8-K/A

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
(Amendment No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 21, 2016

BIOCARDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-21419	23-2753988
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

125 Shoreway Road, Suite B, San Carlos, CA 94070

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (650) 226-0120

Tiger X Medical, Inc.

4400 Biscayne Blvd, Miami, FL 33137
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

BioCardia, Inc. (the “Company”) is filing this Amendment No. 1 on Form 8-K/A (this “Amendment”) to amend its Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 27, 2016 (the “Original Form 8-K”) in order to provide financial information of BioCardia Lifesciences, Inc., a wholly owned subsidiary of the Company (“BioCardia Lifesciences”) upon the consummation of the merger on October 24, 2016 (the “Merger”) and the accounting acquirer, for its fiscal quarter ended September 30, 2016, in accordance with the guidance set forth under Topic 12 of the Division of Corporation Finance Financial Reporting Manual so that there is no lapse in periodic reporting for the quarter ended September 30, 2016. All other disclosures in the Original Form 8-K remain the same. This Current Report on Form 8-K/A should be read in conjunction with the Original Form 8-K.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amendment, contains forward-looking statements, including, without limitation, in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Amendment that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “anticipate,” “attempt,” “develop,” “plan,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of our cell therapy systems , (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:

● our ability to obtain regulatory approval for our cell therapy systems;

● market acceptance of our cell therapy systems;

● the benefits of our cell therapy systems versus other products;

● our ability to successfully sell and market our cell therapy systems;

● competition from existing technologies or products or new technologies and products that may emerge;

● the implementation of our business model and strategic plans for our business and our cell therapy systems;

● the scope of protection we are able to establish and maintain for intellectual property rights covering our cell therapy systems;

● estimates of our future revenue, expenses, capital requirements and our need for additional financing;

● our financial performance;

● our expectation related to the use of proceeds from the Merger; and

● developments relating to our competitors and the healthcare industry.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Amendment to reflect any new information or future events or circumstances or otherwise, except as required by law.

Readers should read this Amendment in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Amendment and the Original Form 8-K, and other documents which we may file from time to time with the Securities and Exchange Commission, or the SEC.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The disclosures required by Item 2.01 of Form 8-K were provided in the Original Form 8-K and are incorporated herein by reference. Additionally, Item 2.01(f) of Form 8-K states that if the registrant was a shell company, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10 under the Securities Exchange Act of 1934, as amended. The Original Form 8-K provided the information that would be included on Form 10, and is hereby supplemented with the Management’s Discussion and Analysis of Financial Condition and Results of Operations of BioCardia Lifesciences for the fiscal quarter ended September 30, 2016, set forth herein.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this Amendment and the Original Form 8-K. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” contained in our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 27, 2016 that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report.

The following discussion highlights BioCardia Lifesciences Inc.’s (“BioCardia”) results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial position and results of operations presented herein. The following discussion and analysis are based on BioCardia’s unaudited financial statements attached to this Report as Exhibit 99.1 and the audited financial statements as of and for the year ended December 31, 2015 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Current Report on Form 8-K filed by us with the Securities and Exchange Commission on October 27, 2016, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

Basis of Presentation

The unaudited interim condensed financial statements of BioCardia for the three and nine months ended September 30, 2016 and 2015, contained herein include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such unaudited interim periods have been included in these unaudited financial statements. All such adjustments are of a normal recurring nature.

Overview

We are a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Our lead therapeutic candidate is the CardiAMP Cell Therapy System, or CardiAMP. We anticipate enrolling the first patient in our U.S. Food and Drug Administration, or FDA, accepted Phase III pivotal trial for CardiAMP in ischemic systolic heart failure in late 2016 or early 2017 and obtaining top-line data in 2019. If our Phase III pivotal trial is successful, we believe we will be the first company to reach the market with a cell-based therapy to treat heart failure. Our second therapeutic candidate is the CardiALLO Cell Therapy System, or CardiALLO. We anticipate preparation of an Investigational New Drug, or IND, application for submission to the FDA for a Phase II trial for CardiALLO for the treatment of ischemic systolic heart failure. This IND is expected to have improved Chemistry Manufacturing Controls, or CMC, in the IND relative to our previous co-sponsored investigations. We are committed to applying our expertise in the fields of autologous and allogeneic cell-based therapies to improve the lives of patients with cardiovascular conditions. Autologous cell therapies use autologous cells, which mean the patient’s own cells, while allogeneic cell therapies use allogeneic cells, which means cells from a third party donor.

To date, we have devoted substantially all of our resources to research and development efforts relating to our therapeutic candidates and biotherapeutic delivery systems, including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting our intellectual property. We have also generated modest revenues from sales of our approved products. From our inception through September 30, 2016, we have funded our operations primarily through the sales of equity and convertible debt securities totaling approximately $49.6 million and certain government and private grants totaling approximately $481,000. All convertible debt securities will convert into shares of our Common Stock in connection with the Merger.

We have incurred net losses in each year since our inception. Our net losses were approximately $3.3 million for the three month period ended September 30, 2016, and $6.7 million for the nine month period ended September 30, 2016. As of September 30, 2016, we had an accumulated deficit of approximately $56.6 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs, clinical trials, intellectual property matters, building our manufacturing and sales capabilities, and from general and administrative costs associated with our operations.

We anticipate that our expenses will increase substantially if and as we:

• commence enrollment in our Phase III pivotal trial for CardiAMP;

• advance CardiALLO, our second program in heart failure using allogeneic cells;

• further build our sales, marketing and distribution infrastructure in the United States to commercialize any therapies or products for which we obtain marketing approval;

• seek to identify, assess, acquire or develop other products, therapeutic candidates or technologies;

• seek regulatory and marketing approvals in multiple jurisdictions for our therapeutic candidates that successfully complete clinical studies;

• establish collaborations with third parties for the development and commercialization of our products and therapeutic candidates;

• seek coverage and reimbursement from third-party payors, including government and private payors for future therapeutics and products;

• make milestone or other payments under our agreements pursuant to which we have licensed or acquired rights to intellectual property and technology;

• seek to maintain, protect, and expand our intellectual property portfolio;

• seek to attract and retain skilled personnel;

• create additional infrastructure to support our operations as a commercial-stage public company and our ongoing and new product development and planned future commercialization efforts; and

• experience any delays or encounter issues with any of the above.

We expect to continue to incur significant expenses and increasing losses for at least the next several years. Accordingly, we anticipate that we will need to raise additional capital prior to the commercialization of CardiAMP and CardiALLO. Until such time that we can generate meaningful revenue from product sales, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our therapeutic candidates. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs or the commercialization of any approved therapies or products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition and results of operations.

Financial Overview

Revenue

We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue.

Cost of Goods Sold

Cost of goods sold includes the costs of raw materials and components, manufacturing personnel and facility costs and other indirect and overhead costs associated with manufacturing our enabling and delivery products.

Research and Development Expenses

Our research and development expenses consist primarily of:

• salaries and related overhead expenses, which include stock-based compensation and benefits for personnel in research and development functions;

• fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial material management and statistical compilation and analysis;

• costs related to acquiring and manufacturing clinical trial materials;

• costs related to compliance with regulatory requirements; and

• payments related to licensed products and technologies.

We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are performed.

From our inception through September 30, 2016, we have incurred approximately $25.4 million in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue to develop CardiAMP, and subject to the availability of additional funding, further advance the development of CardiALLO and any other therapeutic candidates for additional indications. We typically use our employee and infrastructure resources across multiple research and development programs, and accordingly we have not historically allocated resources specifically to our individual programs.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our therapeutic candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our therapeutic candidates.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, sales, corporate development and administrative support functions, including stock-based compensation expenses and benefits. Other significant selling, general and administrative expenses include sales commissions, rent, accounting and legal services, obtaining and maintaining patents, the cost of consultants, occupancy costs, insurance premiums and information systems costs.

