ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the Section entitled “Risk Factors” in Item1A, and other documents we file with the Securities and Exchange Commission. Historical results are not necessarily indicative of future results.

Special Note Regarding Smaller Reporting Company Status

As a result of having been a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended), we are allowed and have elected to omit certain information, including three years of year-to-year comparisons and tabular disclosure of contractual obligations, from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate and necessary.

Overview

We are a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular and pulmonary diseases with large unmet medical needs. 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 and pulmonary conditions.

Our CardiAMP cell therapy platform provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of two clinical indications: heart failure that develops after a heart attack (BCDA-01) and chronic myocardial ischemia (BCDA-02). Our allogeneic mesenchymal stem cell therapy platform, derived from donor cells and intended to be provided “off the shelf,” is also being advanced for two indications, heart failure (BCDA-03) and for the pulmonary indication of acute respiratory distress that has developed from COVID-19 (BCDA-04).

Our HelixTM Biotherapeutic Delivery System platform or “Helix” delivers therapeutics into the heart muscle with a helical needle from within the heart. It enables local delivery of cell and gene-based therapies, including our own cell therapies to treat cardiac indications. The Helix system is CE marked in Europe and under investigational use in the United States. We selectively partner with firms developing other cell, gene and protein therapies utilizing the Helix and other biotherapeutic delivery systems that we have developed.

Our AVANCETM product offering for transseptal cardiac procedures has begun early commercialization activities in the United States through commission-only 1099 sales representatives.

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. We have funded our operations primarily through the sales of equity and convertible debt securities, and certain government and private grants.

CardiAMP Cell Therapy System for Heart Failure and Chronic Myocardial Ischemia

The Company’s lead platform, CardiAMP cell therapy, is an autologous cell therapy being advanced for two indications in pivotal clinical trials: heart failure and chronic myocardial ischemia.

The CardiAMP Heart Failure Trial is a Phase III, multi-center, randomized, double-blinded, sham-controlled study of up to 260 patients at 40 centers nationwide, which includes a 10-patient roll-in cohort. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for heart failure which develops after a patient has a heart attack (BCDA-01). The trial is active at 24 clinical sites and 91 patients have been enrolled to date. The independent DSMB completed a prespecified data review on December 17, 2020, including all data for the 86 patients enrolled and 60 randomized patients that had reached their one-year follow-up at that date. The DSMB performed a risk-benefit review, indicated no safety concerns, and recommended in writing that the study continue as planned.

Enrollment remains our primary focus and challenge. To complete the heart failure trial enrollment requires our active centers to randomize an additional seven patients each on average. Our clinical centers appear to be coming out of COVID-19 with renewed energy and interest in the trial. Enrollment is expected to be enhanced in the months ahead by reductions in COVID-19 cases over time, the recent successful CardiAMP Heart Failure DSMB review, the recent CardiAMP Heart Failure positive results published in the peer reviewed International Journal of Cardiology, the addition of new high-enrolling clinical sites to the trial, obtaining FDA authorization to subsequently provide therapy for patients in the control arm of the trial that otherwise would not receive it, enhanced outreach to sites and increased clinical marketing activities. Starting the parallel CardiAMP Chronic Myocardial Ischemia trial is also anticipated to enhance enrollment in the CardiAMP Heart Failure trail.

The CardiAMP Chronic Myocardial Ischemia Trial is a Phase III, multi-center, randomized, double-blinded, controlled study of up to 343 patients at up to 40 clinical sites. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for the indication of chronic myocardial ischemia (BCDA-02). This therapeutic approach uses many of the same novel aspects as the CardiAMP Heart Failure Trial and is expected to leverage our experience and investment in the heart failure trial. The trial has been activated and we are working towards initial patient enrollment in the first quarter of 2021.

We are continuing to assess the evolving impact of COVID-19 on the CardiAMP trials, including recent spikes and new emerging variants. Some of our clinical centers stopped performing elective procedures during the initial outbreak and advised that they would not be performing elective procedures until restrictions on elective procedures were lifted. Many centers also delayed patient follow-up visits out of concern for patient exposure to COVID-19. In alignment with recent FDA guidance on clinical trials, “FDA Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 Pandemic Guidance for Industry, Investigators, and Institutional Review Boards,” the Company has taken steps to address unavoidable protocol deviations due to COVID-19 illness and/or COVID-19 control measures.

The Department of Health & Human Services Centers for Medicare & Medicaid Services, or CMS, has designated that both CardiAMP pivotal trials qualify for Medicare national coverage. Covered costs include patient screening, the CardiAMP Cell Therapy System and procedure, and clinical follow-up at one and two years after the procedure. Private insurance plans covering 50 million insured Americans follow this CMS reimbursement policy and are similarly anticipated to cover these costs. This coverage significantly reduces our cost of conducting these pivotal trials.

Allogeneic Cell Therapy for Cardiac and Pulmonary Disease

Our second therapeutic platform is our investigational culture expanded bone marrow derived allogeneic, Neurokinin-1 Receptor Positive mesenchymal stem cells (NK1R+ MSC). This “off the shelf” mesenchymal cell therapy is being advanced for cardiac and pulmonary disease.

We are actively working to secure FDA acceptance of an Investigational New Drug (IND) application for a Phase I/II trial using the CardiALLO Cell Therapy System to deliver these allogeneic cells for the treatment of ischemic systolic heart failure (BCDA-03). We are working to receive FDA acceptance of the IND in 2021.

The Company also intends to submit an IND for the use of its allogeneic cell therapy for Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19 (BCDA-04). Based on clinical reports on COVID-19, respiratory failure complicated by ARDS is a leading cause of death for COVID-19 patients. ARDS is a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs. BCDA-04 is on a similar timeline with BCDA-03 and we are working towards FDA acceptance of the IND in 2021.

Recent Developments

Partner Agreement for Catheter Biotherapeutic Delivery Product Candidates

On February 17, 2021, the Company entered into an agreement with a leading international pharmaceutical company to assess the HelixTM Biotherapeutic Delivery System in preclinical testing. Under the terms of the agreement, the Company received a $500,000 up-front payment, a portion of which is creditable for BioCardia biotherapeutic delivery systems, support and training. The agreement includes a one-year option to negotiate a non-exclusive worldwide license for therapeutic delivery of certain cell types for cardiac indications.

Purchase Agreement with Lincoln Park

On March 29, 2021, we and Lincoln Park Capital Fund, LLC, (Lincoln Park) entered into a purchase agreement (the LPC Purchase Agreement) pursuant to which Lincoln Park purchased $2 million of shares of our common stock (373,832 shares) at a purchase price of $5.35 per share. Under the LPC Purchase Agreement, we have the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $20 million, including the initial $2 million purchase, subject to certain significant limitations of the amount and timing of any such sales due to the terms and conditions set forth in the LPC Purchase Agreement.

In consideration for entering into the LPC Purchase Agreement, we agreed to issue an aggregate of 75,000 shares of common stock as a commitment fee. We also agreed to issue to Lincoln Park up to an aggregate of 50,000 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued to Lincoln Park under the Purchase Agreement. On March 29, 2021, we issued 80,000 shares of common stock as commitment shares (which includes 5,000 commitment shares issued on a pro rata basis in respect of the initial purchase by Lincoln Park of $2 million of shares). We will not receive any cash proceeds from the issuance of any of the foregoing commitment shares.

The net proceeds under the LPC Purchase Agreement to us will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park. Actual sales of shares of common stock to Lincoln Park under the LPC Purchase Agreement (beyond the initial purchase of $2 million of shares) and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determination by us as to other available and appropriate sources of funding for us. We expect to use the proceeds from this agreement for general corporate purposes and working capital.

Litigation Settlement

On March 12, 2021, we agreed to settle, pending final documentation and dismissal, the legal proceedings and any and all claims, counterclaims, actions and/or proceedings relating to or arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No. 3:19-05645-VC, U.S.D.C., N. D. Cal. We expect the settlement will not result in any material benefit or liability to the Company. See Note 17 of our notes to the consolidated financial statements for additional information.

Financial Overview

Revenue

We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue. Net product revenues include commercial sales of our Morph vascular access system in the US and EU and collaboration agreement revenues include revenue from partnering agreements with corporate and academic institutions. Under these partnering agreements, we provide our Helix biotherapeutic delivery system and customer training and support for use in preclinical and clinical studies.

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 commercial enabling and delivery products, which generate net product revenue.

Research and Development Expenses

Our research and development expenses consist primarily of:

• 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 of 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 received.

We plan to increase our research and development expenses for the foreseeable future as we continue the pivotal CardiAMP Heart Failure Trial, advance the pivotal CardiAMP Chronic Myocardial Ischemia Trial, further develop our autologous and allogeneic cell therapy candidates. 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.

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 share-based compensation expenses and benefits. Other 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.

