As filed with the Securities and Exchange Commission on June 17, 1999
Registration No. 333-74753
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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)
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Delaware 94-3177883
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
47266 BENICIA STREET
FREMONT, CA 94538
(510) 354-0300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Phillip C. Radlick, Ph.D.
President and Chief Executive Officer
CARDIMA, INC.
47266 Benicia Street
Fremont, CA 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:
Issac J. Vaughn, Esq.
Sanjiv S. Dhawan Esq.
Jason Altieri, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(415) 493-9300
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be 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. [_]
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. [_]
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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 THIS 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. WE 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 June 17, 1999
CARDIMA, INC.
8,604,806 SHARES
COMMON STOCK
The securities offered in this prospectus involve a high degree of risk. See
"Risk Factors" beginning on page 4 of this prospectus for information that you
should consider before purchasing these securities.
Our common stock is quoted on the Nasdaq National Market under the symbol
"CRDM". On June 11, 1999, the closing price of our common stock on the Nasdaq
was $2.5312 per share.
This prospectus relates to 8,604,806 shares of Cardima, Inc. common stock
which may be offered for sale by certain selling stockholders from time to time
and will not be underwritten.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is , 1999
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TABLE OF CONTENTS
Page
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About Cardima.............................................................. 3
Risk Factors............................................................... 4
Issuance of Common Stock to Selling Stockholders........................... 15
Use of Proceeds............................................................ 15
Selling Stockholders....................................................... 16
Plan of Distribution....................................................... 19
Indemnification of Officers and Directors.................................. 19
Legal Matters.............................................................. 19
Experts.................................................................... 20
Where You Can Find More Information........................................ 20
Information Incorporated by Reference...................................... 20
Additional Information..................................................... 21
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SPECIAL NOTE: The following discussion contains certain forward-looking
statements that involve risks and uncertainties. Actual results or events may
differ materially from those projected in such forward-looking statements.
Potential risks and uncertainties include those factors below under the heading
"Risk Factors."
ABOUT CARDIMA
Since our inception, we have focused on the diagnosis and treatment of
tachycardias, or very fast heartbeats. Tachycardias break down in to many
categories, with the most significant being Atrial Fibrillation, or AF, and
Ventricular Tachycardia, or VT. Both conditions require the precise diagnostic
location and/or the subsequent destruction of the cells producing the
arrhythmia. We develop, manufacture and commercialize our microcatheter-based
systems for the diagnosis and treatment of these arrhythmias. Our
microcatheters are being designed with a dual functionality to address the
difficulty in and added costs associated with placing a diagnostic catheter
into the heart to locate the arrhythmia, removing the catheter, replacing it
with a catheter designed to treat the arrhythmia, finding the correct location
again and then treating the site.
Our microcatheters are about one-third to one-fourth the size of existing
catheters. This smaller size allows our microcatheters to access sites within
the wall of the heart using the venous system. The variable stiffness
characteristic makes accessing the veins easier for VT diagnosis and treatment
and allows them to conform to the surfaces of the heart's atrial wall for
diagnosing and treating AF.
Our microcatheters are being developed as disposable, single use products
that can be adapted to and used with virtually any electrophysiology system and
most radio frequency generators available today.
To date, we have only received regulatory approvals in Europe to sell our
ablation products.
Our Strategy
Our strategy is to successfully diagnose and ultimately cure patients with
AF and VT using our microcatheter systems. This strategy is being accomplished
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 EP
lab equipment systems;
. proving the clinical utility of these products for the treatment of AF
and VT; and
. marketing these products throughout the world.
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 January
31, 1999, we had 76 full-time employees. Our operations are carried out in a
44,000 square foot facility containing clean room production, research and
development, and administrative offices.
The "Cardima" logo (used above and with our name) "Revelation," "Revelation
Tx," "Pathfinder," "Pathfinder mini," "Tracer," "Therastream," "Vueport,"
"Venaport," "Naviport," "EP Select," and "Tx Select" are trademarks of Cardima,
Inc. All other tradenames and trademarks appearing in this prospectus are the
property of their respective holders.
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RISK FACTORS
Investing in this company entails substantial risk. You should purchase
shares only if you can afford a complete loss. You should carefully consider
the risks of your investment in the "risk factors" section below, as well as
other information contained in this prospectus, information incorporated by
reference, and information which we file with the securities and exchange
commission from time to time. The information in this prospectus is complete
and accurate as of this date, but the information may change after the date on
this prospectus.