We expect that our selling, general and administrative expenses will increase as we operate as a public company, conduct our Phase III pivotal trial for CardiAMP, and subject to the availability of additional funding, conduct our Phase II trial for CardiALLO and prepare for commercialization. We believe that these increases will likely include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel to support product commercialization efforts and operations as a public company and increased fees for outside consultants, attorneys and accountants. We also expect to incur increased costs to comply with corporate governance, internal controls, investor relations and disclosures, and similar requirements applicable to public companies.

Other Income (Expense)

Other income and expense consists primarily of interest charges we incur in periods when we have convertible debt outstanding, interest income we earn on our cash and cash equivalents and changes in the fair value of our warrant and convertible shareholder note derivative liabilities. We expect our interest income to increase following the completion of the Merger as we invest our cash on hand pending its use in our operations.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported expenses during the periods presented. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

We define our critical accounting policies as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. The following discussion addresses what we believe to be the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and collection from the customer is reasonably assured.

• Net Product Revenue. We recognize revenues from product sales when title and risk of loss have passed to the customer, which typically occurs upon delivery. Product sale transactions are evidenced by customer purchase orders, customer contracts, invoices, and/or the related shipping documents. Revenue is recognized net of provisions made for discounts, expected sales returns and allowances. Estimated returns and allowances are based on historical experience and other relevant factors. We accept returns for unused, unopened and resellable product in its original packaging, subject to a 20% restocking fee.

• Collaboration Agreement Revenue. Collaboration agreement revenue is income from agreements under which we provide biotherapeutic delivery systems and customer training and support on their use in clinical trials and studies. We evaluate activities under these agreements to determine if they represent a multiple element arrangement by identifying the deliverables included within the agreement. We account for these deliverables as separate units of accounting if the following two criteria are met:

^° the delivered items have value to the customer on a stand-alone basis; and

^° if there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within our control.

Factors considered in this determination include, among other things, whether any other vendors sell the items separately and if the customer could use the delivered item for its intended purpose without receipt of the remaining deliverables. A change in these assumptions could impact our reported revenue which could have a material impact to our financial statements.

If multiple deliverables included in an arrangement are separable into different units of accounting, we allocate the arrangement consideration to those units of accounting based on their relative selling prices and recognize the associated revenue when the appropriate recognition criteria are met for those deliverables. The amount of allocable arrangement consideration is limited to the amounts that are fixed and determinable.

Research and Development—Clinical Trial Accruals

As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our clinical trial accrual is dependent upon the timely and accurate reporting of expenses of our CROs and other third-party vendors.

Our objective is to reflect the appropriate clinical trial expenses in our financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of completion of clinical trials, or the services completed. During the course of a clinical trial, we adjust the rate of clinical trial expense recognition if actual results differ from the estimates. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. Although we do not expect that our estimates will be materially different from amounts actually incurred, our understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting amounts that are too high or too low for any particular period. Through September 30, 2016, there had been no material adjustments to our prior period estimates of accrued expenses for clinical trials. However, due to the nature of estimates, we cannot provide assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials.

Stock-Based Compensation

BioCardia granted stock-based compensation under its 2002 Stock Plan. The exercise price of options granted in 2016 was equivalent to the fair market value of our stock at the date of grant. The number of shares, terms, and vesting periods are determined by BioCardia’s board of directors or a committee thereof on an option-by-option basis. Options generally vest ratably over service periods of four years and expire 10 years from the date of grant. Compensation cost for employee stock-based awards is based on the grant-date fair value and will be recognized over the vesting period of the applicable award on a straight-line basis. Stock compensation expense for the three month periods ended September 30, 2016 and 2015 was approximately $87,000 and $120,000 respectively. Stock compensation expense for the nine month periods ended September 30, 2016 and 2015 was approximately $145,000 and $248,000 respectively. Unrecognized stock-based compensation for employee options granted through September 30, 2016, excluding performance stock option awards, is approximately $609,000 to be recognized over a remaining weighted average service period of 3.0 years.

In August and September 2016, the Company granted performance stock option awards to key employee and non-employee consultants. The vesting of these employee and non-employee options will commence upon the closing of the Merger and will vest equally over 48 months. The total grant-date fair value of these stock options is approximately $2.3 million for employees and $803,000 for non-employees. As of September 30, 2016, it was not considered probable that the performance condition would be met, and as such, no compensation expense has been recorded in the third quarter of 2016.

We measure and recognize stock-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. Unvested nonemployee awards are remeasured at each reporting date. We use the Black-Scholes-Merton option-pricing model, or BSM, to calculate fair value. Stock-based compensation expense recognized in the statements of operations is based on options ultimately expected to vest, taking into consideration estimated forfeitures, and is recognized in the period the services are performed. Stock-based compensation expense is revised in subsequent periods, if necessary, if actual forfeitures differ from these estimates. When estimating forfeitures, we consider historic voluntary termination behaviors as well as trends of actual option forfeitures. For options granted to nonemployees, we revalue the stock-based compensation and the resulting change in fair value is recognized in the statements of operations over the period the related services are rendered.

The BSM option-pricing model requires the input of highly subjective assumptions, including the risk-free interest rate, the expected volatility in the value of our Common Stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows:

• Risk-Free Interest Rate. The risk-free interest rate assumption is based on the zero-coupon U.S. treasury instruments appropriate for the expected term of the stock option grants.

• Volatility. As we do not have a trading history for our Common Stock following the Merger, the expected stock price volatility is estimated based on volatilities of a peer group of similar companies by taking the average historic volatility for these peers for a period equivalent to the expected term of the stock option grants. The peer group was developed based on companies in the biotechnology industry whose shares are publicly-traded.

• Expected Term. The expected term represents the period of time that options are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock options awards granted, the expected life is determined using the simplified method, which is an average of the contractual terms of the option and its ordinary vesting period.

• Expected Dividend. BioCardia never paid dividends on its common stock and have no plans to pay dividends on its Common Stock. Therefore, we use an expected dividend yield of zero.

• Fair Value of Common Stock. In the absence of a public trading market for our Common Stock, the estimated fair value is determined using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Aid.

In determining the exercise price of stock options and the fair value of BioCardia’s common stock underlying the options, BioCardia’s board of directors considered the fair values of BioCardia’s common stock derived in the third-party valuations as one of the factors it considered when setting the exercise prices for options granted. The valuations were performed in accordance with applicable elements of the AICPA Practice Aid. The AICPA Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of BioCardia’s common stock at each valuation date. In accordance with the AICPA Practice Aid, we considered the following methods:

• Option Pricing Method. Under the option pricing method, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the preferred and common stock are inferred by analyzing these options.

• Hybrid Method. The hybrid method blends the concepts of the probability-weighted expected return method with the concepts of the option pricing method.

BioCardia’s board of directors also considered a range of objective and subjective factors and assumptions in estimating the fair value of its common stock on the date of grant, including:

• progress of our research and development efforts;

• our operating results and financial condition, including our levels of available capital resources;

• rights and preferences of its common stock compared to the rights and preferences of our other outstanding equity securities;

• our stage of development and material risks related to our business;

• our commercial success in regard to our catheter sales;

• the achievement of enterprise milestones, including a favorable ruling by the FDA which allows us to enroll our first patient in a Phase III pivotal trial;

• the valuation of publicly-traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

• equity market conditions affecting comparable public companies;

• the likelihood of achieving a liquidity event for the shares of its common stock, such as an initial public offering given prevailing market and biotechnology sector conditions; and

• that the grants involved illiquid securities in a private company.

Convertible Shareholder Notes Derivative Liability

We issued convertible notes in 2015, or the 2015 Notes, that have redemption features that were determined to be a compound embedded derivative requiring bifurcation and separate accounting at estimated fair value. The estimated fair value of these derivative instruments was recognized as a debt discount and as an embedded derivative liability on the balance sheet upon issuance of the notes. The debt discount is amortized to interest expense using the effective interest method. At the end of each reporting period, we recorded changes in fair value during the period as a component of other income / (expense). We continue to adjust the liability for changes in the estimated fair value of the embedded derivatives until the redemption feature is forfeited or expires or the 2015 Notes are converted or settled. We used a Monte Carlo simulation to calculate the potential liability in each of the conversion scenarios from inception through June 30, 2016. In scenarios where the liability includes created equity shares and warrants, the Black-Scholes based option pricing method is used to calculate the amounts due to investors. On September 30, 2016, the valuation of the compound embedded derivative was determined based on the settlement value of the common stock exchanged for the notes upon the closing of the Merger.