Other Income (Expense)

Other income and expense consist primarily of interest income we earn on our cash, cash equivalents and investments, changes in fair value of redemptive features embedded in convertible notes, loss on extinguishment of convertible notes, gain on extinguishment of Paycheck Protection Program note payable, and interest charges we incurred in periods during 2020 and 2019 when we had debt outstanding.

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. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various judgements 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 clear 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.

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 December 31, 2020, 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.

Share-Based Compensation

We measure and recognize share-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. We use the Black-Scholes-Merton option-pricing model, or BSM, to calculate the fair value of stock options, which includes subjective assumptions such as the risk-free interest rate, the expected volatility in the value of the Company’s common stock, and the expected term of the option. Restricted stock units (RSUs) are measured based on the fair market values of the underlying stock on the dates of grant. Share-based compensation expense recognized in the statements of operations is based on awards at the time of grant and is reduced for actual forfeitures at the time that the forfeitures occur. Compensation cost for employee share-based awards will be recognized over the vesting period of the applicable award on a straight-line basis.

Results of Operations

The table set forth below summarizes our results of operations for the years ended December 31, 2020 and 2019 (in thousands). The results of operations from 2019 compared to 2018 and related discussion can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 9, 2020, and such results and related discussion are incorporated herein by reference.

Years ended December 31,

Revenue:

Net product revenue $ 13 $ 182

Collaboration agreement revenue 132 528

Costs and expenses:

Cost of goods sold 4 358

Selling, general and administrative 5,861 6,003

Other income (expense):

Interest income 21 87

Gain on extinguishment of Paycheck Protection Program note payable 509 —

Interest expense (3 ) (112 )

Loss on extinguishment of convertible notes — (521 )

Other expense (2 ) (2 )

Total other income (expense) 525 (496 )

Revenue. Revenue for the year ended December 31, 2020 totaled $145,000 compared to $710,000 for the year ended December 31, 2019. The $565,000 decrease was primarily due to lower revenue generating partnership activities in 2020 coupled with reduced volumes of commercial catheter sales as we transition our commercial offerings to a limited launch of the Morph AVANCETM and Morph DNA product families. We expect collaboration agreement revenues to increase in 2021 depending on progress in these existing collaborative programs and the initiation of new partnership relationships. Net product revenue is expected to be modest in 2021 and will be subject to customer demand, the availability of production resources for our new Morph product family members, and the timing of FDA clearance for market release of different models and sizes during the year.

Cost of Goods Sold. Cost of goods sold for the year ended December 31, 2020 totaled $4,000 compared to $358,000 for the year ended December 31, 2019, decreasing by $354,000 primarily due to the decrease in net product revenue. We expect cost of goods sold to increase modestly in 2021 relative to sales, depending on the timing and demand for our new Morph product family members and the associate production costs which will vary depending on volume.

Research and Development Expenses. Research and development expenses were approximately $9.8 million for the year ended December 31, 2020 compared to approximately $8.6 million for the year ended December 31, 2019, representing an increase of $1.2 million or 14%. Research and development in both periods focused on advancing our pivotal CardiAMP Heart Failure Trial and Chronic Myocardial Ischemia trials and development of our Neurokinin-1 Receptor Positive allogeneic cell therapies for cardiovascular and respiratory diseases. The $1.2 million increase in 2020 compared to 2019 was primarily due to cost of additional personnel and supporting systems to enhance enrollment and monitoring in our pivotal trials, accelerate development activities, and strengthen supporting functions. We expect research and development expenses to increase moderately as we continue enrolling in our pivotal trials, advance regulatory approvals for our therapies, and improve our cell processing, manufacturing capabilities and delivery platforms.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $5.9 million during the year end December 31, 2020 compared to approximately $6.0 million for the year ended December 31, 2019. The $142,000 decrease in 2020 compared to 2019, was primarily due to additional stock-based compensation expense related to the modification of certain stock option awards in 2019 that did not recur in 2020, partially offset by higher corporate expenses, including business insurance premiums and additional franchise taxes due related to prior financings. We expect selling, general and administrative expenses to decrease modestly in 2021 relative to 2020.

Other Income (Expense). In 2020, Other income (expense) consisted primarily of interest expense and the gain on extinguishment associated with the Paycheck Protection Program loan obtained on May 1, 2020 and forgiven on November 7, 2020. In 2019,Other income (expense) consisted primarily of amounts recognized in relation to the accounting for the convertible notes, including a gain on change in fair value of the embedded redemption feature of $52,000, interest expense associated with the accretion of the debt discount of $104,000, and a loss upon extinguishment of $521,000. Interest income of $21,000 and $87,000 was earned on cash and cash equivalents for the years ended December 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

We have incurred net losses each year since our inception and as of December 31, 2020, we had an accumulated deficit of approximately $116.1 million. We anticipate that we will continue to incur net losses for at least the next several years.

We have funded our operations principally through the sales of equity and convertible debt securities as well as the cash acquired through the Merger. As of December 31, 2020, we had cash and cash equivalents of approximately $21.4 million.

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

Years ended December 31,

Net cash provided by (used in):

Investing activities (32 ) (146 )

Net increase in cash and cash equivalents $ 15,822 $ 227

Cash Flows from Operating Activities. Cash used in operating activities for the year ended December 31, 2020 totaled approximately $12.4 million, which is the sum of (i) our net loss of $15.0 million, adjusted for non-cash income and expenses totaling $3.0 million (share-based compensation, gain on extinguishment of the Paycheck Protection Program note payable, reduction in the carrying amount of right-of-use assets and depreciation), and (ii) changes in operating assets and liabilities of approximately $367,000. Cash used in operating activities for the year ended December 31, 2019 totaled approximately $9.4 million, which is the sum of (i) our net loss of $14.7 million, adjusted for non-cash income and expenses totaling $3.9 million (share-based compensation, loss on extinguishment of convertible notes, reduction in the carrying amount of right-of-use assets and depreciation), and (ii) changes in operating assets and liabilities of approximately $1.4 million.

The increase in cash used for operating activities of $2.9 million in 2020 compared to 2019 related primarily to increased spending to advance our allogeneic pivotal trials and therapeutic development programs coupled with decreases in advance payments from a customer and legal fees paid that have not yet been reimbursed by a related party under the Litigation Funding Agreement discussed in the notes to the financial statements. We expect net cash used in operating activities to remain relatively consistent in 2021.

Cash Flows from Investing Activities. Net cash used in investing activities of $32,000 and $146,000 during the years ended December 31, 2020, and 2019, respectively consists of purchases of property and equipment, primarily lab equipment and related infrastructure.

Cash Flows from Financing Activities. Net cash provided by financing activities during the year ended December 31, 2020 consisted of proceeds from sales of common stock totaling approximately $27.9 million (net of issuance costs) and proceeds from the Paycheck Protection note payable totaling $506,000, partially offset by tax withholding-related payments on the settlement of restricted unit awards. Net cash provided by financing activities during the year ended December 31, 2019 totaled approximately $9.8 million and consisted of proceeds from the sale of common stock and related warrants and proceeds from convertible loans payable.

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, CardiALLO or Neurokinin-1 Receptor Positive allogeneic 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. 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.

As discussed in the notes to the financial statements, we raised approximately $17.6 million in December 2020 from the sale of common stock under registered direct offerings, and approximately $10.3 million in May 2020 from a public offering of common stock, net of fees, discounts and offering expenses. In April 2019, we raised approximately $8.8 million from a public offering of common stock and warrants, net of underwriting discounts, commissions and offering expenses. We use our sources of capital primarily for clinical development, pursuing regulatory approval and commercialization of our product candidates, including advancing our partnering programs with corporate and academic institutions.

In March 2021, we entered into the LPC Purchase Agreement with Lincoln Park. Pursuant to the terms of the LPC Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of our common stock (subject to certain limitations) from time to time during the term of the LPC Purchase Agreement. Pursuant to the terms of the LPC Purchase Agreement, at the time we signed the LPC Purchase Agreement, we sold 373,832 shares of our common stock at a price of $5.35 per share pursuant to the LPC Purchase Agreement for gross proceeds of $2 million (and issued 80,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock, which consisted of 75,000 shares for Lincoln Park’s initial commitment and 5,000 shares issued on a pro rata basis in respect of Lincoln Park’s initial purchase of 373,832 shares). We may sell up to an additional $18 million of shares of our common stock from time to time at various prices pursuant to the terms of the LPC Purchase Agreement. See Note 19 of our notes to the consolidated financial statements for additional information.

Based upon our current operating plan, we believe that the cash and cash equivalents of $21.4 million as of December 31, 2020 are sufficient to fund our operations for at least the next 12 months from the date of issuance of these financial statements. 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:

• our need to expand our research and development activities;

• the general and administrative expenses related to being a public company;

• the effect of competing technological and market developments; and

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 stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. 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 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.