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 only sold a limited number of our microcatheter systems. In
addition, we will continue to incur substantial losses into the foreseeable
future as a result 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 $16.2 million, $12.3 million and $7.8
million for 1998, 1997 and 1996. As of December 31, 1998, our accumulated
deficit was approximately $46.6 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. Any sale by us of additional shares of
stock will dilute your percentage ownership in us.
Our failure to raise additional capital to develop and market our
microcatheter systems will cause our business to suffer.
We will need to raise additional capital in order to 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 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 would harm our
business.
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, and loan-
facilities. As of February 28, 1999, cash, cash equivalents, short-term
investments and long-term restricted cash totaled $12.0 million. We believe
that our existing cash, cash equivalents and short-term investments along with
cash generated from the sales of our products and from financings, will be
sufficient to fund our operating expenses, debt obligations and capital
requirements through December 31, 1999.
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 parties of their contractual obligations to
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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 parties. If we
are unable to rely on clinical data collected by others, or if these parties do
not perform their contractual duties, we may be required to repeat clinical
trials; which 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 completed two clinical trials and have received 510(k) pre-
market clearances from the FDA with respect to our Cardima Pathfinder and
Pathfinder mini microcatheter systems for venous mapping of VT, and our
Revelation microcatheter system for mapping and pacing of the atria. We also
received FDA 510(k) clearance for the Vueport guiding catheter and for our
Tracer mapping catheter. We are seeking 510(k) clearance for our Naviport
deflectable tip guiding catheter. Our inability to timely obtain clearances for
our other diagnostic products and guiding catheters under development would
have a material adverse effect on our business, financial condition and results
of operations.
We are in the early stage of developing, testing and obtaining regulatory
approval for our microcatheter systems designed for ablation of AF and VT. We
are currently developing the Revelation Tx microcatheter system for ablation of
AF and the Therastream microcatheter system for ablation of VT. We are required
to obtain an Investigational Device Exemption, or IDE, from the FDA prior to
conducting human clinical trials of our microcatheter systems for ablation. 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 on December 1998 allowing us to expand the AF study. We filed an IDE
to begin clinical testing of our Therastream microcatheter system for VT
ablation in December 1998. We must complete these clinical trials and a pivotal
trial for both AF and VT indications, if initiated, in order to gather data for
the submission of a pre-market approval, or PMA, application to the FDA for our
ablation products. We must receive PMA approval prior to marketing such
products for ablation in the United States. Clinical trials of our
microcatheter systems will require substantial financial and management
resources and the completion of such trials will take several years. There can
be no assurance that:
. necessary IDEs will be granted by the FDA,
. human clinical trials, if initiated, 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 to be overcome prior to obtaining necessary regulatory approvals or
market acceptance. Our failure to initiate and complete clinical trials,
demonstrate product safety and clinical effectiveness, and obtain regulatory
approval for the use of our microcatheter systems for the ablation of AF or VT
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 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 our products and procedures are
not accepted by the market, our business could be harmed and our revenues would
decline.
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Our microcatheter products must be safe, effective and cost efficient in order
for them to effectively compete against more established treatments. If we can
not 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 and, in some
cases, reimbursement approval are important competitive factors. Existing
treatments with which we must compete include:
. drugs,
. external electrical cardioversion and defibrillation,
. implantable defibrillators,
. purposeful destruction of the Atrio-Ventricular, or AV, node followed by
implantation of a pacemaker, and
. open heart surgery and 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, our products will not effectively compete against establish
treatments and our revenues will decline.
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 being developed for the ablation of AF and VT
has received regulatory approval in the United States. If we can not gain U.S.
regulatory approval, our business will be harmed. Even if our ablation products
are successfully developed and the required regulatory approvals are obtained,
we cannot be certain that our products and the 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 VT, our failure to successfully commercialize these systems would harm
our business and cause the value of your investment to decline.
The mapping and ablation of AF in the left atrium may cause blood clots that
could lead to a stroke. These adverse results from the use of our products
would cause our revenues to decline.
