Stereotaxis, Inc. 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2015. The company designs and sells the Epoch Solution, including Niobe ES magnetic navigation, Odyssey information management, Vdrive robotic navigation, and related disposables and services. The installed base was 123 Niobe ES systems.
Key Financial Metrics
| Metric | Q2 2015 | Q2 2014 | Six Months 2015 | Six Months 2014 |
|---|---|---|---|---|
| Total revenue | $9.7 million | $8.0 million | $19.2 million | $16.4 million |
| Systems revenue | $3.1 million | $1.2 million | $5.9 million | $2.5 million |
| Disposables, service and accessories | $6.6 million | $6.9 million | $13.3 million | $13.9 million |
| Gross profit | $6.7 million | $6.1 million | $13.6 million | $12.8 million |
| Gross margin | 70% | 75% | 71% | 78% |
| Operating loss | $1.7 million | $2.3 million | $3.1 million | $4.5 million |
| Net loss | $1.5 million | $1.9 million | $4.7 million | $6.1 million |
| Loss per share | $0.07 | $0.10 | $0.22 | $0.31 |
| Cash used in operations | Not separately provided | Not separately provided | $4.2 million | $5.5 million |
Balance Sheet and Liquidity
- Cash and cash equivalents were $3.6 million at June 30, 2015, down from $7.3 million at December 31, 2014.
- Working capital was approximately $0.7 million, compared with $4.6 million at year-end 2014.
- Total assets were $19.9 million, and stockholders’ deficit was $15.9 million.
- Healthcare Royalty Partners debt was $18.3 million, with no current maturities shown. The debt bears interest at 16%, matures December 31, 2018, and is repaid from royalties under the Biosense Webster agreement.
- The Silicon Valley Bank revolving facility had no outstanding balance and approximately $6.0 million of borrowing capacity at June 30, 2015. The facility’s maximum availability is $10 million subject to collateral and includes liquidity and tangible-net-worth covenants.
- The company sold 71,754 shares under its controlled equity offering during the quarter, generating $137,253 of net proceeds. Approximately $14.1 million remained available under the facility at June 30, 2015.
Material Changes Versus Prior Comparable Period
- Second-quarter revenue increased 20%, driven by a 168% increase in systems revenue, including two Niobe systems, Odyssey and Odyssey Cinema sales, and Vdrive sales.
- Six-month revenue increased 17%; systems revenue rose 138%, while disposables, service and accessories revenue declined approximately 5%.
- Gross margin declined because of a greater mix of system revenue and lower margins on disposables, service and accessories. Systems gross margin improved to 40% in the quarter and 45% for the six-month period.
- Operating and net losses narrowed primarily because of higher revenue and lower general and administrative expenses. Sales and marketing and research and development spending increased modestly.
- Cash used in operations improved by approximately $1.3 million year over year, but the company continued to consume cash and remained dependent on financing.
- Foreign currency effects, particularly the stronger U.S. dollar, reduced European sales. Approximately 18% of six-month revenue was denominated in foreign currencies.
Guidance, Outlook, Risks and Unusual Items
- Management expected negative operating cash flow through 2015 and operating expenses generally consistent with 2014, with additional targeted investment.
- Management stated that existing cash, cash equivalents and borrowing facilities may not be sufficient to fund operating expenses and capital requirements for the next 12 months. Additional financing may be required and could be dilutive or unavailable on acceptable terms.
- If adequate funding is unavailable, the company may need to delay product development or commercialization, reduce sales and support resources, license technology to third parties, or potentially cease operations.
- The company has incurred cumulative net losses of approximately $463.3 million since inception.
- Warrants were recorded as a $2.0 million current liability and generated $106,792 of other income from fair-value remeasurement during the six months.
- The company’s 16% royalty-backed debt is full recourse and secured by certain assets and intellectual property. Biosense Webster royalties are directed to debt service until repayment.
- On August 5, 2015, Nasdaq notified the company that it failed to satisfy the $35 million minimum market value of listed securities requirement. The company had until February 1, 2016 to regain compliance, subject to potential delisting and appeal rights.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting.
- Ordinary-course litigation and claims were not expected by management to have a material effect.
Investor Verification Checklist
- Verify the company’s ability to raise capital before cash resources and borrowing capacity are exhausted.
- Review compliance with the revolving credit facility’s liquidity and tangible-net-worth covenants.
- Assess the repayment trajectory and 16% interest burden of the Healthcare Royalty Partners debt.
- Monitor system sales, recurring disposables and service revenue, gross-margin mix, and adoption of the Niobe ES platform.
- Evaluate foreign-exchange sensitivity, particularly the effect of a stronger U.S. dollar on European revenue and operating margins.
- Confirm resolution of the Nasdaq minimum market-value compliance notice and any resulting dilution or financing activity.