Recent Accounting Pronouncements

See Note 2 of our notes to the consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.

ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2020, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates or credit conditions.

We believe that the interest rate risk related to our accounts receivable is not significant. We manage the risk associated with these accounts through periodic reviews of the carrying value for non-collectability and establishment of appropriate allowances.

We operate primarily in the United States and are not exposed to foreign exchange risk with respect to recognized assets and liabilities. We do not enter into hedging transactions and do not purchase derivative instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Reports of Independent Registered Public Accounting Firms 62

Consolidated Balance Sheets 64

Consolidated Statements of Operations 65

Consolidated Statements of Stockholders’ Equity 66

Consolidated Statements of Cash Flows 67

Notes to Consolidated Financial Statements 68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

BioCardia, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of BioCardia, Inc. and Subsidiary (the “Company”) as of December 31, 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Share-based compensation

As discussed in Note 11 to the consolidated financial statements, on January 29, 2020, the Company repriced certain previously granted and still outstanding vested and unvested stock option awards.

Auditing management’s recording of compensation under the modification involved significant judgment given the requirements of the applicable accounting literature.

To evaluate the appropriateness and accuracy of the recording of compensation by management, we examined the closing price on the date of repricing and the closing price of the Company’s common stock for the preceding period, as determined by the Company’s Board of Directors and approved by shareholders. We also reviewed the underlying accounting codifications for this accounting treatment applied by management. In addition, we evaluated the Company’s disclosure in

relation to this matter included in Note 11 to the financial statements.

Accrued research and development expenses – clinical costs

The Company recorded research and development expenses of $9.8 million for the year ended December 31, 2020. As described in Note 2, research and development costs are expensed as incurred. Research and development costs include fees paid to contract research organizations that conduct certain research and development activities on the Company’s behalf and contract manufacturing organizations in connection with the production of materials for clinical trials.

Auditing the Company’s research and development expenses for contract research organizations and contract manufacturing organizations and related accruals was challenging due to the complex nature of evaluating the completeness and accuracy of the expenses and accruals. Research and development expenses are recognized as the services are being performed by the vendors, which requires management to accurately monitor the activity at the vendors to determine the extent of unbilled services performed during the reporting period.

We obtained an understanding and evaluated the design over the Company's process used to determine the completeness and accuracy of the research and development expenses and related accruals for contract research organizations and contract manufacturing organizations, including management’s controls to accurately monitor the activity at the vendors.

To test the completeness and accuracy of the contract research organization and contract manufacturing organization expenses and related accruals, our audit procedures included, among others, testing a sample of research and development expenses recorded during the period and evaluating the timing, amount and project coding of the expense recognition, and testing a sample of cash disbursements after period end to assess the completeness of the expense recognition.

/s/ PKF San Diego, LLP

PKF San Diego, LLP

(formerly PKF, LLP)

We have served as the Company’s auditor since 2020.

San Diego, California

March 29, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

BioCardia, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of BioCardia, Inc. and itssubsidiary (the Company) as of December 31, 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

We served as the Company’s auditor from 2012 to 2020

San Francisco, California

April 8, 2020

BIOCARDIA, INC.

Consolidated Balance Sheets

(In thousands, except share and per share data)

December 31,

Assets

Current assets:

Accounts receivable, net of allowance for doubtful accounts of $16 and $2 at

Inventory — 4

Prepaid expenses and other current assets 401 642

Other receivable due from related party 618 —

Property and equipment, net 145 181

Operating lease right-of-use asset, net 567 1,065

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued expenses and other current liabilities 2,205 2,561

Deferred revenue 683 —

Operating lease liability - current 614 528

Operating lease liability - noncurrent — 614

Deferred revenue — 691

Commitments and contingencies (Note 15)

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 23,424 $ 7,678

See accompanying notes to consolidated financial statements.

BIOCARDIA, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

Years ended December 31,

Revenue:

Net product revenue $ 13 $ 182

Collaboration agreement revenue 132 528

Costs and expenses:

Cost of goods sold 4 358

Selling, general and administrative 5,861 6,003

Other income (expense):

Interest income 21 87

Gain on extinguishment of Paycheck Protection Program note payable 509 —

Interest expense (3 ) (112 )

Loss on extinguishment of convertible notes — (521 )

Other expense (2 ) (2 )

Total other income (expense) 525 (496 )

Net loss per share, basic and diluted $ (1.48 ) $ (2.61 )

See accompanying notes to consolidated financial statements.

BIOCARDIA, INC.

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2020 and 2019

(In thousands, except share data)

Common stock Additional Accumulated

Shares Cost paid-in capital deficit Total

Reverse stock split fractional share true up (494 ) — — — —

Restricted stock units vested and issued 27,426 — — — —

Issuance of restricted stock units in lieu of 2018 cash bonus — — 165 — 165

Share-based compensation — — 2,722 — 2,722

Restricted stock units vested and issued 26,172 — — — —

Exercise of common stock warrants 470 — — — —

Share-based compensation — — 2,952 — 2,952

See accompanying notes to consolidated financial statements.

BIOCARDIA, INC.

Consolidated Statements of Cash Flows

(in thousands)

Years ended December 31,

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Reduction in the carrying amount of right-of-use assets 498 440

Non-cash interest expense on convertible stockholder notes 3 112

Loss on extinguishment of convertible notes — 521

Gain on extinguishment of Paycheck Protection Program note payable (509 ) —

Changes in operating assets and liabilities:

Accounts receivable (85 ) 127

Prepaid expenses and other current assets 241 (198 )

Other receivable due from related party (618 ) —

Accrued liabilities excluding accrued interest on convertible note 797 922

Deferred revenue (8 ) 691

Operating lease liability - current 86 88

Operating lease liability - noncurrent (614 ) (528 )

Net cash used in operating activities (12,357 ) (9,445 )

Investing activities:

Purchase of property and equipment (32 ) (146 )

Net cash used in investing activities (32 ) (146 )

Financing activities:

Proceeds from sale of common stock and warrants — 10,452

Issuance costs from sales of common stock and warrants — (1,259 )

Proceeds from sale of common stock June 19, 2020 11,500 —

Proceeds from sale of common stock Dec 16, 2020 8,500 —

Proceeds from sale of common stock Dec 18, 2020 10,500 —

Issuance costs from sales of common stock (2,635 ) —

Proceeds from Paycheck Protection Program note payable 506 —

Tax withholding payments on settlement of restricted stock unit awards (160 ) —

Proceeds from convertible notes payable — 625

Net cash provided by financing activities 28,211 9,818

Net change in cash and cash equivalents 15,822 227

Cash and cash equivalents at beginning of year 5,585 5,358

Cash and cash equivalents at end of year $ 21,407 $ 5,585

Supplemental disclosure for noncash investing and financing activities:

Restricted stock units issued to settle management bonus obligations $ 391 $ -

Restricted stock units issued to settle board compensation obligations $ 613 $ -

Conversion of interest payable to stock and warrants $ — $ 633

Issuance of restricted stock units in lieu of 2018 cash bonus $ — $ 165

Right-of-use asset obtained in exchange for lease obligation $ — $ 1,505

Cashless exercise of warrant $ — $ —

See accompanying notes to consolidated financial statements.

(1) Summary of Business

(a) Description of Business

BioCardia, Inc. (BioCardia or the Company), is a clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular and respiratory diseases with significant unmet medical needs. The Company’s lead therapeutic candidate is the CardiAMP® Cell Therapy System, which provides an autologous bone marrow derived cell therapy using a patient’s own cells for treatment in two clinical indications: heart failure that develops after a heart attack and chronic myocardial ischemia. The Company’s second therapeutic platform is the investigational culture expanded bone marrow derived allogeneic “off the shelf” Neurokinin-1 Receptor Positive mesenchymal stem cells for the treatment of cardiac and pulmonary disease. To date, the Company has devoted substantially all 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.

BioCardia also has three enabling device product lines: (1) the CardiAMP cell processing system; (2) the Helix biotherapeutic delivery system, or Helix; and (3) the Morph vascular access product line, or Morph. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

(2) Significant Accounting Policies

(a) Basis of Presentation and Consolidation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All material intercompany accounts and transactions have been eliminated during the consolidation process.

(b) Liquidity

The Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit of $116.1 million as of December 31, 2020. Management expects operating losses and negative cash flows to continue through at least the next several years.

Cash and cash equivalents totaled $21.4 million on December 31, 2021, which management believes is sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following the filing of this Form 10-K.

The preparation of the financial statements in accordance with U.S. GAAP requires Company management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, right-of-use assets and related liabilities, allowances for doubtful accounts and sales returns; inventory valuation, derivative instruments, clinical accruals, share-based compensation and the assumptions used for revenue recognition. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ materially from those estimates.