We developed our Revelation and Revelation Tx microcatheter systems to both
map and ablate AF. The Revelation Tx microcatheter is capable of delivering
radio frequency, or RF, energy in both the right and left atria to produce
lesions. In general, the use of RF energy in the left atrium has the potential
to create blood clots, which could travel through the body to the brain, and
which could possibly cause a stroke. Because of this risk, physicians may not
recommend this procedure, in which event the Revelation Tx would be unlikely to
gain market acceptance or be successfully commercialized, which would cause our
revenues to decline.
Our Therastream system for the treatment of VT is designed for use inside the
vasculature of the heart wall. The use of this product may damage the arteries
s of the heart and cause a heart attack.
Our Therastream microcatheter system is being developed to ablate VT using
RF energy. Using RF energy could cause damage to the arteries of the heart and
potentially lead to a myocardial infarction and even death. Because of this
risk, physicians may not recommend this procedure, making it unlikely that
Therastream would gain market acceptance. The failure of the Therastream system
to gain market acceptance or be successfully commercialized would harm our
business.
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Significant increases in operating expenses in the future may adversely effect
our operating results and financial condition.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations and broaden our customer support capabilities as we
attempt to commercialize our microcatheter products and fund greater levels of
product development. Our operating expenses, which include sales and marketing,
research and development and general and administrative expenses, are based on
our expectations of future revenues and are relatively fixed in the short term.
If revenues fall below our expectations, we will not be able to quickly reduce
our spending in response, which would materially affect our operating results
and financial condition.
Reuse of our single-use products could cause our revenues to decline.
Although all of our microcatheter systems are labeled for single use only,
we are aware that some physicians are 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 will be 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 cannot be
guaranteed. In the United States, we must obtain 510(k) premarket notification
clearance or premarket approval, or PMA, from the FDA in order to market a
product. We have received 510(k) premarket notification clearances for both the
Cardima Pathfinder and Pathfinder mini microcatheter systems for mapping VT and
for the Revelation microcatheter system for mapping AF. We believe that our
other mapping products will be eligible for FDA 510(k) premarket notification.
We have also submitted a 510(k) premarket notification application for the
Naviport deflectable tip guiding catheter. Currently, the timing to receive
510(k) clearance is approximately 120 days and PMA approval is 12 months, but
timing can be uncertain and the process may be significantly longer. We cannot
guarantee either the timing or receipt of approval or clearance. These products
may require a PMA and extensive clinical data may be requested to support
either 510(k) clearance or PMA approval.
We will be required to seek PMA approval for our ablation products,
including the Revelation Tx and the Therastream microcatheters for ablation.
The process of obtaining PMA approval is much more expensive, lengthy and
uncertain than the 510(k) premarket notification clearance process. In order to
prepare a PMA application, we will be required to complete clinical trials to
demonstrate the safety and effectiveness of these products. We submitted an IDE
application for the Revelation microcatheter system for mapping and ablation of
AF in January 1997. We completed a mapping study at Stanford University
Hospital and Massachusetts General Hospital in September 1997. In addition, we
received conditional IDE approval in January 1998 and full approval in March
1998 for a feasibility clinical study for AF ablation using the Revelation Tx
microcatheter system. We completed a 10-patient AF ablation feasibility study
and submitted to the FDA a
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supplement to our IDE, requesting expansion of the study in November 1998. We
filed an additional feasibility IDE application for the Therastream
microcatheter system in December 1998. There can be no assurance that any
clinical study that we propose will be permitted by the FDA, will be completed
or, if completed, will provide data and information that supports PMA approval.
We expect that a PMA application will not be submitted for at least one year,
if at all. No assurance can be given that we will ever be able to obtain PMA
approval for any of our ablation products. Our failure to complete clinical
testing or to obtain timely PMA approval would have a material adverse effect
on our business, financial condition and results of operations.
Regulatory agencies may limit the indications for which any of our products
are approved or cleared. 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 our
products are not approved for commercial sales by the FDA, 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 are also 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 are also 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, or the EU, 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 the Cardima Pathfinder, Pathfinder mini, Revelation,
Revelation Tx and Tracer for mapping in the EU. We also received approval to
sell the Cardima Pathfinder, Pathfinder mini, Revelation, Revelation Tx, and
Tracer in Japan and Australia, and to sell the Cardima Pathfinder, Tracer,
Vueport and Naviport in Canada. The Company also received CE mark certification
in August 1998 and December 1998 to sell the Revelation and Revelation Tx
microcatheters, respectively, for ablation of AF in the EU. 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 approval to affix the CE mark
would prohibit us from selling these products in member countries of the EU,
and would require significant delays in obtaining individual country approvals.
