As filed with the Securities and Exchange Commission on May 8, 2002
Registration No. 333-76780
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARDIMA, INC.
(Exact name of registrant as specified in its charter)
Delaware 3842 94-3177883
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
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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)
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Gabriel B. Vegh
Chief Executive Officer
CARDIMA, INC.
47266 Benicia Street
Fremont, California 94538
(510) 354-0300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Thomas E. Sparks, Jr.
Cameo F. Jones
PILLSBURY WINTHROP LLP
50 Fremont Street
San Francisco, California 94105
(415) 983-1000
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
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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.[_]
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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The 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.
Subject to completion, dated May 8, 2002
CARDIMA, INC.
5,329,846 Shares
Common Stock
----------------------
This prospectus is part of a registration statement of Cardima, Inc.
("Cardima" or "we") filed with the Securities and Exchange Commission in
connection with a private placement completed by Cardima in August of 2001. As
part of the private placement, we agreed to register the shares of common stock
sold thereunder for resale. We also agreed to register shares of common stock
issuable pursuant to warrants held by certain holders. This prospectus will be
used by the selling stockholders to sell up to 5,329,846 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 16.
Cardima 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 May 7, 2002, the last bid price for our common stock on
the Nasdaq SmallCap Market was $1.50.
----------------------
Investing in our common stock involves a high degree of risk. You should
carefully read and consider the "Risk Factors" beginning on page 2.
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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 , 2002
TABLE OF CONTENTS
Page
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About Cardima ......................................... 1
Risk Factors .......................................... 2
Cautionary Note On Forward-Looking Information ........ 12
Use of Proceeds ....................................... 13
Issuance of Common Stock to the Selling Stockholders .. 13
Income Tax Considerations ............................. 13
Selling Stockholders .................................. 14
Plan of Distribution .................................. 16
Legal Matters ......................................... 16
Experts ............................................... 16
Where You Can Find More Information ................... 17
Information Incorporated by Reference ................. 17
_________________
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this prospectus is current as of the date on the cover.
The "Cardima" logo and "NAVIPORT," "VENAPORT," "VUEPORT" and "EP SELECT""
are registered trade names of Cardima, Inc. "REVELATION," "REVELATION Tx,"
"REVELATION T-Flex," "REVELATION Helix," "PATHFINDER," "PATHFINDER mini,"
"TRACER," "Tx SELECT," "NavAblator" and "TheraStream," are trademarks of
Cardima, Inc. This prospectus also may contain trademarks of other companies.
ABOUT CARDIMA
We are focused on the diagnosis and treatment of cardiac arrhythmias.
Arrhythmias are abnormal electrical heart rhythms that cause fast heartbeats and
can potentially be fatal. We design, develop, manufacture and market
minimally-invasive, single-use microcatheter-based systems to diagnose and treat
the two most common forms of arrhythmias: atrial fibrillation and ventricular
tachycardia. While we produce and sell microcatheters for the diagnosis of
ventricular tachycardia, our current efforts focus on the development of
microcatheters to diagnose and treat atrial fibrillation.
The principal clinical goal in the treatment of atrial fibrillation 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 by using easy to perform techniques that
minimize trauma to the patient.
All of our microcatheters are designed to offer the following perceived
advantages over existing, competitive catheters:
. Our microcatheters are approximately one-third to one-fourth the size of
other existing catheters, which allow doctors to create thin, linear
lesions.
. Our microcatheters incorporate a variable stiffness technology, using a
central core guidewire and an atraumatic, highly flexible tip, which
allows them to conform to the surface of the heart's atrial wall for
diagnosing and treating atrial fibrillation.
. Our microcatheters contain flexible, coiled electrodes arranged in a
linear fashion. This design permits doctors to create long, thin linear
lesions, or lines of block, using radio frequency energy mimicking the
"maze" procedure, an open chest, open heart surgical procedure in which
a surgeon creates an anatomical scar pattern on the heart tissue by
making small cuts in the tissue.
