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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 March 31, 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
    
    
    1Consolidated Balance Sheets as of December 31, 2005 and March 31, 2006 (unaudited)
    
    
    1Consolidated Statements of Operations for the period October 6, 1995 (date of inception) to March 31, 2006 (unaudited) and the three months ended March 31, 2006 and 2005 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the period October 6, 1995 (date of inception) to March 31, 2006 and the three months ended March 31, 2006 and 2005 (unaudited)
    
    
    3Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Controls and Procedures
    
    
    18PART II. OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19SIGNATURES
    
    
    20Certification of CEO pursuant to Section 302Certification of CEO pursuant to Section 906




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MICROMED CARDIOVASCULAR, INC.
 
 (A Development Stage Company)
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,268,030
    
    
    $
    2,871,071Accounts receivable
    
    
    1,188,350
    
    
    
    882,090Inventory
    
    
    2,635,770
    
    
    
    2,770,688Prepaids and other assets
    
    
    290,900
    
    
    
    340,938Total current assets
    
    
    5,383,050
    
    
    
    6,864,787Property and equipment, net
    
    
    501,960
    
    
    
    541,986Other assets
    
    
    32,083
    
    
    
    39,379Total assets
    
    $
    5,917,093
    
    
    $
    7,446,152LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    307,922
    
    
    $
    390,365Accrued liabilities
    
    
    473,396
    
    
    
    614,774Current portion of long-term debt
    
    
    1,021,734
    
    
    
    1,021,734Note payable
    
    
    282,737
    
    
    
    461,429Total current liabilities
    
    
    2,085,789
    
    
    
    2,488,302Long-term debt
    
    
    165,100
    
    
    
    409,092Commitments and ContingenciesStockholders Equity:Common Stock, $.001 par value, 100,000,000
shares authorized, 28,787,550 shares issued and
28,750,572 shares outstanding at March 31,
2006; 100,000,000 shares authorized, 26,113,495
issued and 26,076,517outstanding at December
31, 2005
    
    
    28,788
    
    
    
    26,077Additional paid-in capital
    
    
    90,003,447
    
    
    
    90,359,633Deferred compensation
    
    
    
    
    
    
    (470,030
    )Deficit accumulated during development stage
    
    
    (86,366,031
    )
    
    
    (85,366,922
    )Total stockholders equity
    
    
    3,666,204
    
    
    
    4,548,758Total liabilities and stockholders equity
    
    $
    5,917,093
    
    
    $
    7,466,152
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##### Table of Contents



MICROMED CARDIOVASCULAR, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 (Unaudited)
 Period fromInceptionThree Months Ended
    
    
    (October 6, 1995)March 31,
    
    
    Through March2006
    
    
    2005
    
    
    31, 2006Revenues:International product sales
    
    $
    615,675
    
    
    $
    1,176,150
    
    
    $
    8,342,419Clinical reimbursements
    
    
    480,367
    
    
    
    441,327
    
    
    
    16,539,186Total Revenue
    
    
    1,096,042
    
    
    
    1,617,477
    
    
    
    24,881,605Expenses:Research and development
    
    
    1,475,364
    
    
    
    3,150,908
    
    
    
    69,687,214General and administrative
    
    
    593,955
    
    
    
    1,013,279
    
    
    
    20,161,536Total operating expenses
    
    
    2,069,319
    
    
    
    4,164,187
    
    
    
    89,848,750Loss from operations
    
    
    (973,277
    )
    
    
    (2,546,710
    )
    
    
    (64,967,145
    )Interest and other income (expenses)
    
    
    32,601
    
    
    
    7,835
    
    
    
    1,633,319Interest expense
    
    
    (58,434
    )
    
    
    (136,779
    )
    
    
    (1,163,767
    )Net loss
    
    
    (999,110
    )
    
    
    (2,675,654
    )
    
    
    (64,497,593
    )Convertible preferred stock dividends and accretion
    
    
    
    
    
    
    
    
    
    
    (22,327,217
    )Net loss available to common stockholders
    
    $
    (999,110
    )
    
    $
    (2,675,654
    )
    
    $
    (86,824,810
    )Basic and diluted net loss per share available to
common stockholders
    
