. Erickson Director July 3, 2001
- -------------------------
Jesse D. Erickson
/s/ Neville J. Jeharajah Director July 3, 2001
- -------------------------
Neville J. Jeharajah
/s/ Rodolfo C. Quijano Director July 3, 2001
- -------------------------
Rodolfo C. Quijano, Ph.D.
/s/ Philip C. Radlick Director July 3, 2001
- -------------------------
Philip C. Radlick, Ph.D.
II-5
EXHIBIT INDEX
-------------
Exhibit
Number Description of Document*
- ------------- ---------------------------------------------------------------
5.1 Opinion of Pillsbury Winthrop LLP regarding the legality of the
securities being registered.
10.1 Form of Stock and Warrant Purchase Agreement between Cardima,
Inc. and certain purchasers
10.2 Form of Warrant for common stock of Cardima, Inc. issued to
AmeriCal Securities, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Pillsbury Winthrop LLP (included in its opinion
filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (see page II-4).