SEC Form 10-K Summary
Filing entity: Ra Medical Systems, Inc. (the source filing does not identify Catheter Precision, Inc.; investors should verify the company-name discrepancy). Reporting period: Fiscal year ended December 31, 2020; filed March 16, 2021.
Business Context and Reporting Period
Ra Medical Systems was a commercial-stage medical-device company operating two segments: vascular and dermatology. Its DABRA excimer laser and single-use catheter addressed peripheral artery disease, while its Pharos laser treated psoriasis, vitiligo, atopic dermatitis and leukoderma.
DABRA was FDA-cleared for crossing chronic total occlusions and ablating a channel in occlusive peripheral vascular disease, but did not have a U.S. atherectomy indication. The company was pursuing that indication through a pivotal clinical trial. Pharos had FDA clearances for several dermatological uses and CE-mark authorization in Europe.
The company completed a one-for-25 reverse stock split in November 2020 and transferred its common-stock listing from the NYSE to NYSE American in December 2020. It had 85 full-time employees at year-end.
Financial Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $4.405 million | $7.199 million | Down $2.794 million |
| Product sales | $1.407 million | $3.859 million | Down $2.452 million |
| Service and other revenue | $2.998 million | $3.340 million | Down $0.342 million |
| Gross loss | $1.077 million | $1.651 million | Improved $0.574 million |
| Operating expenses | $34.982 million | $56.079 million | Down $21.097 million |
| Operating loss | $36.059 million | $57.730 million | Improved $21.671 million |
| Net loss | $36.045 million | $56.957 million | Improved $20.912 million |
| Adjusted EBITDA | $(29.612) million | $(32.437) million | Improved $2.825 million |
| Cash used in operating activities | $28.304 million | $33.173 million | Improved $4.869 million |
| Cash and cash equivalents | $23.906 million | $14.584 million | Up $9.322 million |
| Accumulated deficit | $153.202 million | $117.157 million | Increased $36.045 million |
Revenue fell 39% year over year. Vascular revenue declined to $0.259 million from $1.275 million as commercial catheter sales were paused; dermatology revenue declined to $4.146 million from $5.924 million, primarily because of lower Pharos equipment and service activity during COVID-19.
The gross margin remained negative: approximately negative 24% in 2020 versus negative 23% in 2019. The company reduced SG&A substantially, including a $17.1 million reduction in stock-based compensation and lower personnel, travel and marketing costs, but increased research and development spending to $9.008 million from $4.530 million.
Cash increased primarily through $19.887 million of net proceeds from 2020 public offerings, $2.0 million of Paycheck Protection Program financing and $0.827 million from warrant exercises. Investing activities provided $15.933 million as short-term investments matured. Total liabilities were $12.291 million, including a $2.0 million PPP note, $2.620 million of operating lease liabilities and $0.265 million of equipment financing.
Material Changes Versus the Prior Comparable Period
- Total revenue decreased $2.794 million, with product sales accounting for most of the decline.
- Vascular revenue decreased approximately 80% because commercial DABRA catheter shipments were suspended while shelf-life and performance issues were investigated.
- Operating expenses decreased 38%, primarily because of workforce reductions, lower stock-based compensation, reduced travel and marketing, and lower legal expense, partly offset by higher R&D spending.
- R&D spending approximately doubled as the company funded DABRA catheter engineering and the atherectomy clinical trial.
- Operating cash burn remained substantial at $28.304 million, despite improving from 2019.
- The company raised capital through May and August 2020 offerings that generated approximately $19.1 million net, issuing common stock and warrants. Approximately 2.345 million warrants were outstanding at year-end, creating potential dilution.
- The company entered into a DOJ settlement and five-year Corporate Integrity Agreement in December 2020 and recorded approximately $2.7 million of expense related to the settlement matter.
Guidance, Outlook, Risks, Contingencies and Unusual Items
- Going concern: Management and the auditors reported substantial doubt about the company’s ability to continue as a going concern within 12 months of the financial-statement issuance date. The company expects continuing losses and negative operating cash flow and may require additional equity or debt financing.
- DABRA commercialization: Commercial catheter shipments were paused pending additional shelf-life testing and FDA clearance. Additional test data was submitted in March 2021, but the filing does not state that the FDA had cleared the data. The company supplied catheters only to atherectomy-trial sites and did not expect to rebuild its vascular sales team until engineering work progressed.
- Clinical trial: The atherectomy trial was approved for up to 10 sites and 100 subjects. As of December 31, 2020, 20 subjects had been enrolled and five sites had been cleared; as of March 11, 2021, enrollment had increased to 30 subjects. COVID-19 materially delayed site activation and enrollment, and management could not estimate completion timing.
- Product and regulatory risk: DABRA had experienced calibration failures, overheating, limited shelf life and catheter-kinking concerns. The company had conducted recalls and field corrections involving DABRA and Pharos products. FDA inspections had identified prior quality-system and complaint-reporting issues, although the company stated that corrective actions related to the December 2019 inspection were complete.
- Government investigations: The DOJ civil investigation and related civil action were settled without an admission of liability. The settlement required an initial $2.5 million payment, of which $2.4 million was paid in December 2020 and $0.1 million remained payable when state agreements were finalized. Additional payments apply if annual revenue exceeds $10 million in 2021–2024, and a change-in-control payment could reach up to $28 million. The SEC civil investigation and DOJ criminal investigation remained ongoing and were not released by the settlement.
- Corporate Integrity Agreement: The five-year agreement requires enhanced monitoring, reporting, certification, training, compliance oversight and an independent review organization. Failure to comply could result in penalties or exclusion from federal healthcare programs.
- Litigation: A securities class action and shareholder derivative action remained unresolved. The filing states that potential losses could not be estimated. A former CEO arbitration was settled in January 2021 for $0.265 million, which had been accrued at year-end.
- COVID-19: The pandemic reduced dermatology demand, delayed clinical enrollment, disrupted customer procedures and caused minor component-shipment delays. Management expected continued pressure on revenue and financing access.
- Tax item: An ownership change in May 2020 limited tax attributes and resulted in a reported $20.8 million tax-expense impact that was offset by a reduction in the valuation allowance; cash income-tax expense was only $0.007 million.
Most Important Facts for Investors to Verify
- Confirm whether this Ra Medical Systems filing is the intended filing for Catheter Precision, Inc., and reconcile any subsequent corporate name or business changes.
- Review the audited financial statements and going-concern disclosure, including the company’s projected cash runway relative to its $28.3 million 2020 operating cash burn.
- Verify FDA status of the March 2021 DABRA shelf-life submission and whether commercial catheter shipments resumed.
- Track enrollment, safety and efficacy results, completion timing and FDA review of the atherectomy trial.
- Monitor the SEC civil investigation and DOJ criminal investigation, as well as any resulting fines, penalties, settlements or operational restrictions.
- Assess compliance costs and potential penalties under the Corporate Integrity Agreement, including contingent revenue-based and change-in-control settlement payments.
- Evaluate dilution from the 2.345 million outstanding warrants, stock awards and any additional financing required to fund operations.
- Review the status and potential exposure of the securities class action and derivative litigation.