No assurance can be given that such approvals will ever be obtained. If these
approvals are not obtained, our business could be harmed.
Difficulties presented by international factors could negatively effect 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 significant 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, the new "Euro" currency was introduced and adopted by some
European countries that are part of the European Monetary Union, or EMU.
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 generally. In particular as a
significant amount 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, some of the rules and regulations
relating to the governance of the currency have not yet been defined and
finalized. 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 new 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 RF, ultrasound,
microwave, laser and cryoablation technologies. Other companies are also
developing surgical procedures that could potentially be used by physicians 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 prove 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. These competitors include
Boston Scientific, C.R. Bard, Inc., Johnson & Johnson, through its Cordis
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, Inc. a division of
Johnson and 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 Ventritex, Inc., a subsidiary of St. Jude, 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 prior to our
competitors' products. Our failure to demonstrate the competitive advantages
and achieve market acceptance of our products would harm our business.
We license portions of our products 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 products technology. A license
from Target Therapeutics, Inc., a subsidiary of Boston Scientific Corporation,
as the technological basis for our microcatheter systems for
10
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 it has 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 on
us. The license can also be terminated by either party upon a material breach
that 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.
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 equivalent technology could be developed internally
or identified, licensed and integrated. 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 an issued patent. In addition, the United States patent laws were
recently amended 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 USPTO 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, 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, we are not indemnified 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 health care 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. health care 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 and the
novel
11
procedures in which they 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 (1) a
prescribed device 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 FDA clearance or approval is received, 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 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.
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 under development in
the amounts necessary to achieve significant commercial sales. We currently
believe that our manufacturing capacity will be sufficient through December
1999. 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 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 QSR compliance
inspections conducted by the FDA or receive an FDA exemption from such
compliance inspections in order for us to be permitted 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 are in compliance with procedures to produce products for
sale in Europe. Any failure by Cardima 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.
12
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.
If our sole-source suppliers are unable to meet our demands, our business
results will suffer.
We purchase laminated tubing and hydrophilic coating, 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. Expanding our marketing and sales capability to
adequately support sales in commercial quantities 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 have terminated several distribution arrangements in Europe. We are
in the process of hiring, training and establishing a direct sales force in
certain major European markets. Our ability to effectively operate a remote
sales force will require additional resources, time and expense which could
have a material adverse effect on our business, financial condition and results
of operations. We are in the process of hiring a direct sales force in France
and Germany. We currently have two salesmen in Germany. We can not be certain
that we will be able to build a European direct sales force, that it will be
cost-effective or that its efforts will be successful. Failure to establish an
adequate sales force would harm our business.
Currently, sales and marketing of the Cardima Pathfinder, Pathfinder mini,
Revelation, Revelation Tx and Tracer microcatheter systems is primarily
conducted through a number of exclusive distributors in certain European
countries and Japan. We have sold only a limited number of Pathfinder,
Revelation, Revelation, Tx, and Tracer microcatheter systems through these
distributors. 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
13
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
have not experienced any such claims to date, but 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 the our policies. Although our
microcatheter products are labeled for single use only, we are aware that some
physicians are reusing such products. Moreover, despite labeling of our
microcatheters for diagnostic use only, we believe that physicians are using
such mapping microcatheters for ablation. Multiple use or "off-label" use of
the our microcatheters could subject us to increased exposure to product
liability claims, which could have a material adverse effect on the 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.
Trading in our shares could be subject to extreme price fluctuations which
could adversely affect your investment.
Prior to June 1997, there was no public market for our common stock. The
market price of our common stock has fluctuated widely in the past and is
likely to fluctuate in the future. The stock prices of medical device companies
over the last few years have been volatile and difficult to predict.
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 credit agreement requires
the approval of our bank to declare or pay cash dividends.
Our operations may be negatively impacted by the Year 2000 issue.