. Our microcatheters preserve a greater amount of atrial tissue during an
ablation procedure by delivering less radio frequency energy and
creating thinner lesions than competitive catheters.
. Our ablation microcatheters are designed with temperature-sensing bands
between each electrode to allow direct contact of the temperature bands
with the atrial tissue. We believe that this provides doctors with a
more accurate temperature reading during ablation.
Furthermore, our therapeutic microcatheters for treating atrial
fibrillation, including the Revelation Tx, Revelation Helix and the Revelation
T-Flex, are capable of precisely locating the arrhythmia-causing tissue
(mapping) and ablating it. Using these dual functions in a single microcatheter,
we believe that doctors will need to access the arrhythmia-causing tissue only
once in order to map it, verify its arrhythmia-causing nature and ablate it. We
believe the dual functions of our microcatheter systems will decrease procedure
times and improve treatment of atrial fibrillation. Our Revelation Tx
microcatheter is currently in Phase III clinical trial in the United States for
the treatment of atrial fibrillation. We believe that our Revelation Tx
microcatheter is at least two years ahead of any other development-stage
ablation therapies in the regulatory approval process since no other ablation
therapy for atrial fibrillation has proceeded past the feasibility stage with
the U.S. Food and Drug Administration.
In addition, all of our microcatheters are disposable, single-use products
that can be adapted to, and used with, virtually all existing signal display
systems and most radio frequency generators currently used by doctors. Doctors
can thereby use our products without making additional capital equipment
expenditures. While we market our microcatheters for the mapping of ventricular
tachycardia and atrial fibrillation worldwide, to date, we have only received
regulatory approvals to market our therapeutic microcatheters for the mapping
and ablation of atrial fibrillation in Europe.
While we believe that our microcatheters offers advancements over standard
catheters, they represent a novel approach to diagnosing and treating atrial
fibrillation and ventricular tachycardia which requires additional training of
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users. Doctors may not adopt our microcatheters due to familiarity with existing
technology. Acceptance of our microcatheters and procedures by doctors, patients
and healthcare payors will be necessary in order for us to succeed.
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 December
31, 2001, we had 67 full-time employees. We carry out our operations in a 44,674
square foot facility containing clean room production, research and development,
and administrative offices. We sublet 16,674 square feet of this facility to a
subtenant in May 2001.
RISK FACTORS
You should carefully consider the following risks factors and all other
information in this prospectus and incorporated by reference herein before
purchasing our common stock. Investing in our common stock has a high degree of
risk. The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties that are not yet identified or
that we currently think are immaterial may also have a materially adverse affect
on our business. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer and the trading
price of our common stock could decline. In addition to historical information,
this prospectus contains forward-looking statements. These forward-looking
statements involve certain risks and uncertainties that could cause actual
results to differ materially from those in such forward-looking statements.
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 $9.3 million, $7.8 million and $14.0
million for 2001, 2000 and 1999, respectively. As of December 31, 2001, our
accumulated deficit was approximately $77.8 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.
Our needs to raise additional capital in the future 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 in a private placement of 11,746,916 shares of our
common stock. As part of this private placement, we also issued redeemable
warrants to purchase up to an aggregate of 5,873,465 shares of our common stock
at an exercise price per share of $0.87. In addition, in August 2001, we
received net proceeds of approximately $3.5 million from a private placement of
2,822,471 shares of our common stock along with the issuance of redeemable
warrants to purchase up to an aggregate of 1,411,234 shares of our common stock
at exercise prices between $1.91 and $2.07. In September 2001, we announced that
we had elected to redeem the warrants issued in the May 2001 private placement
for $0.001 per warrant share; all of the May 2001 warrants were exercised by the
redemption date, and we received net proceeds of approximately $4.6 million. Any
sale by us of additional shares of our common stock stock will further dilute
your ownership percentage in Cardima.
If we fail to raise additional capital to develop and market our microcatheter
systems, our business will fail.