(d) Cash Equivalents

The Company classifies all highly liquid investments with an original maturity date of 90 days or less at the date of purchase as cash equivalents. The Company maintains its cash and cash equivalents with reputable financial institutions.

(e) Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains its cash at reputable U.S. financial institutions, which at times, exceed federally insured limits of $250,000 per customer. On December 31, 2020, the Company’s cash was held by one financial institution and the amount on deposit was in excess of FDIC insurance limits. The Company has not recognized any losses from credit risks on such accounts since inception. The Company believes it is not exposed to significant credit risk on cash and cash equivalents.

(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 $16,000 and $2,000 as of December 31, 2020 and 2019, respectively.

(g) Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined using the average-cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. 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.

(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 consolidated 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) Right-of-Use Assets

Operating lease right-of-use asset and liabilities - The Company will determine if an arrangement is a lease at the inception of the arrangement. All leases are assessed for classification as an operating lease or finance lease. The Company will recognize a lease liability and a right-of-use (ROU) asset for all leases, including operating leases, with a term greater than 12 months. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Variable lease payments are expensed as incurred and are not included the computation of the lease liability. The lease liability discount rate is generally the Company’s incremental borrowing rate unless the lessor’s rate implicit in the lease is readily determinable, in which case the lessor’s implicit rate is used.

The Company's ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor, if any. The Company reduces a ROU asset, and the periodic reduction is the difference between the straight-line total lease cost for the period (including reduction of initial direct costs) and the periodic accretion of the lease liability using the effective interest method.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise any such options. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term.

The Company’s lease contracts often include lease and non-lease components. The Company has elected the practical expedient offered by the standard to not separate lease from non-lease components and accounts for them as a single lease component.

The Company has elected not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

(j) Long-lived Assets

Impairment assessment of long-lived assets - The carrying value of long-lived assets, including property and equipment and operating lease right-of-use assets, is reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future undiscounted cash flows, expected to result from the use of the asset and its eventual disposition, are less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. Through December 31, 2020, there have been no such impairment losses.

(k) Clinical Trial Accruals

As part of the process of preparing its consolidated financial statements, the Company is required to estimate its expenses resulting from its 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 negotiation and may result in payment flows that do not match the periods over which materials or services are provided by the vendor under the contracts. The Company’s objective is to reflect the clinical trial expenses in its consolidated financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. The Company makes estimates of its accrued expenses as of each balance sheet date in its consolidated financial statements based on the facts and circumstances known at that time. Although, the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services relative to the actual status and timing of services performed may vary and may result in reported amounts that differ from the actual amounts incurred.

(l) Derivatives

The Company accounts for its derivative instruments as either assets or liabilities on the consolidated balance sheets and measures them at fair value. Derivatives are adjusted to fair value through other (expense) income, net, in the consolidated statements of operations. Derivatives settled in cash or with another financial instrument are reflected in the consolidated statements of cash flows in the same section as the related items.

(m) Revenue Recognition

Net product revenue – BioCardia currently has a portfolio of enabling and delivery products. Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Product sale transactions are evidenced by customer purchase orders, customer contracts, invoices and/or related shipping documents.

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.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.

The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. This evaluation is subjective and requires the Company to make judgments about the promised goods and services and whether those goods and services are separable from other aspects of the contract. Further, determining the stand-alone selling price for performance obligations requires significant judgment, and when an observable price of a promised good or service is not readily available, the Company considers relevant assumptions to estimate the stand-alone selling price, including, as applicable, market conditions, development timelines, probabilities of technical and regulatory success, reimbursement rates for personnel costs, forecasted revenues, potential limitations to the selling price of the product and discount rates.

The Company applies judgment in determining whether a combined performance obligation is satisfied at a point in time or over time, and, if over time, concluding upon the appropriate method of measuring progress to be applied for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, as estimates related to the measure of progress change, related revenue recognition is adjusted accordingly. Changes in the Company’s estimated measure of progress are accounted for prospectively as a change in accounting estimate. The Company recognizes collaboration revenue by measuring the progress toward complete satisfaction of the performance obligation using an input measure. The Company will re-evaluate the estimate of expected costs to satisfy the performance obligation each reporting period and make adjustments for any significant changes.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months, it will be classified in current liabilities. The Company receives payments from its customers as established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. The Company does not assess whether a contract with a customer has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. On December 31, 2020, deferred revenue totaled $683,000, consisting of future service revenues of approximately $183,000 and future license fee revenues of $500,000, to be recognized at a point in time before July 2021.

Multiple contracts with the same customer - When two or more contracts are entered into with the same customer at or near the same time, the Company evaluates the contracts to determine whether the contracts should be accounted for as a single arrangement. Contracts are combined and accounted for as a single arrangement if one or more of the following criteria are met: (i) the contracts are negotiated as a package with a single commercial objective; (ii) the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or (iii) the goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance obligation.

Contract costs - The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered. The Company has elected a practical expedient wherein it recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that it otherwise would have recognized is one year or less. To date, the Company has not incurred any material incremental costs of obtaining a contract with a customer.

Contract modifications - Contract modifications, defined as changes in the scope or price (or both) of a contract that are approved by the parties to the contract, such as a contract amendment, exist when the parties to a contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. Depending on facts and circumstances, the Company accounts for a contract modification as one of the following: (i) a separate contract; (ii) a termination of the existing contract and a creation of a new contract; or (iii) a combination of the preceding treatments. A contract modification is accounted for as a separate contract if the scope of the contract increases because of the addition of promised goods or services that are distinct and the price of the contract increases by an amount of consideration that reflects the Company’s stand-alone selling prices of the additional promised goods or services. When a contract modification is not considered a separate contract and the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification, the Company accounts for the contract modification as a termination of the existing contract and a creation of a new contract. When a contract modification is not considered a separate contract and the remaining goods or services are not distinct, the Company accounts for the contract modification as an add-on to the existing contract and as an adjustment to revenue on a cumulative catch-up basis.

(n) Shipping Costs

Costs incurred for the shipping of products to customers totaled approximately $0 and $6,000 for the years ended December 31, 2020 and 2019, respectively, and are included in cost of goods sold in the accompanying consolidated statements of operations.

(o) Product Warranties

The Company provides a standard warranty of serviceability on all its products for the duration of the product’s shelf life, which is two years for Helix and Morph products currently. Estimated future warranty costs, if any, are accrued and charged to costs of goods sold in the period that the related revenue is recognized. Historical data and trends of product reliability and costs of repairing or replacing defective products are considered. Due to the low historical warranty claims experience, a general warranty accrual has not been required or recorded as of December 31, 2020 and 2019.

(p) Research and Development

The Company’s research and development costs are expensed as incurred. Research and development expense include 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 and support costs for collaborative partnering programs wherein the Company provides biotherapeutic delivery systems and customer training and support for their use in clinical trials and studies. The Company’s research and development costs consist primarily of:

• Laboratory consumables and supplies;

• Facility-related expenses allocated to research and development activities;

• Fees to collaborators to license technology; and

(q) 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 the commercial enabling and delivery products, which generate net product revenue.

(r) Share-Based Compensation

The Company measures and recognizes share-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. The Company uses the Black-Scholes-Merton (BSM) option pricing model to calculate fair value of its stock option grants. The compensation cost for restricted stock awards is based on the closing price of the Company’s common stock on the date of grant. Share-based compensation expense recognized in the consolidated statements of operations is based on the period the services are performed and recognized as compensation expense on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur.

Measurement of nonemployee awards - The measurement of equity-classified nonemployee awards is fixed at the grant date, and the Company may use the expected term to measure nonemployee options or elect to use the contractual term as the expected term, on an award-by-award basis. This differs from the guidance in Accounting Standards Codification (ASC) 505-50 that requires the use of the contractual term. Forfeitures of nonemployee awards will be recognized as they occur.

The BSM option pricing model requires the input of 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, the share-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

The Company has limited historical data of its own to utilize in determining expected volatility. As such the Company based the volatility assumption on a combined weighted average of the Company’s own historical data and that of a selected peer group. 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.

(s) 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 quarterly. 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 consolidated statements of operations and accrued interest and penalties within accrued liabilities in the consolidated balance sheets. No such interest and penalties have been recorded to date.

(t) 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 consolidated 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.

The Company’s financial assets and liabilities consist principally of cash and cash equivalents, accounts receivable, and accounts payable. The fair value of the Company’s cash equivalents is determined based on quoted prices in active markets for identical assets. Cash in the Company’s operating bank accounts represents the difference between cash in the money market accounts and total cash and cash equivalents reported on the consolidated balance sheets. 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.

(u) 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 restricted stock units, warrants to purchase common stock and options outstanding under the stock option plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding since the effects of potentially dilutive securities are antidilutive due to the net loss position.

