##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 or
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
 Commission file number: 000-51487
 
 MICROMED CARDIOVASCULAR, INC.
  Delaware
    
    
    
    98-0228169(State or other jurisdiction of
    
    
    
    (I.R.S. Employerincorporation or organization)
    
    
    
    Identification No.)
 8965 Interchange Drive
Houston, Texas 77054
 (713) 838-9210
  þ o
 o þ
  o þ




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##### 



MICROMED CARDIOVASCULAR, INC
 INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements (Unaudited)
    
    
    1Consolidated Balance Sheets as of December 31, 2005 and June 30, 2006
    
    
    1Consolidated Statements of Operations for the period October 6, 1995 (date of inception) to
June 30, 2006 and the three months and six months ended June 30, 2006 and 2005
    
    
    2Consolidated Statements of Cash Flows for the period October 6, 1995 (date of inception) to
June 30, 2006 and the six months ended June 30, 2006 and 2005
    
    
    3Notes to Unaudited Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3. Controls and Procedures
    
    
    15PART II. OTHER INFORMATION
    
    
    16Item 1. Legal Proceedings
    
    
    16Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds.
    
    
    16Item 3. Defaults Upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits
    
    
    17SIGNATURES
    
    
    18Certification of MicroMed pursuant to Section 13a-14Certification pursuant to 18 U.S.C. Section 906
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MICROMED CARDIOVASCULAR, INC.
(A Development Stage Company)
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,749,457
    
    
    $
    2,871,071Accounts receivable
    
    
    1,046,254
    
    
    
    882,090Inventory
    
    
    2,732,684
    
    
    
    2,770,688Prepaids and other assets
    
    
    287,324
    
    
    
    340,938Total current assets
    
    
    17,815,719
    
    
    
    6,864,787Property and equipment, net
    
    
    445,146
    
    
    
    541,986Other assets
    
    
    17,162
    
    
    
    39,379Total assets
    
    $
    18,278,027
    
    
    $
    7,446,152LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    244,343
    
    
    $
    390,365Accrued liabilities and deferred revenue
    
    
    509,776
    
    
    
    614,774Current portion of long-term debt
    
    
    935,371
    
    
    
    1,021,734Note payable
    
    
    365,642
    
    
    
    461,429Total current liabilities
    
    
    2,055,132
    
    
    
    2,488,302Long-term debt
    
    
    
    
    
    
    409,092Commitments and Contingencies
    
    
    
    
    
    
    Stockholders Equity:Common Stock, $.001 par value, 100,000,000
shares authorized, 38,776,141 shares issued
and 38,739,162 shares outstanding at June
30, 2006; 100,000,000 shares authorized,
26,113,495 issued and 26,076,517
outstanding at December 31, 2005
    
    
    38,739
    
    
    
    26,077Additional paid-in capital
    
    
    104,815,981
    
    
    
    90,359,633Deferred compensation
    
    
    
    
    
    
    (470,030
    )Deficit accumulated during development stage
    
    
    (88,631,825
    )
    
    
    (85,366,922
    )Total stockholders equity
    
    
    16,222,895
    
    
    
    4,548,758Total liabilities and stockholders equity
    
    $
    18,278,027
    
    
    $
    7,466,152
  1




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MICROMED CARDIOVASCULAR, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 (Unaudited)
 Period fromInception(October 6,Three Months Ended
    
    
    Six Months Ended
    
    
    1995) ThroughJune 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues:Clinical reimbursements
    
    $
    199,504
    
    
    $
    1,287,211
    
    
    $
    815,179
    
    
    $
    2,463,362
    
    
    $
    16,873,998International product sales
    
    
    698,327
    
    
    
    550,649
    
    
    
    1,178,695
    
    
    
    991,976
    
    
    
    8,905,439Total revenues
    
    
    897,831
    
    
    
    1,837,860
    
    
    
    1,993,874
    
    
    
    3,455,338
    
    
    
    25,779,437Expenses:Research and development
    
    
    2,523,196
    
    
    
    2,998,946
    
    
    
    3,998,560
    
    
    
    6,149,855
    
    
    
    72,210,410General and administrative,
    
    
    618,312
    
    
    
    737,979
    
    
    
    1,212,268
    
    
    
    1,751,262
    
    
    
    20,779,849Total operating expenses
    
    
    3,141,508
    
    
    