We will need to raise additional capital through public or private
financings or other arrangements in order to complete our clinical trials and
market our microcatheter systems. In addition, we may be required to expend
greater than anticipated funds if unforeseen difficulties arise in the course of
completing the development and marketing of our products or in other aspects of
our business. We cannot assure you that additional capital will be available to
us when needed, if at all, or, if available, on terms attractive to us. If we
cannot obtain sufficient capital, we may be forced to
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delay, scale back or eliminate some or all of our product research and
development programs, to limit the marketing of our products, or to license to
third parties the rights to commercialize our products or technologies that we
would otherwise develop and market ourselves. Furthermore, debt financing, if
available, may involve restrictive covenants that could affect our ability to
raise additional capital. Our failure to raise capital when needed could cause
us to cease our operations.
We have financed our operations since inception primarily through the
private placement 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 December 31, 2001, our cash and cash
equivalents totaled approximately $7.5 million. We believe that our existing
cash and cash equivalents and short-term investments, as well as sales of our
products, will be sufficient to fund our operations through July 2002. However,
there can be no assurance that we can obtain additional funding after such date.
Our independent auditors believe that there is substantial doubt as to our
ability to continue as a going concern.
As a result of our losses to date, working capital deficiency and
accumulated deficit, our independent auditors have concluded that there is
substantial doubt as to our ability to continue as a going concern for a
reasonable period of time, and have modified their report in the form of an
explanatory paragraph describing the events that have given rise to this
uncertainty. Our continuation is based on our ability to generate or obtain
sufficient cash to meet our obligations on a timely basis and ultimately to
attain profitable operations. Our independent auditors' going concern
qualification may make it more difficult for us to obtain additional funding to
meet our obligations. We anticipate that we will continue to incur significant
losses until successful commercialization of one or more of our products. There
can be no assurance that we can be operated profitably in the future.
We rely on multiple third-parties to conduct and collect data for the clinical
trials of our products. If we are unable to access this data or the FDA refuses
to accept the data in a filing, the commercialization of our products will be
delayed and our business will be harmed.
We often rely on multiple third-parties, such as hospital and universities,
to conduct and collect data for our clinical trials. We depend on these third
parties to provide access and cooperate with us in completing regulatory filings
for the approval or clearance of our products. In order for the FDA and other
regulatory agencies to accept and rely on the data of a filing, the data
collection, analysis and summarization must meet the standards of the FDA or
other regulatory agencies. We cannot be certain that the clinical data collected
by the third-parties meet FDA standards. If we are unable to rely on the
clinical data collected by third-parties, or if these third-parties do not
perform their contractual obligations, the FDA or other regulatory agencies may
require us to gather additional clinical data. This could significantly delay
commercialization of our products, require us to spend additional capital on our
clinical trials and harm our business.
We are in an early stage of our product development and cannot assure the
safety or effectiveness of our products.
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 ventricular tachycardia, 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 guiding catheters and our TRACER microcatheter
for mapping ventricular tachycardia.
We are in the final stages of developing, testing and obtaining regulatory
approval for our Revelation Tx microcatheter systems designed for ablation of
atrial fibrillation. We completed the mapping phase of this feasibility study in
August 1997 and the atrial fibrillation ablation feasibility study in December
1998. We received approval of an IDE supplement in December 1998 allowing us to
expand the atrial fibrillation study. In October 2000, we received permission to
expand the clinical trial to Phase III. The Phase III clinical trial requires 80
patients to be treated in up to 20 centers. Additionally, in August 2001, we
began a clinical trial in Germany involving our Revelation Helix microcatheter
in the treatment of atrial fibrillation originating from the pulmonary veins.
We also received approval for an IDE to begin clinical testing of our
TheraStream microcatheter system for ablation of ventricular tachycardia in
December 1999 and approval to expand that trial in 2000, however, we have
postponed the clinical feasibility trial for the TheraStream microcatheter
system for ablation of ventricular tachycardia to focus on completing our atrial
fibrillation Phase III clinical trial. We have no estimate as to when, or if, we
will resume the clinical trial for our TheraStream microcatheter system.