(v) Recent Accounting Pronouncements

In October 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-10—Codification Improvements. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this update do not change U.S. GAAP and, therefore, are not expected to result in a significant change in practice. Section A was removed from the final update of ASU 2020-10. Section B of this update contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Section C of this update contains Codification improvements that vary in nature. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.

In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to change the definitions of accelerated filer and large accelerated filer to provide relief to smaller reporting companies. The amendments in SEC Release No. 34-88365 to Rule 12b-2 of the Securities Exchange Act of 1934 provide that smaller reporting companies with up to $700 million in public float and less than $100 million in annual revenues in their most recently completed fiscal year are excluded from the definitions and as such are now designated as non-accelerated filers, in addition to all entities with less than $75 million in public float. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for intra period allocations, recognizing deferred taxes for investments and calculating income taxes in interim periods. This ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For smaller reporting companies the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Management does not expect that adoption of this guidance will have a significant impact on the Company’s 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.

(3) 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

The following table sets forth the fair value of the financial assets measured on a recurring basis as of December 31, 2020 and 2019 and indicates the fair value hierarchy utilized to determine such fair value (in thousands).

Level 1 Level 2 Level 3 Total

Assets:

Cash in checking accounts - - - 745

Total cash and cash equivalents $ 20,662 $ — $ — $ 21,407

Level 1 Level 2 Level 3 Total

Assets:

Money market funds $ 4,637 $ - $ - $ 4,637

Cash in checking accounts - - - 948

Total cash and cash equivalents $ 4,637 $ — $ — $ 5,585

(4) Inventories

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

December 31,

Raw materials $ — $ —

Work in process — —

Finished goods — 4

Total $ — $ 4

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 $2,000 and $36,000 for the years ended December 31, 2020, and 2019, respectively.

(5) Property and Equipment, Net

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

December 31,

Computer equipment and software $ 159 $ 132

Laboratory and manufacturing equipment 550 550

Furniture and fixtures 59 55

Construction in progress 70 69

Property and equipment, gross 1,170 1,138

Less accumulated depreciation (1,025 ) (957 )

Property and equipment, net $ 145 $ 181

Depreciation expense totaled approximately $68,000 and $111,000 for the years ended December 31, 2020 and 2019, respectively. All of the Company’s property and equipment is located in the United States.

(6) Operating Lease Right-of-Use Assets, Net

The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company’s operating lease, which expires in December 2021, is related to a property lease for its laboratory and corporate offices. BioCardia’s lease agreement does not contain any material residual guarantees or material restrictive covenants, nor does it contain an additional lease extension.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s lease does not provide an implicit rate. The Company used an adjusted historical incremental borrowing rate, based on the information available at the approximate lease commencement date, to determine the present value of lease payments. The net lease asset was adjusted for deferred rent, lease incentives, and prepaid rent. Variable rent expense is made up of expenses for common area maintenance and shared utilities and were not included in the determination of the present value of lease payments. The Company has no finance leases.

The components of lease expense for the year ended December 31, 2020 and 2019, respectively, was as follows (in thousands, except years and percentages):

December 31,

Straight-line rent expense recognized for operating lease $ 601 $ 601

Variable rent expense recognized for operating lease 395 264

Weighted average remaining lease term (in years) 1.0 2.0

Weighted average discount rate 12.05 % 12.05 %

Supplemental cash flow information related to the operating lease was as follows (in thousands):

December 31,

Future minimum lease payments under the operating lease as of December 31, 2020 are as follows (in thousands):

For the years ending December 31,

Thereafter —

Total undiscounted lease payments 649

Less imputed interest 35

Total operating lease liabilities $ 614

(7) Collaborative Agreements

The Company has entered into various collaborations related to clinical development. These agreements allow partners to utilize the Company’s enabling biotherapeutic delivery systems, including training and support during clinical and preclinical delivery of biotherapeutics. Under the terms of these agreements, the Company typically receives a use fee and payments for the systems and services provided. The Company gains access to certain data generated by its partners for use in its own product development efforts and also receives nonexclusive patent rights to any partner discovered BioCardia technology improvement inventions. Revenue from collaborative agreements is recognized in the Consolidated Statements of Operations in the line “Collaboration agreement revenue.”

(8) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

December 31,

Accrued expenses $ 87 $ 10

Accrued salaries and employee benefits 961 652

Accrued director compensation — 648

Accrued clinical trial costs 452 519

(9) Note payable under Paycheck Protection Program

On May 1, 2020, BioCardia Lifesciences, Inc. (the Borrower), a wholly owned subsidiary of BioCardia, Inc. (the Company), entered into a promissory note (the Note) with Silicon Valley Bank (the Lender) evidencing an unsecured loan in the aggregate principal amount of $506,413 pursuant to the Paycheck Protection Program (the PPP) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) administered by the U.S. Small Business Administration. All the funds under the Note were disbursed to the Borrower on May 1, 2020.

In accordance with the requirements of the CARES Act, the Borrower used the proceeds from the Note in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrued on the Note at the rate of 1.00% per annum. The Borrower may apply for forgiveness of amount due under the Note, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the eight weeks following disbursement under the Note. On June 5, 2020, the Paycheck Protection Flexibility Act extended the period for qualifying expenses from eight weeks to an optional twenty-four-week period.

Subject to any forgiveness under the PPP, the Note would have matured two years following the date of issuance of the Note and include a period for the first six months during which time required payments of interest and principal would be deferred. On October 7, 2020, the Company applied for forgiveness of the note payable with the Lender. That application for forgiveness of $506,000 and related interest payable of $3,000 was approved in its entirety on November 2, 2020. Accordingly, $509,000 is presented as a gain on extinguishment of Paycheck Protection Program note payable in the accompanying consolidated statements of operations for the year ended December 31, 2020.

(10) Stockholders’ Equity

$10.5 Million Registered Direct Offering - On December 15, 2020, the Company entered into a securities purchase agreement with certain institutional investors (the December 15 Purchase Agreement) for the sale of an aggregate of 2,038,836 shares (the December 15 Shares) of the Company’s common stock, $0.001 par value per share (the Common Stock), at a price to the public of $5.15 per share (the December 15 Registered Offering) share for gross proceeds of approximately $10.5 million before deducting the fees of A.G.P./Alliance Global Partners, which acted as placement agent, and related offering expenses. The Company paid the placement agent a cash fee equal to 7.0% of the gross proceeds generated from the sale of the December 15 Shares. On December 18, 2020, BioCardia concluded the Purchase Agreement with the purchasers of the December 15 Shares. The Company intends to use the net proceeds for working capital and general corporate purposes, which include, but are not limited to, completing enrollment in the ongoing CardiAMP Cell Therapy pivotal trial for the treatment of heart failure, the funding of clinical development and pursuing regulatory approval for BioCardia’s product candidates. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $9.8 million. The December 15 Offering was made pursuant to a Registration Statement on Form S-3, which was filed by the Company with the Securities and Exchange Commission on October 9, 2020, and declared effective on October 20, 2020, as supplemented by a prospectus supplement dated December 15, 2020.

$8.5 Million Registered Direct Offering - On December 14, 2020, the Company entered into a securities purchase agreement with certain institutional investors (the December 14 Purchase Agreement) for the sale of an aggregate of 1,789,474 shares (the December 14 Shares) of the Company’s common stock, $0.001 par value per share (the Common Stock), at a price to the public of $4.75 per share (the December 14 Registered Offering) for gross proceeds of approximately $8.5 million before deducting the fees of A.G.P./Alliance Global Partners, which acted as placement agent, and related offering expenses. The Company paid the placement agent a cash fee equal to 7.0% of the gross proceeds generated from the sale of the December 14 Shares and reimbursed the Placement Agent for certain of its expenses in an amount not to exceed $40,000. On December 16, 2020, BioCardia concluded the Purchase Agreement with the purchasers of the December 14 Shares. The Company intends to use the net proceeds for working capital and general corporate purposes, which include, but are not limited to, completing enrollment in the ongoing CardiAMP Cell Therapy pivotal trial for the treatment of heart failure, the funding of clinical development and pursuing regulatory approval for BioCardia’s product candidates. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $7.8 million. The December 14 Offering was made pursuant to a Registration Statement on Form S-3, which was filed by the Company with the Securities and Exchange Commission on October 9, 2020, and declared effective on October 20, 2020, as supplemented by a prospectus supplement dated December 14, 2020.

2020 Public Offering on Form S-1 Registration Statement - In May 2020, the Company submitted a Form S-1 Registration Statement (S-1) to the SEC, which was subsequently amended. On June 17, 2020, the Company entered into an underwriting agreement with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1, of 4,762,000 shares of common stock, par value of $0.001 per share. The offering price to the public was $2.10 per share. The underwriters were granted a 45-day option to purchase up to 714,190 additional shares of common stock to cover over-allotments. Such option was exercised in full on June 18, 2020. The closing of the offering occurred on June 19, 2020. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $10.3 million.

