Business context and reporting period
This Form 10-Q covers the quarter and nine months ended September 30, 2012. The filing is for Tiger X Medical, Inc., formerly Cardo Medical—not BioCardia, Inc. Tiger X had sold its reconstructive and spine divisions in 2011. Continuing activity consisted primarily of managing royalties from Arthrex, promoting products transferred to Arthrex, and seeking a buyer or joint-venture partner for remaining intellectual property. The filing states its shares traded on the OTC Bulletin Board as CDOM.OB.
Financial results and liquidity
Amounts below are in thousands of dollars except per-share data.
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $19 | $0 | $47 | $0 |
| Gross profit | $19 | $0 | $47 | $0 |
| General and administrative expense | $102 | $110 | $320 | $460 |
| Loss from continuing operations | $(81) | $(105) | $(265) | $(477) |
| Net income (loss) | $451 | $(561) | $267 | $9,947 |
| Operating cash flow | Not provided quarterly | Not provided quarterly | $(755) | $(2,278) |
Revenue was royalty income under the Arthrex agreement, which pays 5% of net sales of specified products. Gross profit equaled revenue because cost of revenue was zero; the resulting gross margin was 100% on this small royalty base. Q3 net income included a $532 tax-related gain/refund benefit associated with the prior division sales, rather than reflecting profitable continuing operations. The 2011 nine-month net income included an $11,842 gain on those sales, partly offset by discontinued-operation losses.
At September 30, 2012, cash and cash equivalents were $12,823, restricted cash was zero, and an income-tax receivable was $532. Total assets were $13,391, total liabilities $141, and stockholders’ equity $13,250. There was no debt outstanding. Nine-month investing cash inflow of $900 reflected release of sale-related escrow funds; financing cash flow was zero. Cash increased by $145 during the nine months to $12,823. Management said cash was adequate for needs over the next twelve months and beyond.
Changes versus prior periods
- Q3 royalty revenue rose from zero to $19; nine-month revenue rose from zero to $47.
- Continuing-operation losses narrowed to $81 in Q3 and $265 for nine months, mainly alongside lower overhead. Nine-month G&A fell by $140, chiefly because 2011 included higher legal and professional fees related to the divestitures.
- Net results were heavily affected by sale-related and tax items: 2012 included the $532 tax benefit, while 2011 included substantial gains from the division sales. Therefore, net income comparisons do not represent a comparable change in ongoing operating performance.
- Operating cash use declined to $755 from $2,278 for the nine-month comparison period. Cash was broadly stable, with the escrow release contributing to the increase.
Outlook, risks and notable disclosures
- No formal earnings or revenue guidance was provided. Management expected royalties to remain the primary revenue source and G&A to stay at a reduced level; it was evaluating future investment opportunities and uses for cash.
- The filing reports disclosure controls and procedures were not effective at September 30, 2012, citing the former CFO’s departure, elimination of the internal accounting and finance department, and insufficient segregation of duties. No material internal-control changes occurred during the quarter.
- Cash balances exceeded FDIC-insured limits by $12,518 at September 30, 2012, creating significant bank-deposit concentration risk.
- The company expected to receive the $532 income-tax refund related to tax paid on the division-sale gain; the amount was recorded as a receivable. The filing reports no material pending legal proceedings and no debt outstanding.
- Management cautioned that forward-looking statements are subject to risks and uncertainties and referred readers to risk factors in its 2011 Form 10-K.
Important facts for investors to verify
- Confirm the issuer identity: this filing names Tiger X Medical, Inc., not BioCardia, Inc., and identifies the trading symbol as CDOM.OB.
- Verify collection of the $532 tax refund and the status of any related tax matters.
- Assess the sustainability and scale of Arthrex royalty payments and the prospects for monetizing remaining intellectual property.
- Evaluate cash burn, ongoing public-company costs, and management’s cash-sufficiency assessment.
- Review remediation of the disclosed ineffective controls and the uninsured cash concentration.