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000 (the "Year 2000 Issue"). We are in the process of performing an assessment
of the potential impact of the Year 2000 Issue on our operations. We have
evaluated our financial and accounting and inventory tracking systems and
concluded that they are not materially affected by the Year 2000 Issue. The
extent, if any, of the impact of the Year 2000 Issue on the other systems and
equipment is unknown. We have performed a corporate-wide inventory of computer
applications and we have remedied any issues. Our facilities manager has
determined that there is no impact on building security and related equipment.
There can be no assurance that all third parties will address the Year 2000
Issue in a timely fashion, if at all. Any Year 2000 Issue compliance problems
encountered by us, our business partners or our customers could have a material
adverse effect on our business, operating results and financial condition.
14
We have utilized only internal resources to test and replace software for
Year 2000 modifications. All of the replacement software were upgrades being
purchased for other reasons. Therefore we have not incurred any additional
costs in researching and resolving any Year 2000 issues.
We currently have no contingency plans in place in the event we do not
complete all phases of the Year 2000 program. We plan to evaluate the status
of completion in August 1999 and determine whether such a plan is necessary.
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
This prospectus and the documents referred to in this prospectus contain
forwarding-looking statements that are based on current expectations and are
subject to substantial risks and uncertainties. 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; or (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. The risk factors listed in this section, as well as
any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ
materially from the expectations we describe and may cause our stock price to
fall.
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On January 21, 1999 and February 5, 1999, we entered into agreements with
certain investors (collectively the "Investors"), to sell an aggregate of
7,500,000 shares of our Common Stock at a price of $2.00 per share, for an
aggregate purchase price of approximately $15,000,000. These shares were
issued to the Investors on those dates. In connection with this transaction,
we also issued to the placement agent in our private placement 354,806 shares
of our common stock and warrants to purchase 750,000 shares of our common
stock at an exercise price of $2.20 per share.
We issued all of the securities under an exemption from the registration
requirements of the Securities Act of 1933. All of the securities are
restricted securities until we register them under this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the securities by the
selling stockholders in the offering.
15
SELLING STOCKHOLDERS
The following table sets forth the number of Common shares owned by each of
the selling stockholders and the number of Warrants to purchase Common shares
exercisable within 60 days of March 10, 1999 owned by each of the selling
stockholders. Beneficial ownership is determined in accordance with the rules
and regulations of the Commission and generally includes voting or investment
power with respect to securities. Information with respect to beneficial
ownership is based on information as of March 10, 1999 and assumes that there
is outstanding an aggregate of 16,238,021 shares of Common Stock (not including
treasury shares). No options have been issued to the Selling Stockholders named
in this Prospectus. Other than the employees of Sunrise Securities, Corp. which
served as placement agent in the private placement, none of the selling
stockholders has had a material relationship with Cardima within the past three
years other than as a result of the ownership of the shares or other securities
of the Cardima. 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 all or some of the shares and because there
currently are no agreements, arrangements or understandings with respect to the
sale of any of the shares. The shares offered by this prospectus may be offered
from time to time by the selling stockholders named below.
Number of Number of Number of
Common Warrant Shares
Shares Shares Percent of Registered
Beneficially Beneficially Outstanding for Sale
Name of Selling Stockholder Owned Owned Shares Hereby
--------------------------- ------------ ------------ ----------- ----------
Ruth Low..................... 50,000 -- * 50,000
Porter Partners, L.P......... 150,000 -- * 150,000
Talkot Crossover Fund........ 200,000 -- 1.2% 200,000
Thomas Hutchinson............ 12,500 -- * 12,500
Nicholas DiFalco............. 12,500 -- * 12,500
Amy Newmark.................. 100,000 -- * 100,000
Pequot Healthcare Fund,
L.P......................... 75,000 -- * 75,000
Pequot Scout Fund, L.P....... 425,000 -- 2.6% 425,000
Mark J. Sklar................ 5,000 -- * 5,000
Mitchel Sklar................ 5,000 -- * 5,000
Louis F. Bantle.............. 25,000 -- * 25,000
Bernice Brauser.............. 50,000 -- * 50,000
Leonid Feldman............... 5,000 -- * 5,000
John W. Holley Grantor
Trust....................... 62,500 -- * 62,500
John W. Holley, John D.