On June 8, 2020, the Company issued 29,625 shares of common stock to two former Board members to settle in lieu of cash their accrued board compensation liability of approximately $148,000.

Public Offering on Form S-1 Registration Statement - In April 2019, the Company submitted a Form S-1 Registration Statement (S-1) to the SEC, which was subsequently amended. On August 2, 2019, the Company entered into an underwriting agreement with Maxim Group LLC, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1, of 1,666,667 units consisting of one share of common stock, par value of $0.001 per share, and a warrant to purchase one share of common stock. The offering price to the public was $6.00 per unit. The warrants, which are equity classified, are immediately exercisable for shares of common stock at a price of $6.30 per share and expire five years from the date of issuance. In addition, the underwriters were granted 11,958 warrants exercisable at a per warrant exercise price of $6.60 as part of their compensation. The underwriters were granted a 45-day option to purchase up to 250,000 additional shares of common stock, and/or 250,000 additional warrants to cover over-allotments, if any. The closing of the offering occurred on August 6, 2019. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $8.8 million. On September 4, 2019, the underwriters exercised the over-allotment and purchased 75,000 shares of common stock and 250,000 warrants for net proceeds of approximately $420,000, after deducting underwriting discounts of approximately $32,000.

Up List to Nasdaq - On August 2, 2019, the Company’s common stock and warrants to purchase common stock began trading on the Nasdaq Capital Market. Previously, the common stock was quoted on the OTCQB Marketplace (OTCQB) under the symbol, “BCDA.” “BCDA” and “BCDAW” are the trading symbols for the Company’s common stock and warrants to purchase common stock, respectively, on the Nasdaq Capital Market.

Convertible Note Financing - On July 5, 2019, BioCardia entered into a note purchase agreement pursuant to which the Company issued on such date $625,000 in aggregate principal amount of convertible promissory notes to accredited investors, a portion of which were certain of the Company’s officers and directors and a principal stockholder (or their respective affiliates). The notes accrued 14.0% simple interest and mature six months from the issue date, on January 5, 2020. If at any time prior to the maturity date, the Company closes a public stock offering for the purpose of raising capital in which the Company’s common stock is listed or quoted on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, the outstanding principal and interest would automatically convert into the securities offered in the financing at a unit price equal to a 50% discount to the qualified financing price. The convertible notes conversion features were determined to be an embedded derivative requiring bifurcation and separate accounting at estimated fair value. The fair value of the derivative was treated as a discount on the notes, which is subject to accretion over the term of the note. The change in fair value of the derivative liability was approximately $52,000. The loss on extinguishment of the convertible notes approximated $521,000. Interest expense on the notes for the year ended December 31, 2019 totaled $112,000 and included $104,000 of accretion of the discount.

Upon the closing of the Company’s public offering of units on August 6, 2019 the unpaid principal and interest on the convertible notes totaling approximately $633,000, converted into 210,887 units, each unit consisting of one share of common stock and a warrant to purchase one share of common stock, at a conversion price of $3.00 per unit. Holders of the convertible notes had the option of converting the notes into units of one share of common stock and a warrant at a unit price of $8.00 prior to the automatic conversion in the Company’s public offering. The warrants have the same terms, including exercise price and expiration date, as the warrants issued in the public offering.

Reverse Stock Split - On June 6, 2019, the Company effected a 1-for-9 reverse stock split of the Company’s common stock. Neither the par value nor the authorized number of shares was adjusted as a result of the reverse stock split. All issued and outstanding common stock, warrants, stock options, restricted stock units and per share amounts contained in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Sales of Unregistered Common Stock and Warrants - On December 24, 2018, the Company entered into a Securities Purchase Agreement with entities affiliated with BioCardia’s existing investors (the “Investors”), relating to an offering and sale of an aggregate of 592,592 shares (as adjusted) of the Company’s common stock at a purchase price of $6.75 per share (as adjusted), and warrants to purchase up to one-half of the number of shares of common stock sold to an Investor, up to an aggregate for all Investors of 296,296 shares (as adjusted) of common stock, for aggregate net proceeds of $3.8 million net of $200,000 expenses. The warrants are exercisable immediately for cash and, because six months have passed, are also exercisable on a cashless basis until an effective registration statement has been filed registering the resale of the shares issuable upon exercise of the warrants. As of December 31, 2020, no effective registration statement had been filed. Warrants can be settled in unregistered shares. The warrants have an exercise price of $6.75 per share and will expire on December 24, 2023. The issued warrants are stand-alone financial instruments and were equity classified in additional paid-in capital in accordance with U.S. GAAP.

Warrants – Set forth below is a table of activity of warrants for common stock and the related weighted average exercise price per warrant.

Number of Weighted

Common Stock Average

Warrants Exercise Price

Warrants for common stock sold — —

Warrants for common stock exercised (11,083 ) 6.60

On December 24, 2020, a warrant holder exercised 11,083 warrants for common stock using cashless exercise provisions, resulting in the issuance of 470 shares of common stock.

(11) Share-Based Compensation

BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2002 Stock Plan in 2002 (the “2002 Plan”), and the Company assumed the 2002 Plan in the Merger. The Company has not granted or does not intend to grant any additional awards under the 2002 Plan following the Merger. In 2016, BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2016 Equity Incentive Plan (the “2016 Plan”), and the Company assumed the 2016 Plan in the Merger. BioCardia has granted awards, including incentive stock options and non-qualified stock options, under the 2016 Plan following the Merger. Under the 2002 Plan and the 2016 Plan, the number of shares, terms, and vesting periods are determined by the Company’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 ten years from the date of grant. The per share exercise price shall be no less than the fair market value on the date of grant. Compensation cost for employee share-based awards is based on the grant-date fair value and is recognized over the vesting period of the applicable award on a straight-line basis. The number of shares reserved for issuance or transfer pursuant to awards under the 2016 Plan will be increased by (i) the number of shares represented by awards outstanding under 2016 Plan that are returned to the plan because they are either forfeited or lapse unexercised or that are repurchased for the original purchase price thereof, (ii) if approved by the Administrator of the 2016 Plan, an annual increase on the first day of each fiscal year equal to the lessor of (A) 4% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year; (B) 268,997 shares (1,000,000 shares effective January 1, 2021). As of December 31, 2020, 160,020 shares have been authorized and available for awards under the 2016 Plan.

The Company recognizes in the consolidated statements of operations the grant-date fair value of stock options and other equity-based compensation. Share-based compensation expense for the years ended December 31, 2020 and 2019 was recorded as follows (in thousands):

Years ended December 31,

Cost of goods sold $ - $ 191

Selling, general and administrative 1,583 1,416

Total stock-based compensation $ 2,952 $ 2,722

On January 29, 2020 (the “repricing date”), the Company’s Board of Directors repriced certain previously granted and still outstanding vested and unvested stock option awards held by employees, executives, and certain service providers of the Company; as a result, the exercise price was lowered to $5.32 per share. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 515,036 vested and unvested stock options outstanding with original exercise prices ranging from $10.05 to $97.21, were repriced.

The repricing on January 29, 2020 resulted in incremental stock-based compensation expense of $569,000, of which $412,000 related to vested employee stock option awards and was expensed on the repricing date, and $157,000 related to unvested stock option awards and is being amortized on a straight-line basis over the approximately three year remaining weighted average vesting period of those awards.

The following table summarizes activity under the Company’s stock option plans, including the 2002 Plan and the 2016 Plan and related information (in thousands, except share and per share amounts and term):

Options outstanding

Stock options exercised — —

The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of December 31, 2020, based on the Company’s common stock closing price of $3.46 per share, which would have been received by the option holders had all their in-the-money options been exercised as of that date.

The total intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was zero in both years. The weighted average grant-date BSM fair value of options granted during the years ended December 31, 2020 and 2019 was $1.73 and $3.87 per share, respectively.

Employee, Director and Non-employee Share-Based Compensation

During the years ended December 31, 2020 and 2019, the Company granted stock options to certain employees, non-employee directors and non-employees to purchase 342,232 and 254,785 shares of common stock, respectively. The fair value of each option grant was estimated on the date of the grant using the BSM option pricing model with the following assumptions:

Years ended December 31,

Dividend yield None None

Unrecognized share-based compensation for employees, non-employee directors and non-employee options granted through December 31, 2020 is approximately $2.1 million to be recognized over a remaining weighted average service period of 2.2 years.

Share-Based Compensation (RSUs)

During the years ended December 31, 2020 and 2019, respectively, the Company granted to certain members of management 113,976 and 34,713 restricted stock units, or RSUs in lieu of paying bonuses. The fair value of each RSU is estimated on the closing market price of the Company’s common stock on the grant date.