The derivative liability will be remeasured to fair market value immediately prior to the Merger and then reclassified to stockholders’ equity upon conversion of the 2015 Notes in the Merger.

Preferred Stock Warrant Liability

We classify freestanding warrants for shares that are either puttable or redeemable as liabilities on the balance sheet at fair value. Therefore, the freestanding warrants that gave the holders the right to purchase our convertible preferred stock were liabilities that we recorded at estimated fair value. At the end of each reporting period, we recorded changes in fair value during the period as a component of other income (expense).

We continue to adjust the liability for changes in the estimated fair value of the warrants until the earlier of the exercise or expiration of the warrants to purchase shares of convertible preferred stock or the completion of a liquidation event.

We use the BSM to estimate the fair value of preferred stock warrant liabilities utilizing assumptions that include the estimated fair value of the underlying convertible preferred stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends, and the expected volatility of the price of the underlying convertible preferred stock. The contractual term of the warrants represents the period of time remaining before the warrants expire. Because our shares are not publicly traded and our shares are rarely traded privately, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate is based on the U.S. Treasury yield curve with a maturity equal to the remaining contractual term of the warrant.

Most of the warrants were voluntarily exchanged for shares of BioCardia common stock immediately prior to the Merger. The warrants will be revalued immediately prior to the Merger and then reclassified to stockholder’s equity upon consummation of the Merger.

Income Taxes

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

As of December 31, 2015, our total deferred tax assets, less our total deferred tax liabilities, were $18.9 million. Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance. The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. These ownership change limitations may limit the amount of net operating loss carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points (by value) of the outstanding stock of a company by certain stockholders. Since our formation, we have raised capital through the issuance of capital stock on several occasions, which separately or combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such ownership changes, or could result in ownership changes in the future.

We have not completed an analysis to assess whether an ownership change has occurred. If we have experienced an ownership change at any time since our formation, utilization of our net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then applying any additional adjustments that are required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets, with a corresponding reduction of the valuation allowance.

Results of Operations

The following table summarizes our results of operations for the three months ended September 30, 2016 and 2015, and the nine months ended September 30, 2016 and 2015 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue:
Net product revenue	$	100		$	206		$	406		$	660
Collaboration agreement revenue		17			4			33			38
Total revenue		117			210			439			698
Costs and expenses:
Cost of goods sold		196			319			578			739
Research and development		684			432			1,622			1,300
Selling, general and administrative		919			858			2,375			3,197
Total costs and expenses		1,799			1,609			4,575			5,236
Operating loss		(1,682	)		(1,399	)		(4,136	)		(4,538	)
Write-off of deferred financing costs		-			(1,623	)		-			(1,623	)
Interest expense		(520	)		(536	)		(1,627	)		(843	)
Other (expense) income		(1,052	)		328			(965	)		219
Net loss	$	(3,254	)	$	(3,230	)	$	(6,728	)	$	(6,785	)

Revenue.     Revenue decreased by approximately $93,000 from $210,000 for the three months ended September 30, 2015 to $117,000 for the three months ended September 30, 2016 due primarily to a reduction in sales volumes for the Morph products. Revenue decreased by approximately $259,000 from $698,000 for the nine months ended September 30, 2015 to $439,000 for the nine months ended September 30, 2016 due primarily to a reduction in sales volumes for Morph products.

Cost of Goods Sold.    Cost of goods sold decreased by approximately $123,000 from $319,000 for the three months ended September 30, 2015 to $196,000 for the three months ended September 30, 2016 due primarily to an overall reduction in sales volumes for Morph products. Cost of goods sold decreased by $161,000 from $739,000 for the nine months ended September 30, 2015 to $578,000 for the nine months ended September 30, 2016, due primarily to a reduction in sales volumes for Morph products.

Research and Development Expenses.     Research and development expenses increased by approximately $252,000 from $432,000 for the three months ended September 30, 2015 to $684,000 for the three months ended September 30, 2016 due primarily to expenses incurred in the planning and preparation for the CardiAMP Phase III pivotal trial. Research and development expenses increased by approximately $322,000 from $1.3 million for the nine months ended September 30, 2015 to $1.6 million for the nine months ended September 30, 2016 due primarily to expenses incurred in the planning and preparation for the CardiAMP Phase III pivotal trial. We expect research and development expenses to increase as we begin enrollment of the CardiAMP Phase III pivotal trial.

Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased by approximately $61,000 from $858,000 for the three months ended September 30, 2015 to $919,000 for the three months ended September 30, 2016 due primarily to legal, accounting and consulting expenses associated with the Merger, partially offset by decreases in payroll and related expenses from a reduction in workforce in August 2015. Selling, general and administrative expenses decreased by approximately $822,000 from $3.2 million for the nine months ended September 30, 2015 to $2.4 million for the nine months ended September 30, 2016 primarily due to the workforce reduction in August 2015. We expect selling, general and administrative expenses to increase due to expenses to be incurred as we build our infrastructure to support the CardiAMP Phase III pivotal trial and public company operations.

Write Off of Deferred Financing Costs.   The Company deferred costs incurred for a planned initial public offering, or the IPO, which included legal, accounting and other professional fees. The IPO was delayed and subsequently withdrawn, and as a result, the Company recorded a write-off of deferred offering costs of $1.6 million during the three and nine months ended September 30, 2015.

Interest Expense.   Interest expense for the three months ended September 30, 2016 and 2015 and for the nine months ended September 30, 2016 and 2015 consisted primarily of interest expense related to convertible notes.

Other Income (Expense). Other income for the three months ended September 30, 2016 and 2015 and for the nine months ended September 30, 2016 and 2015 consisted primarily of the changes in value of the convertible preferred stock warrant liabilities and the change in value of the convertible shareholder note derivative liability.

Liquidity and Capital Resources

We have incurred net losses each year since our inception and as of September 30, 2016, we had an accumulated deficit of approximately $56.6 million. We anticipate that we will continue to incur net losses for at least the next several years. These conditions raise substantial doubt about our ability to continue as a going concern without additional financing. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our 2015 financial statements with respect to this uncertainty. We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitment in the normal course of business. Our interim condensed financial statements for the three and nine months ended September 30, 2016 and 2015 do not include any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may obtain through one or more public or private equity offerings, debt financings, government or other third-party funding, strategic alliances and licensing or collaboration arrangements.

Since our inception through September 30, 2016, we have funded our operations principally through the sales of equity and convertible debt securities totaling approximately $49.6 million. As of September 30, 2016, we had cash and cash equivalents of approximately $552,000. Subsequent to September 30, 2016, BioCardia issued $4.4 million aggregate principal amount of convertible promissory notes, all of which converted into shares of BioCardia’s common stock immediately prior to the Merger.

The following table shows a summary of our cash flows for the periods indicated (in thousands):

	Nine Months Ended September 30,
	2016			2015
Net cash provided by (used in):
Operating activities	$	(3,007	)	$	(5,659	)
Investing activities		-			(125	)
Financing activities		2			7,496
Net (decrease) increase in cash and cash equivalents	$	(3,005	)	$	1,712

Cash Flows from Operating Activities.    Net cash used in operating activities was $3.0 million and $5.7 million for the nine months ended September 30, 2016 and 2015, respectively. The decrease in overall spending for operating activities of approximately $2.7 million relates primarily to the spending for the IPO in 2015 coupled with reductions in operating costs attributable to the reduction in workforce that occurred in August 2015.

Cash Flows from Investing Activities.    We had no significant investing activities during the nine months ended September 30, 2016 and 2015.