    3,736,925
    
    
    
    5,210,828
    
    
    
    7,901,117
    
    
    
    92,990,259Loss from operations
    
    
    (2,243,677
    )
    
    
    (1,899,065
    )
    
    
    (3,216,954
    )
    
    
    (4,445,779
    )
    
    
    (67,210,822
    )Interest and other income (expenses)
    
    
    21,694
    
    
    
    (26,360
    )
    
    
    54,290
    
    
    
    (18,525
    )
    
    
    1,655,008Interest expense
    
    
    (43,805
    )
    
    
    (161,371
    )
    
    
    (102,239
    )
    
    
    (298,150
    )
    
    
    (1,207,572
    )Net loss
    
    
    (2,265,788
    )
    
    
    (2,086,796
    )
    
    
    (3,264,903
    )
    
    
    (4,762,454
    )
    
    
    (66,763,386
    )Convertible preferred stock dividends and accretion
    
    
    
    
    
    
    (1,324,099
    )
    
    
    
    
    
    
    (2,638,202
    )
    
    
    (22,327,217
    )Net loss available to common stockholders
    
    $
    (2,265,788
    )
    
    $
    (3,410,895
    )
    
    $
    (3,264,903
    )
    
    $
    (7,400,657
    )
    
    $
    (89,090,603
    )Basic and diluted net loss per share available to
common stockholders
    
    $
    (0.07
    )
    
    $
    (0.24
    )
    
    $
    (0.11
    )
    
    $
    (0.51
    )Weighted average common shares outstanding
    
    
    30,646,643
    
    
    
    14,460,069
    
    
    
    29,287,867
    
    
    
    14,460,069
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MICROMED CARDIOVASCULAR, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (Unaudited)
 Period fromInception(October 6,Six Months Ended
    
    
    1995) ThroughJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (3,264,903
    )
    
    $
    (4,762,454
    )
    
    $
    (66,763,385
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    112,906
    
    
    
    137,368
    
    
    
    2,706,442Conversion of accrued interest on Series C and Series D Preferred
    
    
    
    
    
    
    
    
    
    
    346,866Services contributed by stockholders
    
    
    
    
    
    
    
    
    
    
    300,050Non-employees stock compensation
    
    
    29,710
    
    
    
    
    
    
    
    170,451Employee stock based compensation
    
    
    1,096,026
    
    
    
    
    
    
    
    1,096,026Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    310,179Amortization of warrants
    
    
    33,304
    
    
    
    10,265
    
    
    
    66,002Loss on disposal of fixed assets
    
    
    
    
    
    
    4,639
    
    
    
    (2,999
    )Changes in assets and liabilities:Accounts receivable
    
    
    (164,164
    )
    
    
    280,301
    
    
    
    (1,046,254
    )Inventory
    
    
    38,004
    
    
    
    35,745
    
    
    
    (2,911,409
    )Prepaids and other assets
    
    
    75,831
    
    
    
    (242,688
    )
    
    
    (397,197
    )Accounts payable and accrued liabilities
    
    
    (251,020
    )
    
    
    1,459,210
    
    
    
    797,262Net cash used in operating activities
    
    
    (2,294,306
    )
    
    
    (3,077,614
    )
    
    
    (65,327,967
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (16,066
    )
    
    
    (19,709
    )
    
    
    (2,909,852
    )Net cash used in investing activities
    
    
    (16,066
    )
    
    
    (19,709
    )
    
    
    (2,909,852
    )Cash flows from financing activities:Proceeds from bridge loan from stockholders
    
    
    
    
    
    
    3,500,001
    
    
    
    16,458,987Repayments of bridge loans from stockholders
    
    
    
    
    
    
    
    
    
    
    (2,015,986
    )Proceeds from issuance of notes payable
    
    
    734,893
    
    
    
    3,092,611
    
    
    
    9,240,642Repayments of notes payable
    
    
    (1,326,135
    )
    
    
    (3,767,627
    )
    
    
    (7,832,772
    )Proceeds from issuance of warrants and preferred stock, net
of offering costs
    
    
    
    
    
    
    
    
    
    
    43,397,713Proceeds from issuance of common stock and cash contributed
by stockholders, net of offering costs
    
    
    13,780,000
    
    
    
    
    
    
    