During the year ended December 31, 2020, the Company granted 122,977 RSUs to board members to settle $613,000 of board compensation earned from April 2018 to March 30, 2020. The associated compensation expense was recognized when earned. During the year ended December 31, 2020, the Company granted 69,321 RSUs to board members and recognized approximately $190,000 in stock compensation expense for board service from April 1, 2020 to December 31, 2020. The RSUs were granted on a quarterly basis and were calculated based on $92,500 divided by the greater of $4 or the closing share price of the Company’s common stock on the last trading day of the fiscal quarter. These RSUs represent a contingent right to receive one share of common stock, but for which delivery of the stock will occur on the earlier of the two-year anniversary of the grant, the board member’s separation from the Company, a change in control as defined by the 2016 Equity Incentive Plan or the board member’s death.

The following table summarizes the activity for RSUs during the year ended December 31, 2020:

Weighted

average

grant date

Number of fair values

shares per share

RSUs vested and settled are converted into the Company’s common stock on a one-for-one basis. RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. Of the 224,311 RSUs outstanding on December 31, 2020, 216,111 RSUs are vested and have not been settled and 8,200 have not yet vested. The related compensation expense, which is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted, is recognized ratably over the period during which the vesting restrictions lapse. Unrecognized share-based compensation for RSUs granted through December 31, 2020 was approximately $37,000 to be recognized over a remaining weighted average service period of 2.3 years.

(12) Concentrations

Most of the Company’s customers are located in the United States. Two customers accounted for approximately 70% and 16% of total revenues in 2020. Two customers accounted for approximately 43% and 25% of total revenues in 2019. Three customers accounted for approximately 22%, 18% and 11% of accounts receivable on December 31, 2020. One customer accounted for 15% of accounts receivable on December 31, 2019.

(13) Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share for the years ended December 31, 2020 and 2019 (in thousands, except share and per share data):

Years ended December 31,

Numerator:

Denominator:

Net loss per share, basic and diluted $ (1.48 ) $ (2.61 )

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:

At December 31,

(14) Income Taxes

The Company’s provision for income taxes for the years ended December 31, 2020 and 2019 was $0 for both years.

The provision for income taxes differs from the amount which would result by applying the federal statutory income tax rate to pre-tax loss for the years ended December 31, 2020 and 2019. The reconciliation of the provision computed at the federal statutory rate to the Company’s provision (benefit) for income taxes was as follows (in thousands):

Years ended December 31,

Tax at federal statutory rate $ (3,151 ) $ (3,089 )

State, net of federal benefit (449 ) (414 )

Research and development credit (276 ) (225 )

Share-based compensation 649 446

PPP Note forgiveness (107 ) -

Change in valuation allowance 3,332 3,277

Total provision for income taxes $ — $ -

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss and tax credit carryforwards, net of any adjustment for unrecognized tax benefits. The components of the net deferred income tax assets as of December 31, 2020 and 2019 were as follows (in thousands):

Years ended December 31,

Accrued compensation $ 225 $ 148

Depreciation and amortization 90 98

Share-based compensation 686 744

Net operating loss and tax credit carryforwards 26,931 23,809

Net deferred tax asset $ - $ -

The Company has approximately $91.5 million and $62.7 million of federal and state net operating loss (NOL) carryforwards, respectively, as of December 31, 2020. For tax reporting purposes, operating loss carryforwards are available to offset future taxable income; such carryforwards expire in varying amounts beginning in 2022 and 2028 for federal and state purposes, respectively, with 2020, 2019, and 2018 federal NOLs having no expiration date. Under current federal and California law, the amounts of and benefits from net operating losses carried forward may be impaired or limited in certain circumstances. Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period.

Generally, utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by section 382, which discusses limitations on NOL carryforwards and certain built-in losses following ownership changes, and section 383, which discusses, special limitations on certain excess credits, etc., of the Internal Revenue Code (IRC) of 1986, as amended and similar state provisions. Accordingly, the Company’s ability to utilize net operating loss carryforwards and tax credit carryforwards may be limited, potentially significantly, as the result of such an “ownership change.” The Company has not yet performed a comprehensive study to determine if it has undergone any ownership changes. If the Company is able to potentially utilize its net operating loss carryforwards and tax credit carryforwards, it will perform a comprehensive section 382 and 383 study to determine what, if any, limitation on its ability to utilize its NOLs exists.

As of December 31, 2020, the Company has federal and state research and development credits of approximately $2.8 million and $2.1 million available to offset future federal and state income taxes, respectively. The federal tax credit carryforward expires beginning in 2028. The state credit carryforwards have no expiration.

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 deferred tax liabilities as of December 31, 2020 or 2019. The net increase in the total valuation allowance for the year ending December 31, 2020 is $3.3 million, primarily from the net operating losses generated. The net increase in the total valuation allowance for the year ending December 31, 2019 is $3.2 million, primarily from the net operating losses generated. No liability related to uncertain tax positions is reported in the financial statements.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):

Years ended December 31,

Balance, beginning of year $ 1,046 $ 891

Additions based on tax positions related to the current year 189 155

Recognition of approximately $895,000 and $753,000 of unrecognized tax benefits would impact the effective rate at December 31, 2020 and 2019 respectively, if recognized. Increases in 2020 and 2019 relate to increased research and development activity.

On May 1, 2020, the Company received loan proceeds in the amount of approximately $506,413 under the Paycheck Protection Program. The PPP, established as part of the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The Consolidated Appropriations Act, 2021, P.L. 116-260, enacted on Dec. 27, 2020, resolved the issue of whether taxpayers can take deductions for expenses paid with forgiven PPP loans. The act clarified that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. It also clarified that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven and that the tax basis and other attributes of the borrower's assets will not be reduced as a result of the loan forgiveness.

The Company applied for and received a PPP loan for $506,413 during 2020. The Company was approved for forgiveness on the entire loan balance and related interest payable of $3,000 on November 2, 2020.

The Company is subject to U.S. federal, California, Colorado, Florida and North Carolina income taxes. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company was incorporated in 2002 and is subject to U.S. federal, state, and local tax examinations by tax authorities for all prior years.

(15) Contingencies and Uncertainties

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 is not aware of any current legal or administrative proceedings that are likely to have an adverse effect on the Company’s business, financial position, results of operations, or cash flows.

Uncertainties - The results for the year ended December 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future year, particularly in light of the novel coronavirus pandemic, or COVID-19, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and/or experience a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities and are continuing to adapt to these changing actions and guidelines.

Beginning March 17, 2020, substantially all of the Company’s workforce began working from home. On April 6, 2020, manufacturing operations resumed at the Company’s facilities, with a number of other staff continuing to work from home. While the direct effects of the stay-at-home orders and BioCardia’s work-from-home policies have been largely mitigated during the year ended December 31, 2020, the overall impact of the pandemic resulted in disruption to the Company’s business and in delays in the Company’s development programs and regulatory and commercialization timelines. The overall magnitude of the continuing impact will depend, in part, on the length and severity of changing restrictions and other limitations on BioCardia’s ability to conduct the Company’s business. BioCardia’s future research and development expenses and general and administrative expenses may vary significantly if the Company experiences an increased impact from COVID-19 on the costs and timing associated with the conduct of BioCardia’s clinical trials and other related business activities.

As the outbreak continues to mutate and spread, it may affect the Company’s operations and those of third parties on which the Company relies, including causing disruptions in the supply of the Company’s product candidates and the conduct of current and planned preclinical and clinical studies. BioCardia may need to limit operations and may experience limitations in employee resources. There are risks that the COVID-19 outbreak may be more difficult to contain if the outbreak reaches a larger population or broader geography, in which case the risks described herein could be elevated significantly. The extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Additionally, while the potential economic impact brought by, and the duration of, a coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity, and the Company’s ability to complete its preclinical and clinical studies on a timely basis, or at all. The Company was successful in raising additional funding in 2020 (See Note 10). However, the ultimate impact of coronavirus is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing, preclinical and clinical trial activities or the global economy as a whole. However, these effects could have a material, adverse impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which BioCardia relies.

(16) 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. This agreement has been extended for another year to June 2021.

As of December 31, 2020, the Company has received approximately $750,000 under the grant which is accounted for as a reduction to research and development expenses as the related qualifying costs are incurred. Approximately $135,000 of the qualifying costs had been incurred as of December 31, 2020. The remaining $615,000 was recorded as grant liability on the consolidated balance sheet at December 31, 2020. The amount is recorded as a liability as the amounts are refundable, should a default by the Company, as defined in the agreement, occur prior to incurring the qualifying costs.