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We must complete the atrial fibrillation 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 atrial fibrillation ablation product. Currently,
we are targeting approval for our REVELATION Tx before the end of 2002. 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.
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
atrial fibrillation 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 some 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 atrial fibrillation and ventricular tachycardia. 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 involved in their use, 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 atrial fibrillation and
ventricular tachycardia is highly competitive. Our microcatheter systems for the
mapping and ablation of atrial fibrillation and ventricular tachycardia are new
technologies. Safety, cost efficiency and effectiveness are the primary
competitive factors in our market. Other competitive factors include the length
of time required for products to be developed and receive regulatory approval
and, in some cases, reimbursement approval. Existing treatments with which we
must compete include:
. conventional catheters using the "drag and burn" technique,
. drugs,
. external electrical shock to restore normal heart rhythms and
defibrillation,
. implantable defibrillators,
. purposeful destruction of the atrio-ventricular 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 atrial
fibrillation or ventricular tachycardia. 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 be able to
enter the market and our revenues will decline.
None of our ablation products have received regulatory approval in the United
States. Our failure to receive these approvals will harm our business.
None of our products in development for the ablation of atrial fibrillation
or ventricular tachycardia 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
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be certain that our ablation products and their associated procedures will
ultimately gain market acceptance. Since our sole product focus is to design and
market microcatheter systems to map and ablate atrial fibrillation and
ventricular tachycardia, our failure to successfully commercialize these systems
would harm our business.
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 potentially may reuse these products. Reuse of
our microcatheter systems could reduce revenues from product sales and could
cause our revenues to decline. In addition, such misuse of our products could
result in personal injury and death. See "Risk Factor - We may face product
liability claims related to the use or misuse of our products."
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 the applicable governmental authorities. 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 ventricular tachycardia and for the Revelation microcatheter system
for mapping atrial fibrillation. Currently, the process for 510(k) clearance is
approximately 120 days and PMA approval is six to 12 months. However, the timing
of such process can be uncertain and 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 atrial fibrillation
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 clinical trial. 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 atrial fibrillation
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 clinical trial for ablation
of atrial fibrillation will provide us with data and information that supports a
PMA.
In March 2001, the FDA allowed us to file a modular PMA for our Revelation
Tx in Phase III clinical 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 four
modules, two of which have been accepted and closed by the FDA and the other two
currently under review. The modular PMA submission process generally reduces the
time for FDA approval by allowing an applicant to submit data required for
completion of the trial to the FDA on an ongoing
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basis. Instead of waiting until the last patient is treated and then submitting
all the necessary modules in one complete submission, we can submit sections or
modules required for the PMA filing as we go. In addition, dialogue with the FDA
during the modular submission process allows us to modify and improve our
submission. Closure and acceptance of any one module does not allow marketing of
any part of the product. We are restricted from selling the product until the
entire PMA process is complete and approved by the FDA. 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. No assurance can be given that our future
clinical trials will demonstrate the safety and effectiveness of any of our
products or will result in regulatory approval to market our products. As a
result, if we are unable to commence and complete our clinical trials as
planned, or demonstrate the safety and effectiveness of our products, our
business will be harmed. In addition, no assurance can be given that we can
begin any future clinical trials or successfully complete these trials once
started. 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 clinical 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, the proximity of patients' residences to clinical sites and the
eligibility criteria for the study and impact of other clinical studies
competing for the same patient population and/or the same physicians' time and
research efforts. Delays in planned patient enrollment may result in increased
costs and delays, which could cause our business results to suffer.
If we do not comply with applicable domestic laws and regulations after
obtaining approvals or clearances, our business results may suffer.
After the approval or clearance of our products, we will continue to be
subject to extensive domestic 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.
We also are required to demonstrate and maintain compliance with the
Quality System Regulations for all of our products. The FDA enforces the Quality
System Regulations through periodic inspections, including a pre-approval
inspection for PMA products. The Quality System Regulations 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
comply with the Quality System Regulations and cannot be brought into
compliance, we will be required to find alternative manufacturers. Identifying
and qualifying alternative manufacturers may be a long and difficult process. We
also are required to provide
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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 regulations, 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 products 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,
REVELATION T-Flex and REVELATION Helix microcatheters for ablation of atrial
fibrillation in the European Union. We intend to submit data in support of
additional CE Mark applications. However, 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 could damage our business results.
