Business Context and Reporting Period
The filing is Ra Medical Systems, Inc.’s Form 10-K for the fiscal year ended December 31, 2021, filed March 23, 2022. The supplied metadata identifies Catheter Precision, Inc., but the filing itself is for Ra Medical Systems, Inc. (NYSE American: RMED); investors should verify the entity and filing association.
The company focuses on its DABRA excimer laser and single-use catheter system for peripheral artery disease. It sold its Pharos dermatology business to STRATA Skin Sciences on August 16, 2021, and presents that business as discontinued operations. Continuing operations consist primarily of DABRA research, development, manufacturing and clinical-trial support.
Key Financial Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Continuing-operation revenue | $22 thousand | $259 thousand | Down $237 thousand |
| Gross loss | $(1.538) million | $(1.913) million | Improved $375 thousand |
| Operating loss | $(29.266) million | $(35.401) million | Improved $6.135 million |
| Loss from continuing operations | $(27.261) million | $(35.320) million | Improved $8.059 million |
| Net loss | $(25.070) million | $(36.045) million | Improved $10.975 million |
| Net loss per share | $(4.96) | $(21.22) | Improved |
| Cash used in operating activities | $(27.625) million | $(28.304) million | Improved $679 thousand |
| Cash and cash equivalents at year-end | $15.045 million | $23.906 million | Down $8.861 million |
| Accumulated deficit | $178.272 million | $153.202 million | Increased $25.070 million |
| Stockholders’ equity | $13.673 million | $21.147 million | Down $7.474 million |
Including discontinued operations, 2021 revenue was approximately $2.622 million, comprising $22 thousand from continuing operations and $2.600 million from the dermatology business before its sale. Discontinued operations contributed $2.191 million of income in 2021, including a $3.473 million gain on sale, compared with a $725 thousand loss in 2020.
Continuing-operations revenue was substantially below cost of revenues, resulting in a continuing-operations gross margin of approximately negative 6,991%. This percentage is distorted by the very small revenue base and the company’s largely fixed manufacturing and operating costs.
SG&A expense declined to $15.475 million from $24.533 million, primarily because of lower legal, personnel, insurance, depreciation and other costs. Research and development expense increased to $12.253 million from $8.955 million due to catheter engineering and atherectomy-trial activity. Other income included a $2.023 million gain from forgiveness of the PPP loan.
The company had no PPP or equipment-financing debt at year-end; equipment financing was repaid in March 2021 and the PPP loan was forgiven in June 2021. Operating lease liabilities totaled $2.264 million, including $283 thousand classified as current.
Material Changes Versus the Prior Period
- Continuing revenue fell approximately 92% as commercial catheter sales remained paused while the company evaluated catheter shelf-life and performance issues.
- Commercial catheters were not being sold at year-end; shipments continued primarily for atherectomy clinical-trial sites.
- The FDA cleared additional catheter shelf-life test data submitted in March 2021 in July 2021, but the company had not resumed commercial sales.
- The company completed the sale of the dermatology business, generated $3.7 million of cash proceeds and recognized a $3.5 million gain.
- Operating losses narrowed largely because of cost reductions and lower legal expenses, while R&D spending increased.
- The company reduced its DABRA sales force from 34 employees in June 2019 to six clinical specialists at December 31, 2021.
- Cash declined by $8.9 million during 2021 despite $15.2 million of net ATM proceeds and $3.5 million of net proceeds from the dermatology-business sale.
Guidance, Outlook, Risks and Unusual Items
- Going concern: Management and the auditor reported substantial doubt about the company’s ability to continue as a going concern for at least 12 months after issuance of the financial statements. Management expects continuing losses and negative operating cash flow and plans to seek additional financing.
- Subsequent financing: In February 2022, the company raised approximately $10.7 million of net proceeds through common stock, warrants and pre-funded warrants. The financing was highly dilutive and included 27.6 million Series A warrants, 27.6 million Series B warrants and pre-funded warrants for 14.5 million shares, in addition to common shares issued.
- Clinical trial: As of March 21, 2022, 98 subjects had been enrolled at seven cleared sites. FDA approval increased the trial cap from 100 to 125 subjects. Management aimed to complete enrollment by mid-2022 and six-month follow-up in early 2023, but stated that timing could not be reliably estimated because of COVID-19 impacts.
- Product development: The company is developing a more kink-resistant catheter, a guidewire-compatible catheter and potential lithotripsy applications. The kink-resistant catheter was submitted to the FDA in February 2022; future clearance and commercialization remain uncertain.
- Litigation: A proposed securities-class-action settlement provides for a $10.0 million payment. The company paid approximately $0.6 million in March 2022 and may owe up to an additional $0.4 million for its self-insured retention; insurers are expected to fund the remainder, subject to final court approval. A related derivative action remains stayed.
- Government settlement: Under the DOJ and participating-state settlement, additional payments may be required if annual revenue exceeds $10 million during 2021–2024. A change in control before the end of 2024 could trigger an additional payment of up to $28 million. Bankruptcy-related avoidance could expose the company to a claim stated as $56 million, less prior change-in-control payments.
- Operating risks: Key risks include catheter calibration, shelf-life, overheating and kinking issues; FDA and other regulatory requirements; reimbursement uncertainty; dependence on a single manufacturing facility and limited suppliers; COVID-19-related trial delays; competition; litigation; compliance with a five-year Corporate Integrity Agreement; and the CEO’s serious illness and related succession risk.
- Controls: Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021. The auditor was not required to provide an internal-control attestation because the company remained an emerging growth company.
Most Important Facts for Investors to Verify
- Confirm whether this filing should be attributed to Ra Medical Systems, Inc. or Catheter Precision, Inc., since the supplied company metadata and filing registrant differ.
- Verify current cash, quarterly cash burn and the duration of liquidity after the February 2022 financing, including potential settlement and placement-agent payments.
- Review the going-concern disclosure and determine whether additional equity or debt financing is required before operating cash is exhausted.
- Track FDA clearance and commercialization timing for the redesigned catheters and the company’s progress toward an atherectomy indication.
- Confirm final court approval and the company’s ultimate cash exposure under the $10.0 million securities settlement.
- Assess dilution from the February 2022 warrants, pre-funded warrants and any future capital raises.
- Review compliance with the DOJ settlement and Corporate Integrity Agreement, including contingent revenue-based and change-of-control payments.
- Monitor catheter quality, recall-related obligations, reimbursement coverage and customer concentration, as three customers represented more than 10% of continuing-operation revenue in 2021.