Cash Flows from Financing Activities.    We had no significant financing activities during the nine month period ended September 30, 2016. Net cash provided by financing activities of $7.5 million during the nine months ended September 30, 2015 was primarily the result of proceeds from the issuance of convertible notes.

Future Funding Requirements

To date, we have generated modest revenue from sales of our approved products. We do not know when, or if, we will generate any revenue from our development stage biotherapeutic programs. We do not expect to generate any revenue from sales of our CardiAMP or CardiALLO therapeutic candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. Upon the closing of the Merger, we expect to incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval for any of our therapeutic candidates and companion diagnostic, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations.

Based upon our current operating plan, we believe that the cash on hand resulting from the Merger, together with our existing cash and cash equivalents, will enable us to fund our operations through late 2018. We intend to use the net proceeds we receive in connection with the Merger for the FDA accepted Phase III pivotal trial of CardiAMP, working capital, research and development of additional future products or therapies and general corporate purposes. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.

Our future capital requirements will depend on many factors, including:

• the progress, costs, results and timing of our CardiAMP and CardiALLO clinical trials;

• FDA acceptance of our CardiAMP and CardiALLO therapies for heart failure and for other potential indications;

• the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;

• the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;

• the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;

• the ability of our product candidates to progress through clinical development successfully;

• our need to expand our research and development activities;

• the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;

• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

• our need and ability to hire additional management and scientific, medical and sales personnel;

• the effect of competing technological and market developments; and

• our need to implement additional internal systems and infrastructure, including financial and reporting systems.

Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our Common Stock holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our Common Stock holders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the Securities and Exchange Commission.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. This ASU will be effective for the Company in fiscal year 2016. Early adoption is permitted. The Company is currently assessing the future impact of this ASU on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides comprehensive guidance for revenue recognition. ASU 2014-09 affects any entity which either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The core principle of the guidance provides that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. Companies can adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach.

In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers, which deferred the effective date for implementation of the standard. Nonpublic companies must apply the standard for annual reporting periods beginning after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption for nonpublic entities is permitted as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. Public entities are to apply the new standard for annual and interim reporting periods beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the future impact of this ASU on its financial statements.

In July 2015, the FASB issued Accounting Standard Update (“ASU”) No. 2015-11, “Inventory: Simplifying the Measurement of Inventory”, that requires inventory not measured using either the last in, first out (LIFO) or the retail inventory method to be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation. The new standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and will be applied prospectively. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently assessing the future impact of this ASU on its financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification in the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is currently assessing the future impact of this ASU on its financial statements.

Item 2.02 Results of Operations and Financial Condition.

Reference is made to the disclosure set forth under Items 2.01 and 9.01 of this Current Report on Form 8-K concerning the financial information of BioCardia Lifesciences, which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

Attached as Exhibit 99.1 and incorporated herein by reference are the unaudited condensed financial statements of BioCardia Lifesciences as of, and for the three and nine month periods ended September 30, 2016 and 2015, including the footnotes thereto.

The audited financial statements of BioCardia Lifesciences as of December 31, 2015 and 2014, and for each of the years then ended, including the footnotes thereto, were filed as exhibit 99.1 to the Original Form 8-K. The unaudited condensed financial statements of BioCardia Lifesciences as of, and for the six months ended June 30, 2016 and 2015, including the footnotes thereto, were filed as exhibit 99.2 to the Original Form 8-K.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial statements as of, and for the fiscal years ended, December 31, 2015, and for the six months ended, June 30, 2016, were filed as exhibit 99.3 to the Original Form 8-K..

(d) Exhibits

Exhibit Number	Description
99.1	Unaudited condensed financial statements of BioCardia Lifesciences as of, and for the three and nine month periods ended September 30, 2016 and 2015, including the footnotes thereto.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BIOCARDIA, INC.
	By:	/s/ Peter Altman
		Name: Peter Altman
		Title: President and Chief Executive Officer
Dated: November 14, 2016

EXHIBIT INDEX

Exhibit Number	Description
99.1	Unaudited condensed financial statements of BioCardia Lifesciences as of, and for the three and nine month periods ended September 30, 2016 and 2015, including the footnotes thereto.

EX-99.1

Exhibit 99.1

BioCardia Lifesciences, Inc.

Index

	Page
Unaudited Condensed Financial Statements
Unaudited Condensed Balance Sheets as of September 30, 2016 and December 31, 2015	2
Unaudited Condensed Statements of Operations for the three and nine month periods ended September 30, 2016 and 2015	3
Unaudited Condensed Statements of Cash Flows for the nine month periods ended September 30, 2016 and 2015	4
Notes to Financial Statements	5

1

BIOCARDIA LIFESCIENCES, INC.

Condensed Balance Sheets

(In thousands, except share and per share amounts)

(unaudited)

	September 30, 2016			December 31, 2015
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	552			3,557
Accounts receivable, net of allowance for doubtful accounts of $1 and $4 for the periods ended, September 30, 2016 and December 31, 2015, respectively		62			107
Inventory		715			759
Prepaid expenses and other current assets		135			246
Total current assets		1,464			4,669
Property and equipment, net		120			150
Other assets		43			43
Total assets	$	1,627			4,862
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	1,047			542
Accrued liabilities		1,312			692
Deferred rent		8			30
Deferred revenue		76			39
Convertible preferred stock warrant liability		25			275
Maturity date preferred stock warrant liability		—			10
Convertible shareholder notes derivative liability		2,268			1,044
Convertible shareholder notes, net of debt discount of $286 and $1,528 for the periods ended September 30, 2016 and December 31, 2015, respectively		6,914			5,672
Total current liabilities		11,650			8,304
Stockholders’ deficit:
Convertible preferred stock, $0.001 par value, 43,502,124 shares authorized, 110,500,514 shares issued and outstanding at September 30, 2016 and December 31, 2015		46,030			46,030
Common stock, $0.001 par value, 60,000,000 shares authorized, 18,960,066 shares and 18,947,536 shares issued and outstanding at September 30, 2016 and December 31, 2015		19			19
Additional paid-in capital		488			341
Accumulated deficit		(56,560	)		(49,832	)
Total stockholders’ deficit		(10,023	)		(3,442	)
Total liabilities and stockholders’ deficit	$	1,627			4,862

See accompanying notes to condensed financial statements.

2

BIOCARDIA LIFESCIENCES, INC.

Condensed Statements of Operations

(In thousands)

(unaudited)

	Three Months ended September 30,						Nine Months ended September 30,
	2016			2015			2016			2015
Revenue:
Net product revenue	$	100			206		$	406			660
Collaboration agreement revenue		17			4			33			38
Total revenue		117			210			439			698
Costs and expenses:
Cost of goods sold		196			319			578			739
Research and development		684			432			1,622			1,300
Selling, general and administrative		919			858			2,375			3,197
Total costs and expenses		1,799			1,609			4,575			5,236
Operating loss		(1,682	)		(1,399	)		(4,136	)		(4,538	)
Other income (expense):
Interest expense		(520	)		(536	)		(1,627	)		(843	)
Write-off of deferred offering costs		—			(1,623	)		—			(1,623	)
Change in fair value of convertible preferred stock warrant liability		30			65			250			(125	)
Change in fair value of maturity date preferred stock warrant liability		3			56			10			53
Change in fair value of convertible shareholder notes derivative liability		(1,085	)		207			(1,224	)		293
Other income (expense)		—			—			(1	)		(2	)
Total other expense, net		(1,572	)		(1,831	)		(2,592	)		(2,247	)
Net loss	$	(3,254	)		(3,230	)	$	(6,728	)		(6,785	)
Net loss per share, basic and diluted	$	(0.17	)		(0.17	)	$	(0.36	)		(0.36	)
Weighted-average shares used in computing net loss per share, basic and diluted		18,958,221			18,649,928			18,951,164			18,646,830

See accompanying notes to condensed financial statements.

3

BIOCARDIA LIFESCIENCES, INC.

