Business context and reporting period
This is Tiger X Medical, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2014. The request identifies BioCardia, Inc., but the filing names Tiger X Medical, Inc. as the registrant. Tiger X had discontinued its orthopedic-device operations and sold related assets; continuing revenue came primarily from royalties on Arthrex sales under an agreement providing 5% of net sales for up to 20 years. The company was also promoting former knee product lines and evaluating a partner or buyer for remaining intellectual property and potential uses for its cash.
Financial performance and position
- Revenue: Royalty income was $96,000 in Q3 2014, up from $71,000 a year earlier; nine-month income was $299,000, up from $178,000. Management attributed the increases to higher Arthrex sales of the acquired product line.
- Profit and expenses: Q3 net income was $43,000 versus $30,000; nine-month net income was $173,000 versus $14,000. Nine-month G&A fell to $129,000 from $172,000; Q3 G&A rose to $54,000 from $45,000. No income-tax provision was reported. Interest income declined to $3,000 for nine months from $8,000.
- Margins: Operating income was $42,000 on $96,000 of Q3 royalty income and $170,000 on $299,000 for nine months. The filing does not state margins.
- Cash flow: Operating activities provided $161,000 for the nine months, compared with $5,000 used in the prior-year period. There were no investing or financing cash flows reported. Cash increased from $13.295 million at year-end 2013 to $13.456 million at September 30, 2014.
- Liquidity and debt: Total assets were $13.488 million, including $13.456 million cash; current liabilities and total liabilities were $5,000. The company reported no debt and said cash would meet needs for the next 12 months and beyond.
- Other: Accumulated deficit was $12.515 million. Common shares outstanding were 230,293,141 at September 30 and November 6, 2014. Reported earnings per share is shown as a dash; the filing text does not provide a clear per-share value.
Changes, outlook, and risks
- Nine-month net income improved by $159,000 year over year, reflecting higher royalty income and lower G&A. In Q3, higher royalties more than offset increased professional fees; interest income was lower in both comparisons because of reduced rates on cash.
- Management expected royalties to remain the primary revenue source until a partner, buyer, or investment opportunity was found. It expected G&A to remain around 2014 levels. No quantified revenue or earnings guidance was provided.
- The company disclosed that $13.214 million of bank balances exceeded FDIC insurance limits at September 30, 2014, creating significant bank-counterparty concentration exposure.
- Management concluded disclosure controls and procedures were not effective, citing the lack of a full-time CFO, the elimination of the internal accounting and finance department, and insufficient segregation of duties. No material change in internal control over financial reporting was reported during the quarter.
- There were 575,613 warrants outstanding, exercisable at $0.44 per share and due to expire November 13, 2014. The filing reported no material pending legal proceedings.
Important facts for investors to verify
- Confirm the issuer’s identity: this filing is for Tiger X Medical, Inc., not BioCardia, Inc.
- Review Arthrex royalty calculations, product sales trends, and the remaining term and conditions of the royalty agreement.
- Assess plans for the substantial cash balance, including how uninsured bank deposits are managed and whether a proposed investment or transaction is pursued.
- Evaluate remediation of the disclosed ineffective controls and the company’s limited finance staffing and segregation of duties.
- Check the outcome of the November 13, 2014 warrant expiry and any resulting share issuance or other capital changes.