    22,737,676Proceeds from exercise of stock options and issuance of
common stock and cash contributed by stockholders
    
    
    
    
    
    
    
    
    
    
    1,015Net cash provided by financing activities
    
    
    13,188,758
    
    
    
    2,824,985
    
    
    
    81,987,275Change in cash and cash equivalents
    
    
    10,878,386
    
    
    
    (272,338
    )
    
    
    13,749,457Beginning cash and cash equivalents
    
    
    2,871,071
    
    
    
    687,162
    
    
    
    Ending cash and cash equivalents
    
    $
    13,749,457
    
    
    $
    414,824
    
    
    $
    13,749,457
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MICROMED CARDIOVASCULAR, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of Presentation
    2. Reverse Merger
   4




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3. Equity
 Common Stock
     Warrants
   5




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4. Stock-Based Compensation
   Three Months ended
    
    
    Six Months endedJune 30, 2005
    
    
    June 30, 2005Net loss -As reported
    
    $
    (3,410,895
    )
    
    $
    (7,400,657
    )Stock option compensation expense if the fair value
method had been applied
    
    
    (38,340
    )
    
    
    (76,680
    )Pro forma net loss
    
    $
    (3,449,235
    )
    
    $
    (7,477,537
    )Loss per share  Basic and DilutedAs reported
    
    $
    (0.24
    )
    
    $
    (0.51
    )Pro forma
    
    $
    (0.24
    )
    
    $
    (0.52
    )
 5. Options
    6




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WeightedWeighted
    
    
    Average
    
    
    AggregateNumber of
    
    
    Average Exercise
    
    
    Remaining
    
    
    Intrinsic ValueShares
    
    
    Price
    
    
    Contractual Life
    
    
    (In 000s)Outstanding,
December 31, 2005
    
    
    1,644,470
    
    
    $
    0.20Granted
    
    
    2,095,000
    
    
    
    1.55Forfeited
    
    
    (297,294
    )
    
    
    0.20Outstanding, June
30, 2006
    
    
    3,442,176
    
    
    
    1.02
    
    
    
    9.6
    
    
    $
    3,027Exercisable, June
30, 2006
    
    
    1,876,206
    
    
    $
    1.33
    
    
    
    9.9
    
    
    $
    2,190
 6. Inventory
  December 31,June 30, 2006
    
    
    2005Raw materials
    
    $
    130,013
    
    
    $
    131,172Work in progress
    
    
    2,062,160
    
    
    
    2,195,834Finished goods
    
    
    540,511
    
    
    
    443,682Total
    
    $
    2,732,684
    
    
    $
    2,770,688
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7. Supplemental Disclosure of Cash Flow Information
  Period fromInceptionSix Months
    
    
    Six Months
    
    
    (October 6,Ended
    
    
    Ended
    
    
    1995) ThroughJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006Cash paid for interest
    
    $
    252,337
    
    
    $
    112,214
    
    
    $
    419,091Supplemental Disclosure of Noncash financing activity:Conversion of notes payable to Series C Preferred Stock
    
    $
    
    
    
    $
    
    
    
    $
    5,000,000Conversion of notes payable to Series D Preferred Stock
    
    $
    
    
    
    $
    
    
    
    $
    5,194,088Dividends and accretion to redeemable convertible
preferred stockholders
    
    $
    
    
    
    $
    
    
    
    $
    22,627,219Conversion of Bridge Loans from stockholders to common
stock
    
    $
    
    
    
    $
    
    
    
    $
    4,500,001Conversion of Preferred Stock from stockholders to
common stock
    
    $
    
    
    
    $
    
    
    
    $
    76,164,733Issuance of options below fair market value
    
    $
    
    
    
    $
    
    
    
    $
    698,540Issuance of warrants in connection with financing
    
    $
    4,173,042
    
    
    $
    
    
    
    $
    11,511,541Issuance of common stock into escrow
    
    $
    
    
    
    $
    
    
    
    $
    1,500Cancellation of shares in connection with
Recapitalization
    
    $
    
    
    
    $
    
    
    
    $
    5,077Withholding of stock upon option exercises
    
    $
    
    
    
    $
    
    
    
    $
    49,181Noncash transfer of Rental Assets from Inventory to
Property and Equipment
    
    $
    
    
    
    $
    178,725
    
    
    $
    178,725Exercise of Warrants
    
    
    2,711
    
    
    
