Business context and reporting period
This is Tiger X Medical, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2012, filed August 10, 2012. The filing says the company was formerly Cardo Medical, Inc.; it does not identify the registrant as BioCardia, Inc., despite the request metadata. Financial statement amounts below are in thousands of dollars unless stated otherwise.
Tiger X had sold its Reconstructive and Spine divisions in 2011. Continuing operations primarily collected royalties under its Arthrex agreement, promoted former products, sought a partner or buyer for remaining intellectual property, and evaluated possible uses for its cash.
Financial performance and liquidity
| Metric | Three months ended June 30, 2012 | Six months ended June 30, 2012 |
|---|---|---|
| Revenue | $17 | $28 |
| Gross profit | $17 | $28 |
| General and administrative expense | $149 | $218 |
| Operating loss | $(132) | $(190) |
| Net interest income | $3 | $6 |
| Loss from continuing operations and net loss | $(129) | $(184) |
There was no cost of revenue reported, so gross profit equaled revenue. Revenue consisted of Arthrex royalties: $17 for the quarter and $28 for the half year. Basic and diluted loss per share rounded to zero in the filing; weighted-average shares were 230,293,141.
- Cash and liquidity: Cash and cash equivalents were $12,884 at June 30, 2012, versus $12,678 at December 31, 2011. Restricted cash declined from $900 to zero as escrow restrictions were removed. Total assets were $12,940.
- Cash flow: Operating activities used $694 during the six months, compared with $2,365 used in the 2011 period. Investing activities provided $900 from release of restricted cash; financing cash flow was zero. Cash increased by $206.
- Debt and liabilities: No debt was outstanding. Total liabilities were $142, consisting of accounts payable and accrued expenses, down from $756 at year-end 2011.
- Equity: Stockholders’ equity was $12,798; accumulated deficit was $13,196.
Material changes versus the prior comparable period
For the first half of 2011, Tiger X reported net income of $10,515, including a $12,253 after-tax gain on the division sales and a $1,366 loss from discontinued operations. In the first half of 2012, it reported a $184 net loss and no discontinued-operations results. The quarter comparison likewise shifted from 2011 net income of $10,836, including the sale gain and a $1,170 discontinued-operations loss, to a $129 net loss in 2012.
Continuing revenue rose from zero in both 2011 comparison periods to $17 for the quarter and $28 for the half year in 2012. G&A expense declined by $100 for the quarter and $132 for the half year, mainly because 2011 included higher legal and professional fees related to the asset sales. The half-year interest result improved from $22 expense in 2011 to $6 income in 2012, with the earlier period including interest on repaid debt.
Outlook, risks and unusual items
- Management said cash on hand was adequate for cash needs for the next twelve months and beyond, and expected royalties under the Arthrex agreement to remain the primary revenue source. It expected G&A to remain at a reduced level. No numerical revenue or earnings guidance was provided.
- The Arthrex agreement provides royalties equal to 5% of net sales of covered products for up to 20 years from closing. Royalties depend on Arthrex product sales; the filing provides no forecast of those sales.
- Management concluded disclosure controls and procedures were not effective at June 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 during the quarter were reported.
- At June 30, cash balances exceeded FDIC-insured limits by $12,582,000, creating bank-counterparty concentration exposure.
- The company reported no material pending legal proceedings and no debt defaults. Management noted that actual results may differ from forward-looking statements and referred investors to risk factors in its 2011 Form 10-K.
Important facts for investors to verify
- Confirm the registrant’s identity: the supplied filing is for Tiger X Medical, Inc., not BioCardia, Inc.
- Review the adequacy and durability of liquidity against the ongoing operating cash burn and very limited royalty revenue.
- Assess the 5% Arthrex royalty arrangement, covered products, reporting and collection, and the absence of a royalty-sales outlook.
- Review the disclosed ineffective controls, particularly the lack of segregation of duties and reduced finance staffing.
- Consider the concentration of cash above FDIC insurance limits and management’s cash-adequacy assessment.