Business Context and Reporting Period
This Form 8-K is filed by Ra Medical Systems, Inc. (not Catheter Precision, Inc., which is the target of a proposed acquisition) on July 22, 2022. The filing discloses two primary events: a repricing of existing warrants to induce exercise and the signing of a non-binding term sheet for a potential merger with Catheter Precision, Inc.
Key Financial Metrics and Capital Structure
- Warrant Repricing: The exercise price of all Existing Warrants (Series A and Series B) was reduced from $0.50 to $0.28 per share.
- Expected Proceeds: The Company expects to receive approximately $6.2 million in gross proceeds from the exercise of Series A Warrants.
- Share Issuance: The exercise of Series A Warrants is expected to result in the issuance of approximately 22.2 million shares of common stock.
- Pro Forma Capitalization: Following the warrant exercises, pro forma shares of common stock outstanding are expected to be approximately 54.52 million.
- Transaction Fees: The Company agreed to pay an 8.0% cash fee to the warrant inducement agent, Ladenburg Thalmann & Co. Inc., based on gross proceeds.
- Merger Consideration: No financial metrics for Ra Medical's current revenue, profit, or debt are provided in this filing. The proposed merger with Catheter Precision would be funded via the issuance of non-voting preferred stock.
Material Changes and Proposed Transactions
Warrant Inducement Offer
Following the repricing, the Company entered into inducement letters with certain investors to exercise up to 2.2 million Existing Warrants. In exchange, investors will receive new warrants (Series C and Series D) with an exercise price of $0.28 and terms of five and seven years, respectively, covering 100% of the shares issued upon exercise.
Proposed Merger with Catheter Precision, Inc.
On June 18, 2022, Ra Medical signed a non-binding term sheet to acquire 100% of Catheter Precision via a reverse triangular merger. Key proposed terms include:
- Ownership Structure: Post-merger, Catheter Precision equity and debt holders would own approximately 83.3% of the combined company on a fully diluted basis, while existing Ra Medical equity holders would own 16.7%.
- Consideration: Acquisition would be made in exchange for a newly designated series of non-voting preferred stock.
- Binding Status: No binding agreement has been entered into; the Company is currently completing due diligence.
Conditions Precedent to Merger
The merger is subject to several critical conditions, including:
- Delivery of a minimum of $5.0 million in "net cash" at closing.
- Confirmation from NYSE American that the transaction does not violate listing rules regarding reverse mergers.
- Resolution of outstanding putative securities class action and shareholder derivative complaints against Ra Medical.
- Catheter Precision's satisfactory review of Ra Medical's Settlement Agreement and Corporate Integrity Agreement with the U.S. Department of Justice and other regulators.
- Stockholder approval to convert the Merger Preferred Stock into voting common stock.
Risks, Contingencies, and Outlook
The filing contains extensive forward-looking statements regarding the proposed merger and future financial performance. Management explicitly states there is no assurance the merger will be completed or that the terms will remain as proposed. Significant risks include:
- Transaction Failure: The merger may not be completed due to failure to satisfy conditions precedent, regulatory approvals, or shareholder votes.
- Legal Proceedings: Outstanding litigation and the terms of the DOJ settlement agreement could deter Catheter Precision from proceeding.
- Shell Company Status: The transaction is contingent on Ra Medical not being designated as a "shell company" by the SEC or NYSE American.
- Market Disruption: The announcement and potential consummation of the merger may disrupt current operations and divert management attention.
Investor Verification Checklist
- Verify the status of the outstanding securities class action and shareholder derivative complaints against Ra Medical, as their resolution is a condition for the merger.
- Confirm Ra Medical's ability to deliver the required $5.0 million in net cash at the time of a potential closing.
- Monitor the NYSE American's response regarding whether the transaction will be treated as a reverse merger requiring specific shareholder approvals.
- Review the Settlement Agreement and Corporate Integrity Agreement with the DOJ to assess potential liabilities that may affect the merger's viability.
- Track the progress of the definitive merger agreement, as the current term sheet is non-binding.