Holley Co-trustees,
Barbara Holley Art VII
Trust....................... 25,000 -- * 25,000
Bruce N. Barron.............. 10,000 -- * 10,000
David Stone.................. 125,000 -- * 125,000
H. Russell Johnston.......... 50,000 -- * 50,000
Austost Anstalt Schaan....... 250,000 -- 1.5% 250,000
Balmore Funds, S.A........... 250,000 -- 1.5% 250,000
Branscombe Investments Ltd... 100,000 -- * 100,000
Cradock Asset Management,
Inc......................... 100,000 -- * 100,000
EDJ Limited.................. 50,000 -- * 50,000
Michail Shapiro.............. 7,500 -- * 7,500
Triple Equity Investments,
Ltd......................... 75,000 -- * 75,000
Steve Abramow................ 15,000 -- * 15,000
Scott Flamm.................. 5,000 -- * 5,000
David Kalatsky............... 7,500 -- * 7,500
Aries Domestic Fund, LP...... 210,000 -- 1.3% 210,000
Aries Master Fund............ 540,000 -- 3.3% 540,000
Emilio Bassini............... 50,000 -- * 50,000
16
Number of Number of Number of
Common Warrant Shares
Shares Shares Percent of Registered
Beneficially Beneficially Outstanding for Sale
Name of Selling Stockholder Owned Owned Shares Hereby
--------------------------- ------------ ------------ ----------- ----------
Brown Simpson Strategic Growth
Fund, L.P.................... 190,000 -- 1.2% 190,000
Brown Simpson Strategic Growth
Fund, Ltd.................... 310,000 -- 1.9% 310,000
Canadian Imperial Holdings,
Inc.......................... 250,000 -- 1.5% 250,000
Curran Partners, L.P.......... 100,000 -- * 100,000
Alvin H. Einbender Trust...... 50,000 -- * 50,000
FK Investments, L.P........... 25,000 -- * 25,000
Joy Henshel................... 10,000 -- * 10,000
Jerry Heymann................. 38,000 -- * 38,000
Malcolm Hoenlein.............. 20,000 -- * 20,000
Marc L. Hurwitz............... 50,000 -- * 50,000
Eli Jacobson.................. 20,000 -- * 20,000
Jays Twelve, LLC.............. 150,000 -- * 150,000
Michael G. Jesselson 12/18/80
Trust........................ 150,000 -- * 150,000
Ronald Kaufman................ 5,000 -- * 5,000
Neal Kozodoy.................. 10,000 -- * 10,000
Larry Miller.................. 125,000 -- * 125,000
Howard P. Milstein............ 250,000 -- 1.5% 250,000
Ohr Somayach International.... 20,000 -- * 20,000
Steven M. Oliveira............ 50,000 -- * 50,000
Overdrive Capital
Corporation.................. 50,000 -- * 50,000
Pharmaceutical/Medical
Technology Fund, L.P......... 213,000 -- 1.3% 213,000
Radix Associates.............. 50,000 -- * 50,000
Richard Stone................. 103,920 75,825 * 129,745
Strategic Healthcare
Investment Fund Ltd.......... 37,000 -- * 37,000
Joseph Telushkin.............. 12,000 -- * 12,000
Jeffrey Thorp................. 21,000 -- * 21,000
Elliot K. Wolk Family Limited
Partnership.................. 50,000 -- * 50,000
Yad Avraham Institute......... 50,000 -- * 50,000
Jay Schottenstein............. 100,000 -- * 100,000
Edmund & Gloria Dunn J.T.C.... 50,000 -- * 50,000
Thomas J. Hudak............... 50,000 -- * 50,000
Penn Footwear Co.............. 50,000 -- * 50,000
State Capital Partners........ 250,000 -- 1.5% 250,000
Robert L. Swisher, Jr......... 100,000 -- * 100,000
Merle Kovtun.................. 12,500 -- * 12,500
Barbara Wilson Holley and John
W. Holley co-ttees Barbara
Wilson Holley Revocable Trust
dtd 7/31/96.................. 12,500 -- * 12,500
James Stramondo............... 35,000 -- * 35,000
Kieran Nicholson.............. 12,500 -- * 12,500
Target Therapeutics, Inc...... 681,000 -- 4.2% 681,000
HA Ventures................... 12,500 -- * 12,500
Morton Seelenfreund........... 25,000 -- * 25,000
Mark Halper................... 25,000 -- * 25,000
Alan Spiegel IRA Rollover
Account...................... 1,000 -- * 1,000
Michael DiPasquale............ 5,000 -- * 5,000
FM Multi-Strategy Investment
Fund L.P..................... 25,000 -- * 25,000
I. Michael Goodman............ 15,000 -- * 15,000
Gross Foundation.............. 100,000 -- * 100,000
17
Number of Number of Number of
Common Warrant Shares
Shares Shares Percent of Registered
Beneficially Beneficially Outstanding for Sale
Name of Selling Stockholder Owned Owned Shares Hereby
--------------------------- ------------ ------------ ----------- ----------
George Karfunkle.............. 100,000 -- * 100,000
Jeffrey Leiderman............. 13,000 -- * 13,000
Harold Levine................. 12,500 -- * 12,500
First Hand Funds.............. 250,000 -- 1.5% 250,000
John Gallagher................ 3,200 4,500 * 7,700
Preston Tsao.................. 0 29,360 * 29,360