Condensed Statements of Cash Flows

(In thousands)

(unaudited)

	Nine Months ended September 30,
	2016			2015
Operating activities:
Net loss	$	(6,728	)		(6,785	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		30			35
Change in fair value of convertible preferred stock warrant liability		(250	)		125
Change in fair value of maturity date preferred stock warrant liability		(10	)		(53	)
Change in fair value of convertible shareholder notes derivative liability		1,224			(293	)
Stock based compensation		145			248
Non-cash interest expense on convertible shareholder notes		1,627			843
Changes in operating assets and liabilities:
Accounts receivable		45			76
Inventory		44			(247	)
Prepaid expenses and other current assets		111			(90	)
Deferred financing costs		—			48
Accounts payable		505			212
Accrued liabilities excluding accrued interest on convertible note		235			238
Deferred revenue		37			—
Deferred rent		(22	)		(16	)
Net cash used in operating activities		(3,007	)		(5,659	)
Investing activities:
Purchase of property and equipment		—			(125	)
Net cash used in investing activities		—			(125	)
Financing activities:
Proceeds from the exercise of convertible preferred stock warrants		—			2
Proceeds from issuance of convertible notes and warrants		—			7,435
Proceeds from the exercise common stock options		2			59
Net cash provided by financing activities		2			7,496
Net (decrease) increase in cash and cash equivalents		(3,005	)		1,712
Cash and cash equivalents at beginning of period		3,557			3,184
Cash and cash equivalents at end of period	$	552			4,896
Supplemental disclosure for noncash investing and financing activities:
Conversion of convertible shareholder notes and related interest payable	$	—			7,781

See accompanying notes to condensed financial statements.

4

(1) Summary of Business and Significant Accounting Policies

(a) Description of Business

BioCardia was incorporated in Delaware in March 2002. The Company is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases with large unmet medical needs. Its lead therapeutic candidate is the CardiAMP cell therapy system and its second therapeutic candidate for heart failure is the CardiALLO cell therapy system. To date the Company has devoted substantially all of its resources to research and development efforts relating to its therapeutic candidates and biotherapeutic delivery systems including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting its intellectual property.

The Company has two enabling device product lines: the Helix biotherapeutic delivery system (“Helix”) product line offers a catheter system for the local delivery of cells, gene and protein therapeutics to the heart; and the Morph vascular access (“Morph”) product line offers advanced catheter products for interventional medicine. The Helix biotherapeutic delivery system is available for commercial sale in Europe and is approved for investigational use in the United States. The Morph line consists of the Morph Universal Deflectable Guide Catheter and the Morph AccessPro steerable introducer. The Morph Universal Deflector Guide Catheter and the Morph AccessPro steerable introducer lines currently generate commercial revenues. The Morph Universal Deflectable Guide Catheter is sold commercially in the United States. The Morph AccessPro steerable introducer line is sold commercially in the Unites States and in Europe.

(b) Unaudited Interim Financial Statements

The accompanying balance sheets, statements of operations and cash flows as of September 30, 2016 and 2015 and for the three and nine months ended September 30, 2016 and 2015 are unaudited. The unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and on a basis consistent with the annual financial statements and, in the opinion of management, reflect all adjustments which include only normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2016 and 2015, results of operations for the three and nine months ended September 30, 2016 and 2015 and cash flows for the nine months ended September 30, 2016 and 2015. The financial data and other information disclosed in these notes to the condensed financial statements related to the three- and nine-month periods are unaudited. The results for the three and nine months ended September 30, 3016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any other interim period or for any other future year. These condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s financial statements for the year ended December 31, 2015, contained in Exhibit 99.1 attached to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 27, 2016. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

(c) Going Concern and Liquidity

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred significant net losses and negative cash flows from operations since its inception and had an accumulated deficit of $56.6 million as of September 30, 2016 that raise substantial doubt about its ability to continue as a going concern. Management expects operating losses and negative cash flows to continue through at least 2018.

As discussed in Note 15, on August 22, 2016, the Company signed an Agreement and Plan of Merger with Tiger X Medical, Inc. (“Tiger X”). Upon closing of the Merger on October 24, 2016, the combined company had approximately $24.0 million in cash. Management believes cash as of September 30, 2016, when combined with the cash raised in connection with the Merger, is sufficient to fund the Company through at least the next twelve months. The Company also plans to raise other additional capital, potentially including debt and equity arrangements, to finance the Company. If adequate funds are not available, the Company may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations. While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect. The accompanying condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

5

(d) Reverse Merger

On October 24, 2016, the Company completed the Merger with Tiger X (see Note 15). Pursuant to the terms of the Merger, each outstanding share of the Company’s common stock was converted into the right to receive 19.3678009 shares of Tiger X’s common stock (the “Exchange Ratio”). All per share amounts and shares outstanding for all periods give retroactive effect to reflect the reverse merger.

(e) Cash Equivalents

The Company classifies all highly liquid investments with original maturities of three months or less at the date of purchase as cash equivalents. The Company maintains its cash and cash equivalents with reputable financial institutions.

(f) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company considers the creditworthiness of its customers, but does not require collateral in advance of a sale. The Company evaluates collectability and maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio when necessary. The estimate is based on the Company’s historical write-off experience, customer creditworthiness, facts and circumstances specific to outstanding balances and payment terms. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $1,000 and $4,000 as of September 30, 2016 and December 31, 2015, respectively.

(g) Inventory

Inventory is stated at the lower of cost or market. Cost is determined using the average-cost method. The Company analyzes its inventory levels quarterly and writes down inventory that has become obsolete or has a cost basis in excess of its expected net realizable value or inventory quantities in excess of expected requirements. Excess requirements are determined based on comparison of existing inventories to forecasted sales, with consideration given to inventory shelf life. Expired inventory is disposed of and the related costs are recognized in cost of goods sold.

6

(h) Property and Equipment, Net

Property and equipment, net are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, as described in the table below. Maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the accompanying statements of operations:

Asset	Estimated useful lives (in years)
Computer equipment and software		3
Laboratory and manufacturing equipment		3
Furniture and fixtures		3
Leasehold improvements	5 years or lease term, if shorter

(i) Long-Lived Assets

The Company evaluates long-lived assets such as property and equipment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying amount. When undiscounted future cash flows are not expected to be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Where available, quoted market prices are used to determine fair value. When quoted market prices are not available, various valuation techniques, including the discounted value of estimated future cash flows, are utilized. There have been no impairments of the Company’s long-lived assets in any of the years presented.

(j) Derivatives

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in equity instruments and warrants granted, and measurement of their fair value. In determining the appropriate fair value, the Company uses Monte Carlo simulation to calculate potential payouts in each of the three conversion scenarios. In cases where the payout include newly created equity shares and warrants, the Black-Scholes based option pricing method is used to calculate the amounts due to investors. Derivative instruments are subsequently adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value is recorded in results of operations as a change in the fair value of derivatives. Once a derivative liability ceases to exist any remaining fair value is reclassified to additional paid-in capital if redeemed or through earnings if forfeited or expired.

(k) Deferred Rent

The Company’s lease for its facility provides for fixed increases in minimum annual rental payments. The total amount of rental payments due over the lease term is charged to rent expense ratably over the life of the lease. Deferred rent consists of the difference between cash payments and the recognition of rent expense on a straight-line basis.

(l) Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable, and collection from the customer is reasonably assured.

Net product revenue – The Company currently has a portfolio of enabling and delivery products. The Company recognizes revenue from product sales when title and risk of loss have passed to the customer, which typically occurs upon delivery. Product sale transactions are evidenced by customer purchase orders, customer contracts, invoices and/or related shipping documents.

7

Revenue is recognized net of provisions made for discounts, expected sales returns and allowances. Estimated returns and allowances are based on historical experience and other relevant factors. The Company accepts returns for unused, unopened and resellable product in its original packaging, subject to a restocking fee. The sales returns reserve was approximately $1,000 and $3,000 as of September 30, 2016 and December 31, 2015, respectively.