    
    
    
    
    2,711
 8. Subsequent Events
   8




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
   We are going through a period of transition while we search for a new chief executive officer,
chief financial officer and president and if the interim management structure that we have
established does not stabilize our company, there may be internal disruption and our stock price
and results of operation may decline as a result.
   The maintenance of existing and the establishment of additional relationships with cardiac surgeons
and cardiologists are necessary for us to achieve significant responses.
  Reverse Merger
   9




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Business Overview
      10




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Research and Development
     Critical Accounting Policies
  Revenue Recognition
 Accounts Receivable
 11




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Inventories
 Stock-Based Compensation
 Results of Operations
 Three Months Ended June 30, 2006 versus 2005
 Revenues
  Research and Development
  Three Months
    
    
    Three MonthsEnded June
    
    
    Ended June30,
    
    
    30,
    
    
    $
    
    
    %2006
    
    
    2005
    
    
    Change
    
    
    ChangeProduction
    
    $
    0.6
    
    
    $
    1.2
    
    
    $
    (0.6
    )
    
    
    (50
    %)Engineering and
development
    
    
    0.3
    
    
    
    0.3
    
    
    
    (0.0
    )
    
    
    Quality, clinical
and regulatory
    
    
    0.6
    
    
    
    0.7
    
    
    
    (0.1
    )
    
    
    (14
    %)Sales and marketing
    
    
    1.0
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    25
    %Total
    
    $
    2.5
    
    
    $
    3.0
    
    
    
    (0.5
    )
 
    
    Productionexpenses declined in connection with lower overall revenues.
    
    Quality, clinical, and regulatoryexpenses consist of the expenses associated with
maintaining our quality systems, the costs of our clinical trials, including travel and
fees and expenses of our third-party Clinical Research Organization, or CRO, clinical trial
costs, and the costs associated with dealing with the FDA, as well as other regulatory
agencies around the world. The decrease in expenses was primarily due to termination of our
third party CRO and a reduction of personnel involved in our clinical/ regulatory
departments in 2006 versus the same period of 2005.
 12




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
    
    Sales and marketingexpenses increased in connection with increased international
revenue and due to an increase in sales and marketing expenses as a result of increased
participation in medical conference and trade shows.
 General and Administrative
  Net Loss
  Six Months Ended June 30, 2006 versus 2005
 Revenues
  Research and Development
  Six Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,
    
    
    $
    
    
    %2006
    
    
    2005
    
    
    Change
    
    
    ChangeProduction
    
    $
    1.1
    
    
    $
    2.0
    
    
    $
    (0.9
    )
    
    
    (45
    %)Engineering and development
    
    
    0.6
    
    
    
    0.6
    
    
    
    0.0
    
    
    
    0
    %Quality, clinical and regulatory
    
    
    1.0
    
    
    
    2.4
    
    
    
    (1.4
    )
    
    
    (58
    %)Sales and marketing
    
    
    1.3
    
    
    
    1.1
    
    
    
    0.2
    
    
    
    18
    %Total
    
    $
    4.0
    
    
    $
    6.1
    
    
    
    (2.1
    )
 
    
    Productionexpenses declined in connection with lower overall revenues.
    
    Quality, clinical, and regulatoryexpenses consist of the expenses associated with
maintaining our quality systems, the costs of our clinical trials, including travel and
fees and expenses of our third-party Clinical Research Organization, or CRO, clinical trial
costs, and the costs associated with dealing with the FDA, as well as other regulatory
agencies around the world. The decrease in expenses was primarily due to termination of our
third party CRO and a reduction of personnel involved in our clinical/ regulatory
departments in 2006 versus the same period of 2005.
    
    Sales and marketingexpenses increased in connection with increased international
revenue and due to an increase in sales and marketing expenses as a result of increased
participation in medical conference and trade shows.
 General and Administrative
  13




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Net Loss
  Liquidity and Capital Resources
      Off-Balance Sheet Arrangements
  14




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Item 3. Controls and Procedures
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  15




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
   16




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Item 6. Exhibits
   
 (1)
    
    Filed herewith 17




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SIGNATURES
  MICROMED CARDIOVASCULAR, INC.By:

/s/
Clarice MotterName:
    Clarice MotterTitle:
    Corporate Secretary and Authorized Signatory by the Board of Directors  18




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19