We derive a portion of our revenues from the sale of our products in the
European Union. The adoption of the Euro presents uncertainties for our
international business.
All European countries that are part of the European Monetary Union, or
EMU, began operating with the new "Euro" currency in 2002. 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 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
-7-
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 atrial fibrillation and
ventricular tachycardia 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
cryoblation technologies. Other companies are also developing surgical
procedures that could allow physicians to perform the open-heart surgical maze
procedure for the treatment of atrial fibrillation 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 non-competitive or obsolete,
which would harm our business.
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 and Cardiac Pathways divisions, 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
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,
including Biosense-Webster, a division of Johnson & Johnson, and Endocardial
Solutions, Inc. Other companies are also developing, marketing and selling
alternative approaches for the treatment of atrial fibrillation and ventricular
tachycardia, including manufacturers of implantable defibrillators such as
Guidant Corporation, Medtronic, Inc. and St. Jude Medical, Inc. 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 will be available
before those of our competitors. Our failure to demonstrate the competitive
advantages and achieve market acceptance of our products would harm our
business.
We license portions of our product technology from potential competitors, and
the termination of any of these licenses would harm our business.
We rely on license agreements for some of our product technology from
potential competitors. A license from Target Therapeutics, Inc., a subsidiary of
Boston Scientific Corporation, is the technological basis for our microcatheter
systems for mapping and ablation. Boston Scientific currently has research
efforts in the field of electrophysiology that may compete with our products.
Under the Target Therapeutics license agreement, we have an exclusive license
under specific issued U.S. patents. The exclusive license from Target
Therapeutics 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 Therapeutics' 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, Target Therapeutics has
the right to terminate the license earlier if we fail to comply with various
commercialization, sublicensing, insurance, royalty, product liability,
indemnification, non-competition and other obligations. Furthermore, 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
Therapeutics-based microcatheter technology would harm our business.
-8-
In December 2000, we sold certain patents and related intellectual property
pertaining to intravascular sensing and signal detection to Medtronic, Inc., for
$8,000,000 in cash, which currently has research efforts in the field of
electrophysiology that may compete with our products. We received a perpetual,
worldwide license at no cost from Medtronic to use these patents and related
intellectual property in our products for mapping and ablation of
arrhythmia-causing tissue. In addition, Medtronic agreed not to sublicense the
patents within our field of use to any non-affiliated party. We have also
licensed a proprietary surface-coating material from another vendor 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 prevent us from obtaining a
patent issuance. In addition, Congress recently amended the U.S. 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 cannot be certain that at such time 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 Therapeutics, Target Therepeutics 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.
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 payors. 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
-9-
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 harm
our business. 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.
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 U.S. and international sales and for pre-clinical and clinical trials.
However, we have limited 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 2002. 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.
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 Quality System
Regulations 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, the 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 Quality System Regulations 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 Quality System
Regulations or ISO 9001 (EN 46001) standards. There can be no assurance that we
will be found in compliance with the Quality System Regulations 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 Quality
System Regulations, 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
November 2001. 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.
-10-
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. In January 2000, we signed an exclusive three-year
distribution agreement with St. Jude Medical Corporation whereby St. Jude was to
distribute our diagnostic products in the United States. St. Jude did not meet
its minimum annual sales quota for the first year under the distribution
agreement. In June 2001, we mutually agreed with St. Jude to terminate the
agreement and to allow for a transition period to transfer customer accounts by
the termination date of September 1, 2001. As a result, we plan to expand our
own small sales force in the United States. 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 because
of the distributors' failure to meet minimum sales levels under those
agreements. 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 are 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 PATHFINDER,
PATHFINDER mini, REVELATION, and TRACER microcatheter systems through these
distributors. We also have approval to sell the REVELATION, REVELATION Tx,
REVELATION T-Flex and REVELATION Helix 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 cannot 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. We
cannot be certain, in particular after commercial introduction of our products,
-11-
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 such
coverage will be adequate or 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 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, 2001, 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 common
stock. 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 our common stock and your
ability to sell our common stock in the secondary market. We cannot assure you
that we will be able to maintain our listing on the Nasdaq SmallCap Market.
CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION
This prospectus and documents incorporated by reference contain
forward-looking statements that are based on our current expectations,
assumptions, estimates and projections about our business and our industry, and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's results, levels of activity, performance or achievement to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied in or contemplated by the forward-looking
statements. You can identify these forward-looking statements by words such as
"anticipates," "expects," "intends," "plans," "believes,"
-12-
"seeks," "estimates," "predicts," "potential," "continues," "will," "may,"
"should," or the negative of such terms or other similar expressions. 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 future 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
We will not receive any proceeds from the sale of common stock by the
selling stockholders. Assuming the full exercise of the warrants by the selling
stockholders, we will receive approximately $3.9 million. Although we have not
yet formulated a specific plan, we intend to use a significant portion of the
proceeds from the exercise of the warrants for working capital and other general
corporate purposes. 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 August 9, 10 and 13, 2001, we entered into agreements with investors to
sell an aggregate of 2,822,471 total shares of our common stock at prices of
$1.27, $1.29 and $1.38 per share, for an aggregate purchase price of $3,777,000.
In addition, we issued warrants to purchase 1,411,234 shares of our common stock
at exercise prices of $1.91, $1.94 and $2.07 per share. We issued these shares
and warrants to the investors on those dates. The warrants will be exercisable
beginning on February 9, 10, and 13, 2002, respectively, 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 the closing and
February 9, 10 and 13, 2002, respectively. 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 $2.54, $2.58 and $2.76, respectively, (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 $283,275 and warrants to acquire an aggregate of
282,247 shares of our common stock at exercise prices of $1.40, $1.42 and $1.52
per share.
In addition, on May 3, 2001 we adjusted certain warrants to purchase our
common stock, that were issued on April 12, 1999 and February 25, 2000 in
connection with certain private placements, to increase the number of shares of
common stock issuable upon exercise of these warrants by 813,894 shares.
This prospectus covers the resale by the selling stockholders of up to
5,329,846 shares, which includes 2,822,471 shares of our common stock which are
issued and outstanding and 2,506,875 shares of our common stock underlying the
warrants.
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) August 9, 10 and 13, 2003 respectively, (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.
-13-
SELLING STOCKHOLDERS
The following table sets forth information as of January 15, 2002 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.
Shares of Common
Stock Beneficially
Owned Percentage of
As of the Date Number of Common Stock Number of Shares
Hereof (unless Warrant Shares Held Before Sale of Registered for
Selling Stockholder indicated otherwise) Beneficially Owned Common Stock Sale Hereby
- ------------------------------------------ -------------------- ------------------ ------------------- -----------------
Band & Co.(1)(5)(13) ........................ 3,702,598 196,850 8.64% 590,551
Biotechnology Development Fund II,
L.P.(2)(12) ............................. 2,017,742 362,319 4.74% 1,086,957
Charles Engelberg(6)(7)(8)(9)(10)(11)(13) ... 666,078 117,647 1.57% 117,647
Richard Gaston(6)(7)(8)(9)(10)(13) .......... 442,441 73,991 1.04% 73,991
Ha Lin Yip Huang(2) ......................... 100,000 50,000 * 150,000