Paul Scharfer................. 118,228 176,244 * 294,472
Nathan Low.................... 291,758 0 * 291,758
Nathan Low Roth IRA........... 0 361,907 * 361,907
Marc Seelenfreund............. 0 58,275 * 58,275
Dwight Miller................. 6,000 9,001 * 15,001
Derek Caldwell................ 3,200 6,750 * 9,950
Alan Swerdloff................ 0 8,138 * 8,138
Mart Baily.................... 0 5,000 * 5,000
Gary Shemano.................. 0 10,000 * 10,000
Michael Jacks................. 0 5,000 * 5,000
Bret Van Leeuwen.............. 25,000 -- * 25,000
Stefan Shoup.................. 12,500 -- * 12,500
--------- ------- --- ---------
TOTAL:...................... 7,854,806 750,000 8,604,806
- --------
* Less than 1%
18
PLAN OF DISTRIBUTION
The selling stockholders may sell the securities in whole or in part, from
time to time on the over-the-counter market at prices and on terms prevailing
at the time of any such sale. Any such sale may be made in broker's
transactions through broker-dealers acting as agents, in transactions directly
with market makers or in privately negotiated transactions where no broker or
other third party (other than the purchaser) is involved. The selling
stockholders will pay selling commissions or brokerage fees, if any, with
respect to the sale of the securities in amounts customary for the type of
transaction effected. The selling stockholders will also pay all applicable
transfer taxes and all fees and disbursements of counsel for the selling
stockholders incurred in connection with the sale of shares. We will pay the
costs relating to registration of the common stock to be sold under this
prospectus.
The selling stockholders have advised us that during such time as the
selling stockholders may be engaged in the attempt to sell shares registered
under this prospectus, that they will:
(i) not engage in any stabilization activity in connection with any of the
Company's securities;
(ii) cause to be furnished to each person to whom securities included in
this prospectus may be offered, and to each broker-dealer, if any,
through whom securities are offered, such copies of this prospectus,
as supplemented or amended, as may be required by such person; and
(iii) not bid for or purchase any of our securities or any rights to
acquire our securities, or attempt to induce any person to purchase
any of our securities or rights to acquire the Company's securities
other than as permitted under the Exchange Act.
The selling stockholders, and any other persons who participate in the sale
of the shares, may be deemed to be "Underwriters" as defined in the Securities
Act. Any commissions paid or any discounts or concessions allowed to any such
persons, and any profits received on resale of the Securities, may be deemed to
be underwriting discounts and commissions under the Securities Act.
With regard to the securities, we have agreed to maintain the effectiveness
of this registration statement until such time as the selling stockholders
became eligible to resell the Securities pursuant to Rule 144 of the Securities
Act.
We have agreed to indemnify the selling stockholders against certain
liabilities, including liabilities under the Securities Act and the Exchange
Act.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers 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 "Securities
Act"). Our Amended and Restated Certificate of Incorporation and Bylaws provide
for indemnification of its directors, officers, employees and other agents to
the maximum extent permitted by law. In addition, we have entered into
Indemnification Agreements with our officers and directors and maintain
director and officer liability insurance. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company, we have been advised that in
the opinion of the Commission, such indemnification is against public policy,
as stated by the Commission, and is, therefore, unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
common stock offered hereby will be passed upon for us by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California 94304.
19
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report (Form 10-K) for the year ended
December 31, 1998, as set forth in their report, which is incorporated in this
prospectus by reference. Our financial statements are incorporated herein by
reference in reliance on their report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act, file Annual and quarterly reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission").