Amounts received from customers in advance of revenue recognition are recorded as deferred revenue on the balance sheet.

Collaboration agreement revenue – Collaboration agreement revenue is income from agreements under partnering programs with corporate and academic institutions, wherein the Company provides biotherapeutic delivery systems and customer training and support for their use in clinical trials and studies. These programs provide additional clinical data, intellectual property rights and opportunities to participate in the development of combination products for the treatment of cardiac disease. The Company evaluates activities under these agreements to determine if they represent a multiple element arrangement by identifying the deliverables included within the agreements. The Company accounts for these deliverables as separate units of accounting if the following two criteria are met:

● The delivered items have value to the customer on a stand-alone basis

● If there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within the Company’s control

Factors considered in this determination include, among other things, whether any other vendors sell the items separately and if the customer could use the delivered item for its intended purpose without receipt of the remaining deliverables.

If an arrangement includes multiple deliverables that are separable into different units of accounting, the Company allocates the arrangement consideration to those units of accounting based on their relative selling prices and recognizes the associated revenue when the appropriate recognition criteria are met for those deliverables. The amount of allocable arrangement consideration is limited to the amounts that are fixed and determinable.

(m) Shipping Costs

Costs incurred for the shipping of products to customers totaled approximately $1,000 and $2,000 for the three months ended September 30, 2016 and 2015, respectively, and $6,000 and $8,000 for the nine months ended September 30, 2016 and 2015, respectively, and are included in cost of goods sold in the accompanying statements of operations.

(n) Research and Development

The Company’s research and development costs are expensed as incurred. Research and development expense includes the costs of basic research activities as well as other research, engineering, and technical effort required to develop new products or services or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses. The Company’s research and development costs consist primarily of:

● Salaries, benefits and other personnel-related expenses, including stock based compensation

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● Fees paid for services provided by clinical research organizations, research institutions, consultants and other outside service providers

● Costs to acquire and manufacture materials used in research and development activities and clinical trials

● Laboratory consumables and supplies

● Facility-related expenses allocated to research and development activities

● Fees to collaborators to license technology

● Depreciation expense for equipment used for research and development and clinical purposes.

(o) Stock Based Compensation

The Company measures and recognizes stock-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. Nonemployee awards are remeasured at each reporting date. The Company uses the Black-Scholes-Merton (“BSM”) option pricing model to calculate fair value. Stock-based compensation expense recognized in the statements of operations is based on options ultimately expected to vest, taking into consideration estimated forfeitures, and is recognized in the period the services are performed. Stock-based compensation expense is revised in subsequent periods, if necessary, if actual forfeitures differ from these estimates. When estimating forfeitures, the Company considers historic voluntary termination behaviors as well as trends of actual option forfeitures. For options granted to nonemployees, the Company revalues the unearned portion of the stock-based compensation and the resulting change in fair value is recognized in the statements of operations over the period the related services are rendered.

The BSM option pricing model requires the input of highly subjective assumptions, including the risk-free interest rate, the expected volatility in the value of the Company’s common stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows:

Risk-free Interest Rate

The risk free interest rate assumption is based on the zero-coupon U.S. Treasury instruments appropriate for the expected term of the stock option grants.

Expected Volatility

As the Company does not have a trading history for its common stock, the expected stock price volatility is estimated based on volatilities of a peer group of similar companies by taking the average historic volatility for these peers for a period equivalent to the expected term of the stock option grants. The peer group was developed based on companies in the biotechnology and medical device industries whose shares are publicly-traded.

Expected Term

The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock options awards granted, the expected life is determined using the simplified method, which is an average of the contractual terms of the option and its ordinary vesting period.

9

Common Stock Valuation

Due to the absence of a public market for the Company’s common stock, it is necessary to estimate the fair value of the common stock underlying the stock-based awards when performing fair value calculations using the BSM option pricing model. The fair value of the common stock underlying the stock-based awards was assessed on each grant date by management and the Company’s board of directors. All options to purchase shares of the Company’s common stock have been granted with an exercise price per share no less than the fair value per share of the common stock underlying those options on the grant date.

In the absence of a public trading market for the Company’s common stock, the estimated fair value was determined using methodologies, approaches and assumptions consistent with American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Aid. These estimates require considerable judgment and the consideration of numerous objective and subjective factors to determine fair value. The Company engages third-party consultants with the requisite expertise to assist in the valuations. These estimates will not be necessary to determine fair value of new awards once the underlying shares are publicly traded.

(p) Income Taxes

The Company accounts for income taxes based on the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets, liabilities, operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, forecasts of future taxable income, and ongoing tax planning. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.

The Company recognizes and measures benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions annually. Evaluations are based upon a number of factors, including the technical merits of the tax position, changes in facts or circumstances, changes in tax law, interactions with tax authorities during the course of audits, and effective settlement of audit issues. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense in the statements of operations and accrued interest and penalties within accrued liabilities in the balance sheets. No such interest and penalties have been recorded to date.

(q) Fair Value of Financial Instruments

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity.

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The Company’s financial assets and liabilities consist principally of cash and cash equivalents, accounts receivable, accounts payable, warrants for convertible preferred stock, and convertible notes. The fair value of the Company’s cash equivalents is determined based on quoted prices in active markets for identical assets. The recorded values of the Company’s accounts receivable and accounts payable approximate their current fair values due to the relatively short-term nature of these accounts. The fair value of the Company’s convertible preferred stock warrants is measured using the BSM option pricing model. Convertible notes are recorded at amortized cost. Based on borrowing rates currently available for loans with similar terms, the carrying value of convertible notes approximates fair value.

(r) Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Common stock equivalents are comprised of convertible preferred stock, notes convertible into preferred stock, warrants to purchase convertible preferred stock and options outstanding under our stock option plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position.

(s) Recently Issued Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. This ASU will be effective for the Company in fiscal year 2016. Early adoption is permitted. The adoption of this ASU is not expected to have any material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides comprehensive guidance for revenue recognition. ASU 2014-09 affects any entity which either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The core principle of the guidance provides that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. Companies can adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach.

In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers, which deferred the effective date for implementation of the standard. Nonpublic companies must apply the standard for annual reporting periods beginning after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption for nonpublic entities is permitted as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. Public entities are to apply the new standard for annual and interim reporting periods beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the future impact of this ASU on its financial statements.

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In July 2015, the FASB issued Accounting Standard Update (“ASU”) No. 2015-11, “Inventory: Simplifying the Measurement of Inventory”, that requires inventory not measured using either the last in, first out (LIFO) or the retail inventory method to be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation. The new standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and will be applied prospectively. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which supersedes existing guidance on accounting for leases in “Leases (Topic 840)” and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently assessing the future impact of this ASU on its financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification in the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is currently assessing the future impact of this ASU on its financial statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures.

(2) Fair Value Measurements

The fair value of financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company follows a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 – quoted prices in active markets for identical assets and liabilities

Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The following table sets forth the fair value of our financial liabilities measured on a recurring basis as of September 30, 2016 and indicates the fair value hierarchy utilized to determine such fair value.

	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	552	$	—	$	—	$	552
Liabilities:
Convertible preferred stock warrant liability	$	—	$	—	$	25	$	25
Convertible shareholder notes derivative liability	$	—	$	—	$	2,268	$	2,268

The following table sets forth the fair value of our financial liabilities measured on a recurring basis as of December 31, 2015 and indicates the fair value hierarchy utilized to determine such fair value.

	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	3,557	$	—	$	—	$	3,557
Liabilities:
Convertible preferred stock warrant liability	$	—	$	—	$	275	$	275
Maturity date preferred stock warrant liability	$	—	$	—	$	10	$	10
Convertible shareholder notes derivative liability	$	—	$	—	$	1,044	$	1,044

As discussed more fully in Notes 7 and 8, the Company issued warrants to purchase preferred stock in connection with the note agreements to various shareholders. The warrant liabilities were recorded at the fair value on the date of issuance and were remeasured each subsequent balance sheet date and as of the warrant exercise date, with fair value changes recognized as income (decrease in fair value) or expense (increase in fair value) in other income (expense) in the statement of operations. The fair value of the warrants at September 30, 2016 was based on the value of common shares exchanged for the warrant upon the merger discussed more fully in Note 15. The fair value of the warrants at December 31, 2015 included in current liabilities in the balance sheets and was determined using the BSM valuation model.