Katz Family Trust, Daniel S. Katz,
Trustee(3)(12) .......................... 124,967 19,380 * 58,140
Rose Krans(7)(9)(10)(13) .................... 31,118 10,000 * 10,000
Daniel Lee(1)(12) ........................... 337,361 39,370 * 118,110
Victor S. Lee(1)(12) ........................ 663,523 137,795 1.56% 413,386
Nai Ping Leung(7)(9)(10) .................... 132,288 35,609 * 35,609
Qing Mei(7)(9)(10)(13) ...................... 16,761 10,000 * 10,000
Marksman Partners, L.P.(1)(12)(13) .......... 611,112 19,685 *% 59,055
Bernard J. McDermott, Jr.(3)(4)(12) ......... 2,175,725 77,519 4.88% 232,558
The Leonard and Dena Oppenheim
Revocable Trust dated 1/6/00(3)(12) ..... 672,281 77,519 1.58% 232,558
Perceptive Life Sciences Master
Fund Ltd.(2)(12) ........................ 499,275 249,638 1.17% 748,913
Richtime Management Limited(2)(12) .......... 3,644,533 181,159 8.57% 543,478
Williem Tan(7)(9)(10)(13) ................... 50,000 10,000 * 10,000
Michael Kit Yap(7)(9)(10)(13) ............... 100,000 25,000 * 25,000
David Bartash(14) ........................... -- 13,006 * 13,006
Marcia Kucher(14) ........................... -- 520 * 520
Richard Stone(14) ........................... -- 35,838 * 35,838
Derek Caldwell(15) .......................... -- 2,770 * 2,770
Preston Tsao(14)(15) ........................ -- 34,589 * 34,589
Dwight Miller(14)(15) ....................... -- 6,310 * 6,310
Nathan Low(14)(15)(16) ...................... -- 184,023 * 184,023
Marc Seelenfreund(14)(15) ................... -- 29,111 * 29,111
Paul Scharfer(14)(15)(16) ................... -- 91,551 * 91,551
Mart Baily(15) .............................. -- 2,052 * 2,052
Gary Shimano(15) ............................ -- 4,103 * 4,103
Michael Jacks(15) ........................... -- 2,052 * 2,052
Alan Swerdlof(15) ........................... -- 3,339 * 3,339
Jay's Twelve LLC(14) ........................ 307,550 26,012 * 26,012
Prism Partners I, L.P.(14) .................. 133,750 12,139 * 12,139
Rebel Investments(14) ....................... -- 8,671 * 8,671
Robert Swisher, Jr.(14) ..................... 100,000 8,671 * 8,671
Porter Partners(14) ......................... -- 6,937 * 6,937
Ben Joseph Partners(14) ..................... -- 6,937 * 6,937
-14-
Shares of Common
Stock Beneficially
Owned Percentage of
As of the Date Number of Common Stock Number of Shares
Hereof (unless Warrant Shares Held Before Sale of Registered for
Selling Stockholder indicated otherwise) Beneficially Owned Common Stock Sale Hereby
- ------------------------------------------ -------------------- ------------------ ------------------- -----------------
EDJ Limited(14) ............................. -- 6,937 * 6,937
Prism Partners II Offshore Fund(14) ......... 37,250 3,469 * 3,469
Prism Partners Offshore Fund(14) ............ 19,000 1,735 * 1,735
Special Situations Fund III, L.P.(14) ....... -- 66,836 * 66,836
Special Situations Private Equity
Fund, L.P. (14)] ........................ -- 65,029 * 65,029
Special Situations Cayman
Fund, L.P.(14) .......................... -- ]22,279 * 22,279
Ursus Capital, L.P.(14) ..................... 8 4,336 * 4,336
St. Jude Medical, Inc.(14) .................. 1,333,333 115,608 3.14% 115,608
Talkot Crossover Fund(14) ................... -- 30,347 * 30,347
Rock Associates(14) ......................... -- 3,512 * 3,512
Robert Fishel(14) ........................... -- 2,168 * 2,168
Thomas Akin(14) ............................. -- 13,006 * 13,006
* Represents less than one percent.
(1) Represents shares underlying exercised warrants to acquire our common
stock at a price per share of $1.91.
(2) Represents shares underlying unexercised warrants to acquire our common
stock at a price per share of $2.07.
(3) Represents shares underlying unexercised warrants to acquire our common
stock at a price per share of $1.94.
(4) Includes 907,651 shares held by Joyce McDermott, as to which Mr.