This filed material can be inspected and copied at regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York,
New York 10048; and at the Public Reference Office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains
a World Wide Web site on the Internet at http://www.sec.gov that contains our
reports, proxy and information statements and other information about us and
other companies that file electronically with the Commission.
INFORMATION INCORPORATED BY REFERENCE
The Commission 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 filed with
the Commission will update and supersede that information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13a, 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until our offering is completed.
You can request a copy of any or all of the documents incorporated by
reference, other than exhibits to the documents, by writing or telephoning us
at the following address: Cardima, Inc., 47266 Benicia Street, Fremont,
California 94538, telephone: (510) 354-0300, attention Ronald E. Bourquin,
Chief Financial Officer.
1. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
2. Our Annual Report on Form 10-K for the year ended December 31, 1998.
3. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
as amended.
4. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
as amended.
5. Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
6. The description of our Common Stock set forth in our Registration
Statement on Form 8-A filed with the Commission on April 23, 1997,
including any amendment thereto or report filed for the purpose of
updating such description.
7. Our Current Report on Form 8-K filed December 24, 1998.
8. Our Current Report on Form 8-K filed February 2, 1999.
9. Our Current Report on Form 8-K filed February 11, 1999.
20
ADDITIONAL INFORMATION
This prospectus constitutes a part of a Registration Statement on Form S-3
(referred to, together with all amendments and exhibits, as the "Registration
Statement") filed by the Cardima with the Securities and Exchange Commission
(the "Commission") under the Securities Act. This prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to Cardima and the shares of
Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained herein concerning the provisions of any
document are not necessarily complete, and each such statement is qualified in
its entirety by reference to the copy of such document filed with the
Commission.
21
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 and 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 estimates except the registration
fee.
Amount
to be
Paid
-------
Registration Fee....................................................... $ 5,430
Legal Fees and Expenses................................................ $10,000
Accounting Fees and Expenses........................................... $ 8,000
Miscellaneous.......................................................... $ 2,000
-------
Total.................................................................. $25,430
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers 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. Article IX of the
Registrant's Amended and Restated Certificate of Incorporation and Article VII,
Section 6 of the Registrant's Bylaws provide for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by law. In addition, the Registrant has entered into Indemnification Agreements
with its officers and directors and maintains director and officer liability
insurance.
ITEM 16. EXHIBITS
Exhibit
Number Description of Exhibit
------- ----------------------
Form of Subscription Agreement by and between the Registrant and
10.1* certain investors
10.2* Form of Share Purchase Warrant issued to Sunrise Securities, Inc.
Sales Agency Agreement dated January 21, 1999 by and between the
10.3* Registrant and Sunrise Securities, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1* Consent of Ernst & Young LLP Independent Auditors
23.2* Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (see page 32)
- --------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution
II-1
not previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 above or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont, State of California, on the
17th day of June 1999.
CARDIMA, INC.
By: /s/ Phillip C. Radlick
__________________________________
Phillip C. Radlick
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Phillip C. Radlick President, Chief Executive June 17, 1999
____________________________________ Officer and Director
Phillip C. Radlick, Ph.D. (Principal Executive Officer)
Ronald E. Bourquin* Vice President of Finance June 17, 1999
____________________________________ and Chief Financial Officer
Ronald E. Bourquin (Principal Financial and
Accounting Officer)
Michael J.F. DuCros* Director June 17, 1999
____________________________________
Michael J.F. DuCros
Neville J. Jeharajah* Director June 17, 1999
____________________________________
Neville J. Jeharajah
Gabriel B. Vegh* Director June 17, 1999
____________________________________
Gabriel B. Vegh
Charles P. Waite, Jr* Director June 17, 1999
____________________________________
Charles P. Waite, Jr
*By /s/ Philip C. Radlick
___________________________
Philip C. Radlick
(Attorney-in-fact)
II-3
CARDIMA, INC.
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------- ----------------------
Form of Subscription Agreement by and between the Registrant and certain
10.1* investors
10.2* Form of Share Purchase Warrant issued to Sunrise Securities, Inc.
Sales Agency Agreement dated January 21, 1999 by and between the
10.3* Registrant and Sunrise Securities, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1* Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (see page 32)
- --------
* Previously filed.