    $
    (0.04
    )
    
    $
    (0.19
    )Weighted average common shares outstanding
    
    
    26,522,166
    
    
    
    14,460,069
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MICROMED CARDIOVASCULAR, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (Unaudited)
 Period fromInception(October 6,1995)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (999,110
    )
    
    $
    (2,675,654
    )
    
    $
    (64,497,593
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    56,092
    
    
    
    74,646
    
    
    
    2,649,628Conversion of accrued interest on Series CPreferred
Stock
    
    
    
    
    
    
    
    
    
    
    95,778Conversion of accrued interest on Series DPreferred
Stock
    
    
    
    
    
    
    
    
    
    
    251,088Services contributed by stockholders
    
    
    
    
    
    
    
    
    
    
    300,050Non-employees stock compensation
    
    
    42,511
    
    
    
    
    
    
    
    183,252Employee stock based compensation
    
    
    74,044
    
    
    
    
    
    
    
    74,044Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    310,179Amortization of warrants
    
    
    
    
    
    
    
    
    
    
    32,698Loss on disposal of fixed assets
    
    
    
    
    
    
    4,639
    
    
    
    (2,999
    )Changes in assets and liabilities:Accounts receivable
    
    
    (306,260
    )
    
    
    183,837
    
    
    
    (1,188,350
    )Inventory
    
    
    134,918
    
    
    
    (102,984
    )
    
    
    (2,814,495
    )Prepaids and other assets
    
    
    57,335
    
    
    
    126,417
    
    
    
    (415,693
    )Accounts payable and accrued liabilities
    
    
    (223,820
    )
    
    
    907,946
    
    
    
    824,461Net cash used in operating activities
    
    
    (1,164,290
    )
    
    
    (1,481,153
    )
    
    
    (64,197,952
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (16,067
    )
    
    
    (12,719
    )
    
    
    (2,909,853
    )Net cash used in investing activities
    
    
    (16,067
    )
    
    
    (12,719
    )
    
    
    (2,909,853
    )Cash flows from financing activities:Proceeds from bridge loan from stockholders
    
    
    
    
    
    
    1,505,613
    
    
    
    16,458,987Repayments of bridge loans from stockholders
    
    
    
    
    
    
    
    
    
    
    (2,015,986
    )Proceeds from notes payable
    
    
    175,183
    
    
    
    1,249,780
    
    
    
    8,680,932Repayments of notes payable
    
    
    (597,867
    )
    
    
    (1,781,411
    )
    
    
    (7,104,503
    )Proceeds from issuance of warrants and preferred stock,
net of offering cost
    
    
    
    
    
    
    
    
    
    
    43,397,713Proceeds from issuance of common stock and cash
contributed by stockholders
    
    
    
    
    
    
    
    
    
    
    8,957,677Proceeds from exercise of stock options and issuance of
common stock and cash contributed by stockholders
    
    
    
    
    
    
    
    
    
    
    1,015
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Period fromInception(October 6,1995)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006Net cash (used in) provided by financing activities
    
    
    (422,684
    )
    
    
    1,017,982
    
    
    
    68,375,835Change in cash and cash equivalents
    
    
    (1,603,041
    )
    
    
    (475,890
    )
    
    
    1,268,030Beginning cash and cash equivalents
    
    
    2,871,071
    
    
    
    687,162
    
    
    
    Ending cash and cash equivalents
    
    $
    1,268,030
    
    
    $
    211,272
    
    
    $
    1,268,030Supplemental Disclosure of Cash Flow InformationCash paid for interest
    
    $
    58,434
    
    
    $
    86,149
    
    
    $
    477,525Supplemental 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
    
    $
    
    
    
    $
    
    
    
    $
    7,338,499Issuance 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
    
    $
    
    
    
    $
    
    
    
    $
    178,725Excersice of Warrants
    
    
    2,711
    
    
    
    
    
    
    
    2,711
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MICROMED CARDIOVASCULAR, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of Presentation
     2. Reverse Merger and Financing
 Completion of Merger
   Principal Terms of the Merger
  5




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Private Placements
    6




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3. Net Loss Per Share
  4. Warrants
 Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.
  5. Stock-Based Compensation
    7




