Stereotaxis, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; filed March 12, 2021. The source is an annual filing, not a standalone fourth-quarter report. Stereotaxis develops and sells robotic magnetic navigation systems, related interventional devices, imaging and workflow solutions for hospital electrophysiology and other interventional procedures.
Financial performance and position
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $26.6 million | $28.9 million | Down 8% |
| Systems revenue | $3.6 million | $2.1 million | Up 76% |
| Disposables, service and accessories | $22.0 million | $25.9 million | Down 15% |
| Gross profit | $19.0 million | $22.8 million | Down 17% |
| Gross margin | 71% | 79% | Down 8 percentage points |
| Operating loss | $6.7 million | $4.8 million | Loss increased |
| Net loss | $6.6 million | $4.6 million | Loss increased |
| Loss attributable to common stockholders | $8.0 million | $6.0 million | Loss increased |
| Basic and diluted loss per share | $0.11 loss | $0.10 loss | Worsened |
| Cash flow used in operations | $3.5 million | $4.6 million | Use decreased |
| Cash and cash equivalents | $44.2 million, including compensating cash | $30.2 million | Increased |
| Working capital | $39.1 million | $26.7 million | Increased |
Systems gross margin was less than negative $0.1 million in 2020 versus $0.7 million in 2019, primarily reflecting installation costs and changes in production and obsolescence reserves. Disposables, service and accessories generated an 87% gross margin versus 86% in 2019.
Operating expenses declined to $25.7 million from $27.6 million. Research and development declined 10% to $8.1 million, sales and marketing declined 12% to $11.2 million, and general and administrative expense increased 9% to $6.4 million. The filing does not report a cash-flow margin or adjusted EBITDA measure.
Liquidity, debt and capitalization
- Cash used in operating activities was $3.5 million, while financing activities provided $17.3 million.
- The company raised approximately $15.0 million of net proceeds in a May 2020 common-stock offering and received $2.2 million from a Paycheck Protection Program loan.
- Debt consisted of approximately $2.2 million of PPP borrowings, reported as $1.2 million current and $1.0 million long-term at year-end. The company expected substantial forgiveness, but stated that repayment would begin in August 2021 for any unforgiven amount, with final repayment in April 2022 at 1% interest.
- The prior Silicon Valley Bank working-capital line matured on June 30, 2020.
- The company had an accumulated deficit of $488.0 million and has sustained operating losses throughout its history.
- Potential dilution is significant: approximately 43.5 million shares were issuable upon conversion of Series A preferred stock, 5.6 million upon conversion of Series B preferred stock, and additional shares were reserved for options, restricted stock units and warrants.
Material changes versus 2019
- COVID-19 reduced procedure volumes and recurring revenue, more than offsetting higher system sales.
- Revenue from systems increased, but system gross margin turned slightly negative.
- Overall gross margin contracted from 79% to 71%, and the operating loss widened despite lower operating expenses.
- Operating cash burn improved by approximately $1.1 million, but the company remained dependent on equity and government-backed financing.
- Backlog increased to approximately $6.9 million from $1.1 million. Management expected approximately 93% of the 2020 year-end backlog to be recognized in 2021, subject to customer, construction and other contingencies.
- International revenue declined to $9.2 million from $9.6 million, while U.S. revenue declined to $17.4 million from $19.3 million.
Outlook, commentary and risks
Management expected operating expenses in 2021 to exceed gross margin and stated that operating losses and negative cash flows would continue until revenue growth or expense reductions support operations. The company identified additional debt or equity financing as a principal liquidity plan and warned that it may not continue as a going concern if operating performance does not improve or adequate capital cannot be obtained.
COVID-19 caused procedure volumes in certain regions to fall materially, with U.S. and European weekly procedures reaching approximately 40% of fourth-quarter 2019 levels in April 2020 before recovering. Management expected periodic disruption to procedure volumes, service activity and system placements into 2021.
- Backlog may be delayed, revised or canceled because of hospital construction, certificate-of-need approvals, customer financing and other contingencies.
- The business depends on hospital adoption of expensive capital systems, physician training and continued use of recurring disposable products.
- Strategic relationships, particularly with Biosense Webster and imaging-system providers, are important to product compatibility and commercialization. Royalty revenue from Biosense Webster represented 8% of 2020 revenue versus 10% in 2019.
- The company relies on contract manufacturers and certain sole- or single-source suppliers, including suppliers of key magnets, creating supply-chain, trade and manufacturing risks.
- Medical-device regulatory approvals, quality-system compliance, reimbursement, product liability, cybersecurity and intellectual-property protection remain material risks.
- The Series A preferred stock carries cumulative dividends at 6% annually and has senior liquidation rights. A change of control could trigger redemption rights and a potential Biosense Webster termination fee.
- Subsequent events included a potential performance share award of up to 13.0 million shares to the CEO and a new ten-year St. Louis facility lease beginning no earlier than January 2022.
Investor verification checklist
- Verify the amount and timing of any PPP loan forgiveness and the remaining repayment obligation.
- Assess whether 2020 year-end backlog of $6.9 million converted into 2021 revenue and identify cancellations or delays.
- Review quarterly procedure volumes, system placements and recurring disposable revenue to determine the pace of post-pandemic recovery.
- Reconcile cash consumption with the company’s stated 2021 operating-loss outlook and expected financing needs.
- Evaluate system gross-margin improvement, inventory reserves and installation-cost trends.
- Quantify fully diluted share count, including Series A and Series B conversions, warrants, options, restricted units and the subsequent CEO performance share award.
- Review Biosense Webster agreement terms, royalty concentration and any change-of-control fees or supply obligations.
- Confirm regulatory clearances, reimbursement status, supplier continuity and the impact of the new facility lease on future fixed costs.