Ra Medical Systems, Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Ra Medical Systems, Inc., not Catheter Precision, Inc. The filing covers the three months ended March 31, 2021 and was filed May 11, 2021. The company develops and manufactures excimer laser systems and related products for vascular and dermatological applications, including DABRA and Pharos.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $1.118 million | $1.374 million | Down $0.256 million |
| Gross loss | $(0.255) million | $(0.210) million | Loss increased $0.045 million |
| Operating loss | $(7.185) million | $(7.790) million | Improved $0.605 million |
| Net loss | $(7.236) million | $(7.701) million | Improved $0.465 million |
| Adjusted EBITDA | $(6.062) million | $(6.165) million | Improved $0.103 million |
| Cash used in operations | $(8.078) million | $(7.043) million | Use increased $1.035 million |
| Cash and equivalents, period end | $15.954 million | $18.437 million | Current-period balance |
Product sales declined to $0.406 million from $0.586 million, while service and other revenue declined to $0.712 million from $0.788 million. Vascular revenue was only $4,000, compared with $113,000 in the prior-year quarter, reflecting the suspension of commercial DABRA catheter sales. Dermatology revenue was $1.114 million, down from $1.261 million.
Gross margin was approximately negative 22.8%, compared with negative 15.3% in Q1 2020. Operating margin was approximately negative 642.6%, and net margin was approximately negative 647.0%. The filing reports no income tax expense.
SG&A declined by $2.171 million to $4.114 million, primarily due to lower legal, personnel, insurance, travel, marketing, audit and other costs, partly offset by higher compliance and administrative consulting costs. Research and development increased by $1.521 million to $2.816 million as the company invested in catheter engineering and the atherectomy clinical study.
Cash declined by $7.952 million during the quarter. Investing activities provided $0.289 million, primarily from the sale of property and equipment. Financing activities used $0.163 million, including equipment-financing payments and offering costs, partly offset by $0.291 million of net proceeds from an at-the-market equity offering.
At March 31, 2021, total liabilities were $10.117 million, including a $2.000 million PPP promissory note, operating lease liabilities of $2.533 million, and deferred revenue of $2.394 million. The company had total stockholders’ equity of $15.145 million and an accumulated deficit of $160.438 million.
Material changes versus the prior comparable period
- Revenue decreased 18.6%, driven by the near-elimination of vascular revenue and lower dermatology revenue.
- Gross loss widened despite lower total cost of revenue, primarily because revenue declined and dermatology operated below capacity.
- Operating loss and net loss improved because SG&A reductions exceeded the increase in R&D spending.
- Operating cash burn increased to $8.078 million from $7.043 million.
- R&D spending increased approximately 117%, reflecting next-generation catheter development and clinical-trial activity.
- The weighted-average share count increased to 2.917 million from 551,000, reflecting the November 2020 1-for-25 reverse stock split and subsequent equity activity. Per-share results are presented on a post-split basis.
Guidance, outlook, risks and unusual items
Management provided no quantified revenue, earnings or cash-burn guidance. It expects continued operating losses and negative operating cash flow while it funds the atherectomy trial, catheter engineering, compliance activities and litigation.
- Going concern: Management stated that substantial doubt exists regarding the company’s ability to continue as a going concern for at least 12 months from issuance of the financial statements. Additional equity or debt financing may be required, potentially on unfavorable terms and with dilution to existing stockholders.
- DABRA catheter restrictions: Commercial shipments of DABRA catheters not used in the clinical trial remain paused while the company addresses shelf-life and performance issues. Additional testing data was submitted to the FDA in March 2021 and must be cleared before commercial shipments resume.
- Clinical trial: The atherectomy study was approved for up to 10 sites and 100 subjects. As of May 6, 2021, 50 subjects had been enrolled and five sites were cleared to enroll. Completion timing could not be estimated because of COVID-19 and product-performance constraints.
- COVID-19: The pandemic continued to reduce elective procedures, affect dermatology demand, delay trial enrollment, create minor supply delays and potentially impair access to financing.
- Regulatory and compliance matters: The company remains subject to a five-year Corporate Integrity Agreement following a December 2020 settlement with the DOJ, OIG and participating states. It paid $2.5 million in initial settlement amounts, including $0.1 million in April 2021, and may owe additional amounts if revenue exceeds specified thresholds or upon a change in control.
- Ongoing investigations and litigation: The SEC investigation and DOJ criminal investigation remain ongoing. A securities class action continues after the court dismissed some claims and plaintiffs filed a second amended complaint. Potential losses from these matters cannot be reasonably estimated.
- Unusual items: The quarter included a $0.5 million gain on the sale of automobiles and $1.169 million of stock-based compensation expense.
Most important facts for investors to verify
- Confirm whether this filing belongs to Catheter Precision, Inc. or to Ra Medical Systems, Inc.; the supplied document identifies Ra Medical Systems throughout.
- Verify the company’s ability to raise additional capital before cash resources are exhausted and assess the resulting dilution or financing terms.
- Monitor FDA clearance of the submitted catheter shelf-life data and the timing of resumed commercial DABRA shipments.
- Track atherectomy-trial enrollment, completion timing and the prospects for obtaining the requested FDA indication.
- Review compliance with the Corporate Integrity Agreement and the potential additional settlement payments tied to revenue or a change in control.
- Follow the SEC and DOJ criminal investigations and the securities class action for potential financial, regulatory or operational consequences.
- Assess whether recurring revenue and cost reductions can offset the company’s continuing negative gross margins and substantial operating cash burn.