SUNNYVALE, Calif.--(BW HealthWire)--May 21, 1999--Cardiac Pathways Corporation (Nasdaq: CPWY), today announced a change in Company leadership, its third quarter results and other recent developments. Leadership Changes The current Chief Executive Officer of the Company, William N. Starling, will resign effective May 24, 1999. Starling will continue to serve as Chairman of the board of directors. Starling will be replaced as Chief Executive Officer by Thomas M. Prescott, also effective May 24, 1999. For the past three years, Prescott has served as Vice President and General Manager of a $200 million respiratory business unit of Mallinckrodt, Inc. In 1994, he joined Nellcor, and along with other members of the senior leadership team, substantially grew the Nellcor Puritan Bennett business prior to the acquisition by Mallinckrodt in August 1997. Prior to Nellcor, Prescott spent seven years with General Electric Medical Systems and five years with a unit of Siemens. Regarding Prescott's decision to join the Company, Starling said, "We are extremely pleased to have an operating executive with such a strong background and demonstrated success at driving profitable growth, join Cardiac Pathways to provide the leadership necessary to transition from a development stage company to commercial viability." In response, Prescott commented, "I am very pleased to join Cardiac Pathways -- we have unique differentiable products like the Chilli cooled ablation catheter available today, outstanding technology in the R&D pipeline, and terrific, committed employees that are dedicated to delivering cost-effective products that address life-threatening heart rhythm disturbances." Dr. Thomas J. Fogarty, a founding and current board member at Cardiac Pathways noted that Starling "provided invaluable assistance in guiding the Company through a challenging developmental stage and will most certainly be helpful in the future while serving as the board's chairman." Results For Third Fiscal Quarter Sales for the third quarter of fiscal 1999 were $1.3 million, compared to $738,000 for the third quarter of fiscal 1998. The Company recorded a net loss of $4.3 million, or $0.43 per share, for the third quarter of fiscal 1999, compared to a net loss of $4.3 million, or $0.45 per share, for the third quarter of fiscal 1998. Sales for the second quarter of fiscal 1999 were $967,000. Year-to-date sales for fiscal 1999 were $3.4 million, compared to $1.7 million for the same period a year ago. The year-to-date net loss for fiscal 1999 was $13.9 million, or $1.41 per share, compared to a net loss of $13.0 million, or $1.35 per share for the same period of fiscal 1998. Non-Compliance with Nasdaq Listing Requirements On May 5, 1999, Nasdaq notified the Company that the Company was no longer in compliance with the net tangible assets requirement of $4.0 million for continued listing on the Nasdaq National Market under NASD Rule 4450(a) (Maintenance Standard 1). As a result of the Company's failure to meet the stated standards, Nasdaq is reviewing the Company's eligibility for continued listing on the Nasdaq National Market. In order to facilitate Nasdaq's review, the Company provided on May 17, 1999 a proposal for achieving compliance. Over the last several months, the Company has considered various financing options and actively sought additional financing that would bring it back into compliance with the requirements of Nasdaq. The Company may receive a formal notice of deficiency from Nasdaq shortly; at which time Nasdaq may commence the delisting process. There can be no assurances that Nasdaq will permit the continued listing of the Company's common stock. Nasdaq's decision with respect to continued listing will be based in part on the Company's ability to demonstrate to Nasdaq that the Company can sustain compliance with Nasdaq's listing requirements. Term Loan Liquidation The Company's long-term credit facility with Silicon Valley Bank required the Company to collateralize 105% of the principal balance of the loan in the event of non-compliance with the restrictive covenants of the facility. In late March 1999, as a result of non-compliance with certain financial covenants, the Company fully collateralized its $6.0 million loan obligation to Silicon Valley Bank by pledging $3.0 million of cash and $3.3 million of short term investments as collateral for the loan. On May 18, 1999, the Company received notice that Silicon Valley Bank was commencing to foreclose upon and take possession of the pledged cash and short-term investments. As of May 20, 1999, Silicon Valley Bank had foreclosed and taken possession of the collateral in satisfaction of the full amounts under the loan. Cardiac Pathways Corporation designs, develops and manufactures minimally invasive systems to diagnose and treat cardiac tachyarrhythmias (abnormally rapid heart rhythms). The Company is developing products designed to provide integrated system solutions for the improved diagnosis and treatment of ventricular tachycardia and atrial fibrillation, two of the most serious and prevalent types of abnormally rapid heart rhythms. Statements included in this letter that are not historical or current facts and which relate to the desisting of the Company's Common Stock from Nasdaq, or the Company's compliance with Nasdaq listing requirements are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties include, but are not limited to, Nasdaq's determination as to the Company's compliance with the requirements, including the Company's ability to demonstrate sustainable, long term compliance with all applicable requirements. CARDIAC PATHWAYS CORPORATION Consolidated Statement of Operations Data Three months ended March 31, --------------------------- 1999 1998 ------------ ------------ (unaudited) Net sales $ 1,322,960 $ 737,947 Cost of goods sold 991,119 793,057 ------------ ------------ Gross margin (deficit) 331,841 (55,110) Operating expenses: Research and development 3,069,920 3,581,398 Selling, general and administrative 1,596,064 1,041,843 ------------ ------------ Total operating expenses 4,665,984 4,623,241 ------------ ------------ Loss from operations (4,334,143) (4,678,351) Other income (expense): Interest income 140,785 427,663 Interest expense (157,014) (130,717) Other, net 11,822 37,752 ------------ ------------ Total other income (expense), net (4,407) 334,698 ------------ ------------ Net loss $ (4,338,550) $ (4,343,653) ============ ============ Net loss per share - basic and diluted ($0.43) ($0.45) ============ ============ Shares used in computing net loss per share - basic and diluted 9,974,000 9,723,000 ============ ============ Nine months ended March 31, -------------------------- 1999 1998 ------------ ------------ (unaudited) Net sales $ 3,427,277 $ 1,659,451 Cost of goods sold 3,111,677 2,063,366 ------------ ------------ Gross margin (deficit) 315,600 (403,915) Operating expenses: Research and development 9,783,331 10,687,922 Selling, general and administrative 4,669,302 3,000,259 ------------ ------------ Total operating expenses 14,452,633 13,688,181 ------------ ------------ Loss from operations (14,137,033) (14,092,096) Other income (expense): Interest income 652,594 1,483,191 Interest expense (496,620) (439,089) Other, net 31,854 61,082 ------------ ------------ Total other income (expense), net 187,828 1,105,184 ------------ ------------ Net loss $(13,949,205) $(12,986,912) ============ ============ Net loss per share - basic and diluted ($1.41) ($1.35) ============ ============ Shares used in computing net loss per share - basic and diluted 9,909,000 9,603,000 ============ ============ Consolidated Balance Sheet Data March 31, June 30, ----------- ----------- 1999 1998 ----------- ----------- (unaudited) Cash and short term investments $ 2,163,658 $24,517,377 Working capital 265,429 22,350,838 Total assets 16,666,834 30,934,577 Long-term obligations 7,444,925 9,247,781 Stockholders' equity 4,079,060 17,485,018  