Stereotaxis, Inc. 2023 Form 10-K Summary
Business context and reporting period
Stereotaxis designs and markets robotic magnetic navigation systems, information systems, and interventional devices for hospitals. Its primary focus is electrophysiology and cardiac ablation, with expansion initiatives in coronary, neurovascular, and peripheral procedures. The filing covers the fiscal year ended December 31, 2023; it is an annual report rather than a standalone fourth-quarter filing.
Primary products include the Genesis RMN System, the Odyssey Solution, Cardiodrive, QuikCAS, Vdrive and related disposable devices. The company reported one operating segment and had 122 employees at year-end.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $26.8 million | $28.1 million | Down approximately 5% |
| Systems revenue | $8.7 million | $6.8 million | Up approximately 28% |
| Disposables, service and accessories | $18.0 million | $21.3 million | Down approximately 15% |
| Gross margin | $14.9 million; 56% | $18.5 million; 66% | Margin declined 10 percentage points |
| Operating loss | $21.8 million | $18.8 million | Loss increased |
| Net loss | $20.7 million | $18.3 million | Loss increased |
| Net loss attributable to common stockholders | $22.1 million | $19.6 million | Loss increased |
| Basic and diluted loss per share | $0.27 | $0.26 | Loss per share increased |
- Cost of revenue increased 23% to $11.9 million, primarily because of higher system sales volume, period costs, and product mix.
- Disposable, service and accessory gross margin was 79%, compared with 82% in 2022.
- Research and development expense was $10.3 million, sales and marketing expense was $12.4 million, and general and administrative expense was $14.1 million.
- Interest income increased to $1.1 million from $0.5 million because of higher interest rates and invested balances.
- Cash flow used in operations was $9.1 million, compared with $8.4 million in 2022. Investing activities provided $19.8 million, principally from $20.1 million of investment maturities.
- Cash, cash equivalents and restricted cash totaled $20.6 million at year-end, including $19.8 million of cash and cash equivalents. Working capital was approximately $20.0 million, down from $29.0 million.
- The company reported no debt at December 31, 2023. Lease liabilities totaled approximately $5.5 million on a present-value basis.
- Accumulated deficit was $537.7 million. The company has sustained significant historical losses and recorded no income tax benefit because its deferred tax assets remain fully reserved.
Material changes versus 2022
- System revenue improved, but recurring revenue declined substantially. The decline reflected the expiration of Biosense Webster royalty arrangements and lower procedure volumes associated with catheter shortages.
- Biosense Webster royalties represented approximately 7% of 2022 revenue and less than 1% in 2023. The agreement expired December 31, 2022, although supply is expected to continue for three years after termination.
- Gross margin fell from 66% to 56%, primarily because of product mix and higher system-related costs.
- The outstanding Series B Convertible Preferred Stock was converted into 5.6 million common shares in April 2023.
- Common shares issued increased to approximately 80.9 million at year-end from 74.9 million, excluding additional potential dilution from preferred stock, options, restricted stock units, and performance awards.
- Stock-based compensation was $10.6 million, including $7.1 million related to the CEO Performance Award. Approximately $37.0 million remained unrecognized under that award at year-end.
Backlog, outlook, risks and unusual items
- Backlog was approximately $14.7 million at December 31, 2023, compared with $14.8 million a year earlier. Management expects approximately 81% of the 2023 year-end backlog to be recognized as revenue during 2024, subject to customer, construction, regulatory, and other contingencies.
- The company states that 2024 operating expenses are expected to exceed gross margin and that it expects continued operating losses and negative cash flows until revenue growth or expense reductions support operations.
- Management believes existing cash and cash equivalents will fund ordinary-course obligations for at least 12 months from the financial statement date, but identifies additional equity or debt financing as a potential future liquidity source. No current plan to issue securities under its $100 million universal shelf registration was disclosed.
- Key operating risks include lengthy and variable hospital sales and installation cycles, hospital budget pressure, supply-chain disruptions, inflation, component dependence, single-source suppliers, and reliance on strategic partners for compatible imaging systems and catheters.
- Regulatory approval for the MAGiC catheter remains pending in various geographies. FDA, international regulatory, reimbursement, quality-system, and certificate-of-need requirements may delay commercialization.
- A vendor filed UCC financing statements covering approximately $0.6 million of inventory after year-end. Management considers the filings without merit and intends to contest them.
- The company disclosed no material legal proceedings, no material cybersecurity incidents, and no subsequent events. Ernst & Young issued an unqualified audit opinion; systems revenue recognition was identified as the critical audit matter.
- The company maintains cash at financial institutions in amounts that may exceed FDIC insurance limits. It reported no loss from its Silicon Valley Bank exposure, which was less than 6% of total cash, cash equivalents, and marketable securities.
Important facts for investors to verify
- Whether 2024 system placements and the $14.7 million backlog convert to revenue on the expected schedule.
- Whether disposable and service revenue recovers after the loss of Biosense Webster royalties and prior catheter shortages.
- The company’s quarterly cash burn, operating-loss trajectory, and remaining liquidity relative to its stated 2024 expense outlook.
- Progress toward regulatory approvals and commercialization of the MAGiC catheter and other disposable devices.
- The availability and terms of alternative catheter, imaging, and component suppliers.
- Potential dilution from approximately 49.4 million shares issuable on conversion of Series A Preferred Stock, 3.7 million options and stock appreciation rights, 1.5 million restricted stock units, and up to 13 million CEO performance shares.
- The effect of the $7.1 million annual CEO Performance Award expense and approximately $37.0 million of remaining unrecognized expense on future GAAP profitability.