(17) Related Party Transactions

Litigation Funding Agreement

On April 9, 2020, BioCardia, Inc. entered into a Litigation Funding Agreement (the Funding Agreement) with BSLF, L.L.C. (the Funder), an entity owned and controlled by Andrew Blank, Chair of BioCardia’s board of directors, for the purpose of funding the Company’s currently pending legal proceedings and any and all claims, actions and/or proceedings relating to or arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No. 3:19-05645-VC, U.S.D.C., N. D. Cal (the Litigation). BioCardia seeks imposition of constructive trusts both on the patents naming Ms. Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.

Under the terms of the Funding Agreement, the Funder agreed to fund the legal fees and costs incurred by the Company in connection with the Litigation on and after March 1, 2020 on a non-recourse basis. The Company agreed to repay the Funder from any proceeds arising from the Litigation (the Litigation Proceeds), (i) any taxes paid by or imposed upon Funder (other than taxes imposed upon Funder as a consequence of Funder’s income) with respect to the claims, the litigation proceeds or as a consequence of any settlement in connection with the Litigation, if any, plus (ii) an amount, without reduction, set-off or counterclaim, equal to the amount actually paid by the Funder pursuant to the Funding Agreement (the Actual Funding Amount) plus (iii) the greater of:

50% of the remaining Litigation Proceeds, up to three times the Actual Funding Amount; or

30% of the remaining Litigation Proceeds.

Although the Company is required under the terms of the Funding Agreement to consult with the Funder regarding any settlement in connection with the Litigation and to allow Funder to participate in any real-time settlement negotiations, the Company has the sole and exclusive right to settle on whatever terms it deems acceptable.

The Funding Agreement may be terminated by Funder upon ten days’ written notice to the Company. Funder is obligated to fund only the fees and costs incurred in the Litigation through the end of the month in which the termination notice was served. BioCardia may terminate the agreement upon ten days’ written notice to Funder from and after a failure by Funder to fulfill its obligations under the Funding Agreement if such failure or material breach is continuing at the end of such ten-day period. Under the terms of the agreement, the total due from the related party as of December 31, 2020 is approximately $618,000.

On March 12, 2021, the Company agreed to settle the Litigation, which is pending final documentation and dismissal. The Company expects the settlement will not result in any material benefit or liability to the Company.

OPKO

BioCardia, Inc. and OPKO Health, Inc. (OPKO) previously entered into a consulting agreement dated August 19, 2016, between the Company and OPKO (the Consulting Agreement). The chairman and chief executive officer of OPKO is a beneficial owner of more than 5% of the outstanding shares of the Company’s common stock.

Pursuant to the terms of the Consulting Agreement, OPKO was to provide advisory services to the Company in support of strategic transactions, financings and other matters as agreed between the parties from time to time. Also, in August 2016, the Company granted OPKO a ten-year option to purchase 46,553 shares of common stock, with a 4-year vesting period and an exercise price of $16.20 per share, to OPKO as consideration for consulting services to be provided under the Consulting Agreement. The term of the Consulting Agreement was initially for four years and was to have been automatically renewed for successive one-year periods.

Effective August 29, 2019, the Company and OPKO mutually agreed to terminate the Consulting Agreement without penalty or payment of any kind as the services under the Consulting Agreement were no longer necessary. In connection with the termination of the Consulting Agreement, OPKO’s option grant was amended such that it is unaffected by the termination of the Consulting Agreement and will continue to vest and remain outstanding for the remainder of its ten-year term unless earlier exercised. As a result of this modification of the option grant, all future unrecognized stock-based compensation expense was remeasured and recognized in August 2019. BioCardia recorded $225,000 expense (of which $167,000 pertains to the option modification) in share-based compensation expense related to the OPKO stock option in selling, general and administrative expense during the year ended December 31, 2019.

Convertible Note Financing

On July 5, 2019, BioCardia entered into a note purchase agreement pursuant to which the Company issued on such date $625,000 in aggregate principal amount of convertible promissory notes to accredited investors, a portion of which were certain of the Company’s officers and directors and a principal stockholder (or their respective affiliates). See note 10 above.

(18) Employee Benefit Plans

The Company’s U.S. employees are eligible to participate in a retirement and savings plan that qualifies under Section 401(k) of the IRC. Participating employees may contribute up to 75% of their pretax salary, but not more than statutory limits. The Company made matching contributions of $26,000 and $25,000 during the years ended December 31, 2020 and 2019, respectively.

(19) Subsequent Events

On March 29, 2021, the Company and Lincoln Park Capital Fund, LLC, (Lincoln Park) entered into a purchase agreement pursuant to which Lincoln Park purchased $2 million of shares of the Company’s common stock (373,832 shares) at a purchase price of $5.35 per share. Under the purchase agreement, the Company has the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $20 million, including the initial $2 million purchase, subject to certain significant limitations of the amount and timing of any such sales due to the terms and conditions set forth in the purchase agreement.

In consideration for entering into the purchase agreement with Lincoln Park, the Company agreed to issue an aggregate of 75,000 shares of common stock as a commitment fee. In addition, the Company agreed to issue to Lincoln Park up to an aggregate of 50,000 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the purchase agreement with Lincoln Park). On March 29, 2021, the Company issued 80,000 shares of common stock as commitment shares (which includes 5,000 commitment shares issued on a pro rata basis in respect of the initial purchase by Lincoln Park of $2 million of shares). The Company will not receive any cash proceeds from the issuance of any of the foregoing commitment shares.

The net proceeds under the purchase agreement to the Company will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park. Actual sales of shares of common stock to Lincoln Park under the purchase agreement and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determination by the Company as to other available and appropriate sources of funding for the Company. The Company expects to use the proceeds from this agreement for general corporate purposes and working capital.

ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

As previously reported on our Current Report on Form 8-K, filed on November 13, 2020, the Audit Committee (the Audit Committee) of the Company approved the dismissal of KPMG LLP (KPMG), which was then serving as the Company’s independent registered public accounting firm. KPMG was dismissed on November 9, 2020 as the Company’s independent registered public accounting firm, effective upon completion of their review of the Company’s unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2020. On November 9, 2020, the Audit Committee approved the appointment of PKF, LLP as the Company’s new independent registered public accounting firm, effective November 11, 2020. Effective December 1, 2020, PKF, LLP changed its name to PKF San Diego, LLP.

During the two fiscal years ended December 31, 2019 and 2018 and the subsequent interim period through November 9, 2020, there were no: (1) disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events, except that KPMG LLP advised BioCardia, Inc. of the following material weakness: a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards.

ITEM9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as our controls are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2020, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020, our disclosure controls and procedures were, in design and operation, effective.

Changes in Internal Control over Financial Reporting

Other than those noted below under the section titled “Previously Identified Material Weaknesses in Internal Control Over Financial Reporting,” there were no changes to our internal control over financial reporting identified in connection with the evaluation required by rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.

Management assessed our internal control over financial reporting as of December 31, 2020. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.

Previously Identified Material Weaknesses in Internal Control Over Financial Reporting

We previously identified a material weakness in internal control over financial reporting as of September 30, 2019 and for the year ended December 31, 2019. The material weakness resulted from a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards. This material weakness was remediated as of December 31, 2020.

We have implemented measures designed to improve our internal control over financial reporting and remediate the material weakness, including the following:

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM9B. OTHER INFORMATION

None.

PART III

ITEM10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to our Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.

We have adopted a Code of Business Conduct and Ethics that applies to all our (1) officers, (2) employees (including our principal executive officer, principal financial officer, principal accounting officer or controller and other employees who perform financial or accounting functions), and (3) agents and representatives, including our independent directors and consultants, who are not employees of ours, with regard to their BioCardia-related activities. Our code of business conduct and ethics is available on our website at www.biocardia.com under the heading “Corporate Governance” under the section titled “Investors”. We will post on this section of our website any amendment to our code of business conduct and ethics, as well as any waivers of our code of business conduct and ethics, that are required to be disclosed by the rules of the SEC.

ITEM11. EXECUTIVE COMPENSATION

ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this report are as follows:

1. Consolidated Financial Statements:

Our Consolidated Financial Statements are listed in the “Index to Financial Statements” of BioCardia, Inc. in Part II, Item 8 of this Annual Report on Form 10-K.

2. Financial Statement Schedules

All financial statement schedules have been omitted because they are not required, not applicable, or the required information is included in the financial statements or notes thereto included in this Annual Report on Form 10-K.

3. Exhibits

The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

BCDA US Equity

BCDA · 10-K · period ended 2020-12-31

ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM9A. CONTROLS AND PROCEDURES

ITEM9B. OTHER INFORMATION

ITEM10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM11. EXECUTIVE COMPENSATION

ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

BCDA US Equity☆

BCDA · 10-K · period ended 2020-12-31

ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM9A. CONTROLS AND PROCEDURES

ITEM9B. OTHER INFORMATION

ITEM10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM11. EXECUTIVE COMPENSATION

ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

BCDA US Equity