In May 2015, the Company entered into note agreements with various stockholders of the Company and other lenders for a total of $7.2 million (the “2015 Notes”). As discussed more fully in Note 8, the 2015 Notes include embedded derivative features that were determined to be a compound embedded derivative requiring bifurcation and separate accounting at estimated fair value. The Company estimated the fair value of the compound embedded derivative utilizing a Monte Carlo simulation model from inception through June 30, 2016. The inputs used to determine the estimated fair value of the compound embedded derivative instrument include the probability of an underlying event triggering the redemption event and its timing prior to the maturity date of the 2015 Notes. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjective and involve significant management judgment. On September 30, 2016, the valuation of the compound embedded derivative was determined based on the settlement value of the common stock exchanged for the notes upon the closing of the merger on October 24, 2016, discussed more fully in Note 15.

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The following tables set forth the fair value of our financial liabilities that the Company remeasured on a recurring basis (in thousands):

	Convertible Preferred Stock Warrant Liability			Maturity Date Preferred Stock Warrant Liability			Convertible Shareholder Note Derivative Liability
Fair value December 31, 2015	$	275		$	10		$	1,044
(Decrease) increase in fair value		(250	)		(10	)		1,224
Fair value September 30, 2016	$	25		$	—		$	2,268

(3) Inventories

Inventories are stated at the lower of cost or market using the average cost method. Inventories consist of the following (in thousands):

	September 30, 2016		December 31, 2015
Raw materials	$	189		194
Work in process		108		36
Finished goods		418		529
	$	715		759

Write downs for excess or expired inventory are based on management’s estimates of forecasted usage of inventories and are included in cost of goods sold. A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional write downs for excess or expired inventory in the future. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage and expired inventories totaled approximately $57,000 and $151,000 for the three months ended September 30, 2016 and 2015, respectively, and $94,000 and $172,000 for the nine months ended September 30, 2016 and 2015, respectively.

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30, 2016		December 31, 2015
Prepaid expenses	$	135		146
Refund receivable of deferred financing costs		—		100
	$	135		246

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(5) Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

	September 30, 2016			December 31, 2015
Computer equipment and software	$	143			143
Laboratory and manufacturing equipment		366			366
Furniture and fixtures		48			48
Leasehold improvements		325			325
Property and equipment, gross		882			882
Less accumulated depreciation		(762	)		(732	)
Property and equipment, net	$	120			150

Depreciation expense totaled approximately $9,000 and $13,000 for the three months ended September 30, 2016 and 2015, respectively, and $30,000 and $35,000 for the nine months ended September 30, 2016 and 2015, respectively.

(6) Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	September 30, 2016		December 31, 2015
Accrued expenses	$	486		229
Accrued interest		759		374
Customer deposits		67		89
	$	1,312		692

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(7) Convertible Preferred Stock Warrant Liability

The Company has historically issued warrants to purchase shares of the Company’s preferred stock in connection with certain preferred stock offerings and note financings.

The outstanding Series D and Series F convertible preferred stock warrants are as follows (in thousands):

	Exercise		Value				Shares				Estimated Fair Value
	price		at grant		Issue	Expiration	September 30,		December 31,		September 30,		December 31,
Share class	per share		date		date	date	2016		2015		2016		2015
Series D	$	0.37	$	0.30	January 2006	January 2016		—		325,861	$	-	$	2
Series D	$	0.37	$	0.30	July 2007	July 2017		203,691		203,691		6		20
Series D	$	0.37	$	0.30	August 2007	August 2017		203,691		203,691		6		20
Series D	$	0.37	$	0.30	September 2007	September 2017		203,691		203,691		6		20
Series F	$	0.64	$	0.27	April 2013	April 2016		—		888,176		-		94
Series F	$	0.64	$	0.28	April 2013	October 2017		482,699		482,699		7		115
Series F	$	0.64	$	0.28	April 2013	November 2017		11,620		11,620		-		3
Series F	$	0.64	$	0.27	May 2013	May 2016		—		13,169		-		1
								1,105,392		2,332,598	$	25	$	275

The fair value of the warrants at September 30, 2016 in current liabilities in the balance sheets was based on the value of common shares exchanged for the warrant upon the merger discussed more fully in Note 15. The fair value of the warrants at December 31, 2015 included in current liabilities in the balance sheets and was determined using the BSM valuation model using the following assumptions:

	December 31, 2015
Risk-free interest rate	0.14	–	0.86%
Volatility	98.5	–	116.2%
Dividend yield	None
Contractual term (in years)	0.1	–	1.8

The contractual term of the warrants represents the period of time remaining before the warrant expires. Since the Company’s shares are not publicly traded and its shares are rarely traded privately, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk free rate is based on the U.S. Treasury yield curve with a maturity equal to the remaining contractual term of the warrant.

(8) Convertible Notes

In May 2015, the Company entered into note agreements with various stockholders of the Company and other lenders for a total of $7.2 million. The notes accrue 8% annual simple interest, mature 18 months from the issue date and are callable after the maturity date by written demand of a majority of the holders of the outstanding note principle. If the Company closes an effective registration statement filed under the Securities Act of 1933, as amended, covering the sale of the Company’s common stock (an IPO) prior to maturity, the outstanding principle and accrued interest automatically convert into shares of common stock at 80% of the price of the shares of common stock purchased in the IPO. If at any time prior to the maturity date, the Company closes a private placement of the Company’s preferred stock for aggregate sales proceeds of at least $5.0 million excluding note conversions, at the note holder’s option (“Optional Conversion Right”), the outstanding principle and interest may be converted into shares of the preferred stock at a conversion price equal to 80% of the price of the preferred shares plus preferred stock warrant coverage equal to 8% with an exercise price equal to the purchase price of the preferred stock shares. If the notes are held to maturity, subject to the Company authorizing sufficient shares of a new class of preferred stock (“Maturity Date Preferred Stock”), the holder will have the option to convert the outstanding principle and interest to this new class of preferred stock at an exercise price of $0.07 per share, plus 8% warrant coverage. The Maturity Date Preferred Stock will have a senior liquidation preference to the Company’s Series F preferred stock and otherwise identical rights, obligations and terms of the Company’s Series F preferred stock. The Optional Conversion Rights will terminate upon the closing of a private placement financing with an aggregate sales price of at least $15 million during the term of the notes. Notes that are not converted prior to maturity will remain outstanding until the earlier of an IPO or until called by a majority of the holders of the outstanding notes.

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In August 2016, the Company and the holders of convertible notes amended the notes, pursuant to which the outstanding principal amount and all accrued interest through August 31, 2016 will automatically convert into shares of common stock at 80% of the convertible price of the convertible notes issued upon closing of the merger, as described in Note 15. In addition, the amendment eliminated the payment of interest for the period subsequent to August 31, 2016, and through the date of the closing of the merger.

The 2015 Notes have redemption features that were determined to be a compound embedded derivative requiring bifurcation and separate accounting at estimated fair value. The changes in the estimated value are reflected in the change in fair value of convertible shareholder notes derivative liability in the statements of operations. The Company estimated the fair value of the compound embedded derivative utilizing a Monte Carlo simulation model. The inputs used to determine the estimated fair value of the compound embedded derivative instrument include the probability of an underlying event triggering the redemption event and its timing prior to the maturity date of the 2015 Notes. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjective and involve significant management judgment. On September 30, 2016, the valuation of the compound embedded derivative was determined based on the settlement value of the common stock exchanged for the notes upon the closing of the merger on October 24, 2016.