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Three Months ended March 31,2005Net loss -As reported
    
    $
    (2,675,658
    )Stock option compensation
expense if the fair value
method had been applied
    
    
    (38,340
    )Pro forma net loss
    
    $
    (2,713,998
    )Loss per share  Basic and DilutedAs reported
    
    $
    (0.19
    )Pro forma
    
    $
    (0.19
    )
     8




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WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    AggregateShares
    
    
    Price
    
    
    Life
    
    
    Intrinsic ValueOutstanding, December 31, 2005
    
    
    1,644,470
    
    
    $
    0.20Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Forfeited
    
    
    (35,514
    )
    
    
    0.20Outstanding, March 31, 2006
    
    
    1,608,956
    
    
    
    0.20
    
    
    
    9.33
    
    
    $
    513,000Exercisable, March 31, 2006
    
    
    304,956
    
    
    $
    0.20
    
    
    
    7.83
    
    
    $
    0
  9




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WeightedNumber of
    
    
    Average FairShares
    
    
    ValueNonvested, December 31, 2005
    
    
    1,334,000
    
    
    $
    1.22Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    (34,500
    )
    
    
    0.70Nonvested, March 31, 2006
    
    
    1,299,500
    
    
    $
    1.22
 6. Inventory
   Raw materials
    
    $
    133,307Work in progress
    
    
    1,982,125Finished goods
    
    
    520,338$
    2,635,770
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Recent Events
 Completion of Merger
   10




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Principal Terms of the Merger
   The August 2005 Private Placement
   The December 2005 Private Placement
  11




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Overview
      12




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13




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Research and Development
      Critical Accounting Policies
  Revenue Recognition
 Accounts Receivable
 14




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Inventories
 Stock-Based
Compensation
 Results of Operations
 Three Months Ended March 31, 2006 and 2005
 Revenues
  Research and Development
  Three Months
    
    
    Three MonthsEnded March
    
    
    Ended March
    
    
    $
    
    
    %31, 2006
    
    
    31, 2005
    
    
    Change
    
    
    ChangeProduction
    
    $
    0.6
    
    
    $
    1.0
    
    
    $
    (0.4
    )
    
    
    (40
    %)Engineering and development
    
    
    0.2
    
    
    
    0.3
    
    
    
    (0.1
    )
    
    
    (33
    %)Quality, clinical and regulatory
    
    
    0.3
    
    
    
    1.4
    
    
    
    (1.1
    )
    
    
    (79
    %)Sales and marketing
    
    
    0.4
    
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (20
    %)Total
    
    $
    1.5
    
    
    $
    3.2
 
    
    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
 15




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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 decreased due to a reduction in sales and marketing
expenses in our international markets as a result of a reduction of personnel and increased
reliance on our international distributor network.
 General and Administrative
  Interest Expense
  Net Loss Per Share
  Liquidity and Capital Resources
     16




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Off-Balance Sheet Arrangements
  Forward-Looking Statements
   
    
    Completion of Clinical Trials;
    
    Limited sources of liquidity;
    
    MicroMeds ability to obtain additional debt or equity financing;
    
    MicroMeds history of operating losses;
    
    Market acceptance of the DeBakey VAD;
    
    The uncertainty of FDA and other government regulatory requirements may
have a material adverse effect on our ability to commercialize the DeBakey VAD;
    
    The degree and nature of our competition; and
 17




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
    
    The limited trading market for our common stock.
  
 Item 3. Controls and Procedures
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  18




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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
  
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer and Principal Financial Officer of MicroMed
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer and the Principal Financial Officer of MicroMed
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    This exhibit shall not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, whether made before or after the date
hereof and irrespective of any general incorporation language in any filings. 19




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SIGNATURES
  MICROMED CARDIOVASCULAR, INC.By:
    
    /s/ Travis E. BaughName: Travis E. BaughTitle: President and Chief ExecutiveOfficer and Chief Financial Officer
  20




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Exhibit Index
 31.1
    
    Certification of Chief Executive Officer and Principal Financial Officer of MicroMed
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer and the Principal Financial Officer of MicroMed
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    This exhibit shall not be deemed filed for purposes of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, whether made before or after the date
hereof and irrespective of any general incorporation language in any filings. 21