Tiger X Medical, Inc. — Form 10-Q Summary
Reporting period: Quarter ended June 30, 2011; financial statements are unaudited and amounts below are in thousands of dollars unless noted otherwise. The filing identifies the registrant as Tiger X Medical, Inc., formerly Cardo Medical, Inc.; this differs from the BioCardia name in the request metadata.
Business context and major transactions
The company sold substantially all assets of its Reconstructive and Spine divisions and discontinued those businesses. Its continuing activity consists primarily of public-company expenses and managing royalty income from the Arthrex transaction, while it evaluates future investments and uses for cash.
- On June 10, 2011, the Reconstructive Division was sold to Arthrex. The company reported $14.586 million of consideration, including preliminary inventory and equipment values, and a $10.527 million gain. The agreement provides royalties of 5% of Arthrex net sales of the products for up to 20 years.
- On April 4, 2011, the Spine Division was sold to Altus for $3.0 million, with $300,000 held in escrow. The reported gain was $2.286 million; final closing-value adjustments were still pending.
- The company changed its name from Cardo Medical, Inc. to Tiger X Medical, Inc., effective June 10, 2011.
Financial results and liquidity
- Revenue: Continuing-operations net sales were zero in both the three- and six-month periods ended June 30, 2011 and in the comparable 2010 periods. Gross profit and gross margin are not applicable because there were no continuing-operations sales.
- Quarterly results: General and administrative expense was $249 versus $139 in Q2 2010. Continuing-operations loss was $247 versus $136. Net income was $11.396 million versus a $1.482 million loss in Q2 2010, primarily reflecting the $12.813 million after-tax gain on the division sales; discontinued operations also incurred a $1.170 million loss.
- Six-month results: General and administrative expense was $350 versus $330 in 2010; continuing-operations loss was $372 versus $320. Net income was $11.075 million versus a $2.937 million loss, including the $12.813 million after-tax sale gain and a $1.366 million loss from discontinued operations.
- Cash flow: For the six months, operating activities used $2.925 million, investing activities provided $15.990 million, and financing activities used $500,000. Cash increased by $12.565 million to $12.692 million. Sale proceeds included $17.586 million; $1.459 million was placed in restricted escrow cash.
- Balance sheet at June 30, 2011: Cash was $12.692 million, restricted cash $1.459 million, and total assets $14.646 million. Current and total liabilities were $270,000, consisting of accounts payable and accrued expenses. No notes payable remained outstanding. Stockholders’ equity was $14.376 million.
Changes, outlook, and risks
- Compared with Q2 2010, continuing-operations G&A increased by $110,000, mainly due to higher insurance costs and accounting fees related to the asset sales, partly offset by lower legal fees. For the six-month period, G&A increased by $20,000; lower legal fees offset higher insurance and transaction-accounting costs.
- Management stated that the sale proceeds alleviated the factors that had raised substantial doubt about the company’s ability to continue as a going concern and that cash was adequate to fund operations and other activities for the next 12 months and beyond.
- Management expects reduced legal and other professional fees, and expects interest income to rise with the larger cash balance. No quantified financial guidance was provided.
- Escrowed sale proceeds remain subject to purchase-price adjustments and potential indemnification claims. The company noted that final Spine Division closing-value adjustments were pending.
- Receivables were concentrated: three hospital customers represented 33.8%, 32.9%, and 21.3% of net accounts receivable at June 30, 2011. The filing also states that the company had no employees other than its CEO after the asset sales.
- The CFO left in July 2011. The company had not appointed a replacement and was assessing the departure’s impact on internal control over financial reporting. Management had concluded disclosure controls were effective as of June 30, 2011.
Important facts for investors to verify
- Confirm the registrant identity and its relationship, if any, to the BioCardia name in the request metadata.
- Check final sale-price adjustments, escrow releases, and any claims affecting the $1.459 million of restricted cash.
- Monitor Arthrex product sales and resulting royalties; the filing does not provide a clear value for royalties received or expected.
- Assess the company’s ongoing cash burn and operating costs now that it has sold substantially all operating assets.
- Review the CFO departure and the company’s subsequent assessment of internal controls.