Catheter Precision, Inc. — 2022 Second-Quarter SEC Filing Summary
Filing context: The Form 10-Q was filed by Ra Medical Systems, Inc., the prospective merger partner of Catheter Precision, Inc., for the quarterly and six-month periods ended June 30, 2022. The filing states that the parties had only signed a non-binding term sheet and had not entered into a definitive merger agreement. Ra Medical operated as a medical-device company focused on the DABRA excimer laser and catheter system for peripheral artery disease.
Financial performance and position
| Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 |
|---|---|---|---|---|
| Revenue | $5 thousand | $9 thousand | $14 thousand | $13 thousand |
| Gross loss | $(61) thousand | $(511) thousand | $(147) thousand | $(954) thousand |
| Operating loss | $(8.46) million | $(6.74) million | $(13.96) million | $(13.61) million |
| Net loss | $(8.45) million | $(5.25) million | $(13.94) million | $(12.49) million |
| Loss per share | $(0.26) | $(1.28) | $(0.53) | $(3.56) |
| Net cash used in operating activities | Not separately provided | Not separately provided | $(14.58) million | $(14.70) million |
Gross margins were deeply negative because product sales were minimal and cost of revenue exceeded revenue. Six-month selling, general and administrative expense was $4.78 million, research and development expense was $5.51 million, and restructuring and impairment charges were $3.53 million. Six-month adjusted EBITDA was $(9.78) million, compared with $(11.77) million in the prior-year period.
At June 30, 2022, cash and cash equivalents were $11.13 million, down from $15.05 million at December 31, 2021. Total assets were $14.37 million, total liabilities were $4.58 million, and stockholders’ equity was $9.79 million. The balance sheet did not report conventional debt, but included operating lease liabilities of $2.13 million, including $297 thousand classified as current. The company also reported $1.97 million of accrued expenses, including an estimated $890 thousand cash tail fee owed to a former placement agent.
Material changes versus the prior comparable period
- Revenue remained negligible, reflecting sales primarily to clinical-trial sites rather than commercial customers.
- Operating loss increased by $1.72 million in the second quarter and by $355 thousand for the six-month period, primarily because of $3.53 million in restructuring and impairment charges.
- Net loss increased by $3.20 million in the second quarter and by $1.46 million for the six-month period. The prior-year periods benefited from approximately $2.02 million of other income related to forgiveness of a Paycheck Protection Program promissory note.
- SG&A declined by $922 thousand in the quarter and $2.30 million year to date, while R&D declined by $433 thousand in the quarter and $68 thousand year to date.
- The company completed a February 2022 public offering that generated approximately $9.7 million of net proceeds and issued substantial warrant coverage. Total financing cash inflows were $10.66 million for the six months.
- On June 6, 2022, the company terminated approximately 65% of its full-time employees, paused engineering activities, stopped manufacturing, discontinued new patient enrollment in its atherectomy study, and sold or disposed of substantially all property and equipment and inventory.
- The restructuring charge included approximately $1.55 million of property and equipment impairment, $1.00 million of inventory obsolescence, $584 thousand of severance, and $395 thousand of prepaid-expense write-offs.
Outlook, contingencies, and unusual items
- Going concern: Management concluded that substantial doubt existed regarding the company’s ability to continue as a going concern for at least 12 months. The company had an accumulated deficit of $192.2 million and used $14.6 million in operating cash during the first six months of 2022.
- Proposed Catheter Precision merger: The contemplated transaction would acquire all of Catheter Precision in exchange for Ra Medical shares. Terms remained under negotiation, and closing was subject to conditions and third-party approvals. The filing provides no assurance that the merger would occur or that its anticipated benefits would be realized.
- Subsequent financing: In July 2022, the company repriced certain warrants from $0.50 to $0.28 per share. Investors exercised approximately 22.2 million Series A warrants, generating approximately $5.5 million of net proceeds after issuance costs and resulting in the issuance of Series C warrants.
- Regulatory development: On July 5, 2022, the company received FDA 510(k) clearance for the DABRA 2.0 catheter, but stated that it had no current plans to commercialize it.
- Clinical program: Enrollment in the atherectomy study stopped at 108 subjects. Management aimed to complete six-month follow-up in early 2023, although COVID-19-related delays remained a risk.
- Litigation: A proposed $10.0 million securities class-action settlement had received preliminary approval, but final approval was scheduled for August 15, 2022. The company had paid approximately $600 thousand toward its self-insured retention, with insurers paying the remainder subject to final approval.
- Government settlement obligations: The company could owe additional payments if annual revenue exceeded $10 million or if a change-in-control transaction occurred before the end of 2024. A change-in-control payment could include $5 million plus 4% of transaction value above $100 million, subject to a $28 million cap.
- COVID-19 and operating risks: The filing identified continuing uncertainty affecting trial follow-up, operations, supply chains, and access to financing. The company also cited risks related to regulatory compliance, product performance, litigation, dilution, and possible liquidation or dissolution if financing or a strategic transaction could not be completed.
Most important facts for investors to verify
- Whether Ra Medical and Catheter Precision entered into a definitive merger agreement and whether all closing conditions were satisfied.
- The post-transaction ownership percentages, share issuance, dilution, capitalization, and warrant overhang.
- The company’s cash runway after the July 2022 warrant exercise proceeds and any subsequent financing.
- Whether the going-concern uncertainty was resolved or remained in subsequent filings.
- The final status and financial effect of the securities class-action settlement and other litigation.
- Whether the atherectomy trial follow-up was completed and whether FDA clearance for the atherectomy indication was obtained.
- Whether DABRA manufacturing and commercialization resumed, particularly given the June 2022 cessation of manufacturing and the stated lack of plans to commercialize DABRA 2.0.
- The amount and terms of any placement-agent tail fees, additional warrants, lease obligations, and potential government settlement payments.