McDermott has shared investment and voting power.
(5) Represents shares of Common Stock beneficially owned as of December 31,
2001.
(6) Represents shares underlying exercised warrants to acquire our common
stock at a price per share of $1.40.
(7) Represents shares underlying unexercised warrants to acquire our common
stock at a price per share of $1.52.
(8) Represents shares underlying unexercised warrants to acquire our common
stock at a price per share of $1.42.
(9) 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, warrants to purchase 282,247 shares of our common
stock, at the following exercise prices: 78,740 at $1.40 per share,
34,884 at $1.42 per share and 168,623 at $1.52 per share. AmeriCal
Securities instructed us to issue the warrants to the following names:
Qing Mei, Rose Krans, William Tan, Michael Yap, Charles and Becky
Engelberg, Nai Ping Leung, and Richard Gaston.
(10) Represents shares of Common Stock beneficially owned as of December 31,
2001.
(11) Includes 622,254 shares held by Charles and Becky Engelberg, as to which
Dr. Engelberg has shared investment and voting power.
(12) Represents shares of Common Stock beneficially owned as of January 31,
2001.
(13) A limited partner of Marksman Partners, L.P. is a broker. Qing Mei, Rose
Krans, William Tan, Michael Yap, Charles Engelberg, and Richard Gaston
are all affiliates of a broker dealer. Each of the aforementioned
persons acquired the securities in the ordinary course of business, and
at the time of such acquisition, these persons had no aggreements or
understandings, directly or indirectly, with any person to distribute
such securities.
(14) Represents shares underlying unexercised warrants issued on February 25,
2000, as adjusted effective May 3, 2001, to acquire our common stock at
a price per share of $1.73.
(15) Represents shares underlying unexercised warrants issued on April 12,
1999, as adjusted effective May 3, 2001, to acquire our common stock at
a price per share of $1.56.
(16) Represents shares underlying unexercised warrants issued on June 2,
2000, as adjusted effective May 3, 2001, to acquire our common stock at
a price per share of $1.02.
-15-
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;
. 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 were 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, 2001, 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.
-16-
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 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).
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, 2001,
including all material incorporated by reference therein and any
amendments or reports filed for the purpose of updating any or such
reports, statements or descriptions;
(b) The Proxy Statement for our 2002 Annual Meeting of Stockholders,
including any amendments or reports filed for the purpose of updating
any or such reports, statements or descriptions 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-
================================================================================
5,329,846 Shares
Common Stock
CARDIMA, INC.
-------------------------
PROSPECTUS
-------------------------
, 2002
================================================================================
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 $ 2,446.00
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 1,000.00
-----------
Total $ 46,946.00
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).
_______________
* Previously filed.
+ Incorporated by reference to the exhibit of the same number filed
with the Registration Statement on Form S-3 (File No. 333-64536)
filed with the Securities and Exchange Commission on July 3,
2001.
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, May 8, 2002.
CARDIMA, INC.
By /s/ Gabriel B. Vegh
-----------------------------------------
Gabriel B. Vegh
Chairman and Chief Executive Officer
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 Chairman May 8, 2002
----------------------------------------
Gabriel B. Vegh of the Board of Directors (Principal
Executive Officer)
/s/ Ronald E. Bourquin Senior Vice President, Chief May 8, 2002
----------------------------------------
Ronald E. Bourquin Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
* Director May 8, 2002
----------------------------------------
Jesse D. Erickson
* Director May 8, 2002
----------------------------------------
Lawrence J. Siskind
* Director May 8, 2002
----------------------------------------
Rodolfo C. Quijano, Ph.D.
* Director May 8, 2002
----------------------------------------
Phillip C. Radlick, Ph.D.
*/s/ Ronald E. Bourquin
----------------------------------------
Ronald E. Bourquin
Attorney-in-fact
II-4
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 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).
_____________
* Previously filed.
* Incorporated by reference to the exhibit of the same number filed with the
Registration Statement on Form S-3 (File No. 333-64536) filed with the
Securities and Exchange Commission on July 3, 2001.