The Company’s accrued interest associated with the 2015 Notes amounted to $759,000 and $374,000 as of September 30, 2016 and December 31, 2015, respectively. The Company recognized interest expense, including amortization of the debt discount of approximately $520,000 and $536,000 for the three months ended September 30, 2016 and 2015, respectively, and $1.6 million and $843,000 for the nine months ended September 30, 2016 and 2015, respectively.

(9) Convertible Preferred Stock

At September 30, 2016 and December 31, 2015, convertible preferred stock consisted of the following (in thousands, except share data):

	Shares				Liquidation amount		Carrying Value
	Authorized		Outstanding
Series A		7,703,785		20,923,195	$	3,082	$	3,082
Series B		2,567,390		6,972,887		2,567		2,567
Series C		3,256,601		8,606,455		1,806		1,806
Series D		11,773,243		31,004,350		11,415		11,425
Series E		2,212,960		6,010,107		3,319		3,319
Series F		15,988,145		36,983,520		23,830		23,831
Total convertible preferred stock		43,502,124		110,500,514	$	46,019	$	46,030

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(10) Share-Based Compensation

The Company adopted and the shareholders approved the 2002 Employee, Director and Consultant Stock Option Plan in 2002. 32,177,804 options were granted during the nine months ended September 30, 2016. No options were granted during the nine months ended September 30, 2015.

The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation. Stock compensation attributable to manufacturing operations was not significant and was expensed directly to cost of goods sold in the condensed statements of operations. Share-based compensation expense for the three and nine months ended September 30, 2016 and 2015 was recorded as follows (in thousands):

	Three Months ended September 30,
	2016		2015
Cost of goods sold	$	-	$	1
Research and development		30		8
Selling, general and administrative		57		111
Share-based compensation expense	$	87	$	120

	Nine Months ended September 30,
	2016		2015
Cost of goods sold	$	1	$	3
Research and development		30		26
Selling, general and administrative		114		219
Share-based compensation expense	$	145	$	248

The fair value of each option grant is estimated on the date of the grant using the BSM option pricing model with the weighted average assumptions in the table below.

	2016
Risk-free interest rate	1.28	-	1.58%
Volatility		88%
Dividend yield	None
Expected term (in years)		6.25

Unrecognized stock-based compensation for employee options granted through September 30, 2016, excluding the performance stock option awards discussed below, is approximately $609,000 to be recognized over a remaining weighted average service period of 3.0 years.

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A summary of activity is as follows:

				Options outstanding
									Weighted
							Weighted		average
	Shares						average		remaining		Aggregate
	available			Number of			exercise		contractual		intrinsic
	for grant			shares			price		term (years)		value
											(In thousands)
Balance, December 31, 2015		4,683,925			13,788,475			0.15		6.6	$	140
Additional shares authorized		38,921,377			—			—
Stock options granted - 2002 Plan		(4,082,961	)		4,082,961			0.15
Stock options granted - 2016 Plan		(23,067,117	)		23,067,117			0.15
Stock options granted - Non Plan		(5,027,726	)		5,027,726			0.15
Stock options exercised		—			(12,530	)		0.17
Stock options cancelled		1,350,390			(1,350,390	)		0.15
Balance, September 30, 2016		12,777,888			44,603,359			0.15		8.7	$	138

At September 30, 2016, there were 42,980,203 options vested and expected to vest with a weighted-average exercise price of $0.14, a weighted-average remaining contractual term of 8.7 years and an aggregate intrinsic value of $138,000.

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Performance Stock Option Awards

In August 2016, the Company granted 28,094,843 performance based options to employees and non-employee consultants, respectively, with a weighted average exercise price of $0.15 per share. The vesting of these employee and non-employee options will commence upon the closing of the Merger and will vest equally over 48 months. The grant-date fair value of these stock options is $0.15 per option.

For awards with performance conditions, no expense will be recognized until the occurrence of the event is deemed probable. As of September 30, 2016, it was not deemed probable that the performance condition related to the Merger would be met, and as such, no compensation expense related to these awards has been recognized in the period ended September 30, 2016.

(11) Net Loss and Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except share and per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Numerator:
Net loss	$	(3,254	)	$	(3,230	)	$	(6,728	)	$	(6,785	)
Denominator
Weighted average shares used to compute net loss per share, basic and diluted		18,958,221			18,649,928			18,951,164			18,646,830
Net loss per share, basic and diluted	$	(0.17	)	$	(0.17	)	$	(0.36	)	$	(0.36	)

The following weighted-average outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	September 30,
	2016		2015
Convertible preferred stock		110,500,514		110,432,630
Notes convertible into shares		67,443,988		102,770,876
Stock options to purchase common stock		44,603,359		15,133,100
Convertible preferred stock warrants		1,105,392		2,434,436
		223,653,253		230,771,042

(12) Income Taxes

During the three and nine months ended September 30, 2016 and 2015, there was no income tax expense or benefit for federal or state income taxes in the accompanying condensed statement of operations due to the Company’s net loss and a full valuation allowance on the resulting deferred tax asset. Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. The Company does not believe that these assets are realizable on a more-likely-than-not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance. The Company did not have any deferred tax liabilities as of September 30, 2016.

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(13) Contingencies

The Company may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management does not believe that any current legal or administrative proceedings are likely to have a material effect on our business, financial position, results of operations, or cash flows.

(14) Grant Funding

In June 2016, the Company entered into a grant agreement with Maryland Technology Development Corporation (“TEDCO”). TEDCO was created by the Maryland State Legislature in 1998 to facilitate the transfer and commercialization of technology from Maryland’s research universities and federal labs into the marketplace. TEDCO administers the Maryland Stem Cell Research Fund to promote State funded stem cell research and cures through financial assistance to public and private entities operating within the State. Under the agreement, TEDCO has agreed to provide the Company an amount not to exceed $750,000 to be used solely to finance the costs to conduct the research project entitled “Heart Failure Trial” over a period of three years.

No funds have been received under the grant and no qualifying expenses have been submitted against the grant as of September 30, 2016.

(15) Subsequent Events

(a) Convertible Notes

In October 2016, the Company issued convertible notes with an aggregate principle amount of approximately $4.4 million, which accrued 8% annual simple interest. The cash raised in connection with the issuance of the convertible notes was held in an escrow account and was released to the Company upon closing of the Merger. The principle and accrued and unpaid interest on the notes converted automatically into 29,649,248 shares of common stock upon completion of the Merger.

(b) Merger

On October 24, 2016, the Company completed the Merger with Tiger X. For accounting purposes, BioCardia Lifesciences, Inc. is considered to be acquiring Tiger X. The Merger will be accounted for as an asset acquisition rather than a business combination because as of the acquisition date, Tiger X does not meet the definition of a business as defined by U.S. GAAP. The net assets acquired in connection with the transaction will be recorded at their estimated acquisition date fair values as of October 24, 2016, the date the Merger with Tiger X was completed.

Pursuant to the Merger, each of the shares of common stock issued and outstanding prior to the merger, including shares of common stock underlying outstanding preferred stock, convertible notes (which converted into common stock immediately prior to the Merger), and stock options where converted into the right to receive 19.3678009 shares of Tiger X common stock, subject to adjustment post-closing as based on Closing Net Cash as described in the Merger Agreement. The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse merger.

The combined entity changed its name to BioCardia, Inc. following closing, will trade on the OTC Markets, and will focus solely on the business of BioCardia Lifesciences, Inc. The combined entity had cash of approximately $24 million at closing, which will be used to support a Phase III heart failure trial for the commercialization and development of other product candidates and for general corporate purposes.

(c) Grant Funding

Pursuant to the grant agreement with TEDCO, as discussed in Note 14, the Company received approximately $313,000 in October 2016.

(d) Lease Extension

In November 2016, the Company entered into an amendment to lease with respect to its office and laboratory space. The extended term of this lease is 60 months and expected to commence on January 1, 2017 and expire on December 31, 2021. The aggregate minimum lease commitment over the 60 month term of the lease is approximately $3.1 million.

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