Business Context and Reporting Period
This Form 8-K, dated September 9, 2022, reports that Ra Medical Systems, Inc. (RMED) has entered into a definitive Merger Agreement with Catheter Precision, Inc. (Catheter). The transaction is structured as a reverse merger where Catheter will be the accounting acquirer. Upon closing, the combined entity will operate as a wholly-owned subsidiary of the Post-Merger Combined Company, focusing on Catheter's medical device portfolio.
Key Financial Metrics and Transaction Terms
- Consideration Structure: Catheter shareholders will receive Ra Medical Common Stock based on an Exchange Ratio. The ratio is contingent on the conversion of $25,465,000 in Catheter convertible promissory notes into Ra Medical stock at 75% of the lower of the last closing price or the 5-day average closing price prior to closing.
- Ownership Split: Post-merger, Catheter stakeholders (including stockholders, noteholders, and option holders) are projected to own approximately 79.37% of the economic value. Ra Medical stockholders are projected to own approximately 20.63%.
- Debt Settlement: Noteholders will receive royalty rights equal to 12% per year on Net Sales of Catheter's vessel closure device in exchange for forgiving accrued interest.
- Liquidity Requirement: A closing condition requires Ra Medical to deliver Net Cash greater than $8,000,000. If Net Cash exceeds this threshold, the ownership percentages are subject to downward adjustment for Catheter stakeholders and upward adjustment for Ra Medical stakeholders.
- Stock Price Condition: The closing requires Ra Medical's stock price to be at least $0.09 (adjusted for reverse stock split) on the last trading day prior to closing and the 5-day average prior to closing.
Material Changes and Strategic Shift
The filing represents a fundamental change in control and business focus. Ra Medical is transitioning from its legacy operations to a combined entity focused on Catheter's three product areas:
- VIVO: An FDA-cleared and CE Mark product for locating ventricular arrhythmias non-invasively.
- Amigo: A second-generation robotic arm for catheter control, previously cleared by FDA and CE.
- Vessel Closure Device: A device under development for closing percutaneous catheter insertion sites, targeting a market of over one million procedures annually, with a planned release in the first half of 2023.
Guidance, Outlook, and Risks
Management Changes: David Jenkins, currently CEO of Catheter, will become Executive Chairman and CEO of the Post-Merger Combined Company with a base salary of $300,000. Current Ra Medical CEO Jonathan Will McGuire and interim CFO Brian Conn will remain through closing.
Outlook and Conditions: The merger is subject to numerous conditions, including stockholder approval, regulatory clearance, and the ability to raise sufficient funds to meet the $8,000,000 Net Cash requirement. The transaction is intended to be tax-free under Section 368(a) of the Internal Revenue Code.
Risks and Contingencies:
- Delisting Risk: The transaction is contingent on assurance that the merger will not cause Ra Medical to be delisted from the NYSE American.
- Stock Price Volatility: If Ra Medical's stock price falls below the $0.09 threshold, the merger consideration for Catheter stockholders is adversely impacted, though parties reserve the right to waive this condition.
- Forward-Looking Statements: Projections regarding product timelines and market size are subject to significant uncertainty, including the impact of the COVID-19 pandemic and capital market access.
Investor Verification Checklist
- Verify the final Exchange Ratio and the specific stock price used for the calculation of the merger consideration.
- Confirm whether Ra Medical successfully raised the required Net Cash of over $8,000,000 prior to closing.
- Review the Proxy Statement for details on the voting process and the specific terms of the Support Agreements and Lock-Up Agreements.
- Examine the unaudited pro forma financial information (Exhibit 99.6) to understand the combined entity's projected financial position.
- Monitor the status of the NYSE American listing maintenance and any correspondence regarding delisting.