Catheter Precision, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Quarter ended March 31, 2024; filed May 6, 2024. Catheter Precision develops and commercializes cardiac electrophysiology technologies. Its primary products are the VIVO non-invasive cardiac mapping system and LockeT, a suture-retention device. Legacy DABRA operations have been discontinued. The company operates as one business segment and generated approximately 90% of first-quarter sales outside the United States.
Financial performance and liquidity
| Metric ($ in thousands, except per-share data) | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $82 | $85 | $(3) |
| Gross profit | $77 | $75 | $2 |
| Gross margin | 93.9% | 88.2% | +5.7 percentage points |
| Operating loss | $(2,616) | $(66,484) | Improved by $63,868 |
| Net loss | $(2,675) | $(66,400) | Improved by $63,725 |
| Net loss attributable to common stockholders | $(2,675) | $(67,200) | Improved by $64,525 |
| Loss per share | $(0.36) | $(24.65) | Improved |
| Net cash used in operating activities | $(1,942) | $(12,053) | Improved by $10,111 |
- Revenue declined modestly because of lower VIVO System product sales. U.S. revenue was $8 thousand versus $58 thousand, while European revenue increased to $74 thousand from $27 thousand.
- Cost of revenues fell to $5 thousand from $10 thousand. The company reported approximately a 40% reduction in manufacturing cost for VIVO positioning patches following process changes.
- SG&A declined to $2.656 million from $10.233 million, primarily due to lower executive compensation, merger-related legal fees, amortization, stock-based compensation, and accounting and audit expenses.
- Research and development expense declined to $37 thousand from $240 thousand.
- Cash and cash equivalents were $1.491 million at March 31, 2024, down from $3.565 million at December 31, 2023. Total current assets were $1.954 million versus current liabilities of $2.350 million.
- Total liabilities were $9.497 million, including $7.060 million of royalties payable. Notes payable were $74 thousand and operating lease liabilities totaled $180 thousand.
- Accumulated deficit was $278.4 million. Total stockholders’ equity was $18.524 million, down from $21.193 million at year-end 2023.
Material changes versus the prior comparable period
- Q1 2023 included a $56.1 million goodwill impairment charge and $0.8 million deemed dividend related to a warrant inducement. No goodwill impairment or deemed dividend was recorded in Q1 2024.
- Operating cash burn decreased substantially, but the company continued to incur recurring operating losses and negative operating cash flow.
- Financing cash flow changed from $8.434 million provided in Q1 2023, primarily from the private placement and warrant exercises, to $110 thousand used in Q1 2024 for note payments. No comparable financing proceeds were reported in Q1 2024.
- Common shares outstanding increased to 7,573,403 at March 31, 2024 from 7,026,627 at December 31, 2023, primarily reflecting conversion of Series A preferred stock. Potential dilution remains significant: 11.042 million warrants and 614,593 stock options were outstanding at quarter-end, in addition to convertible preferred stock.
Guidance, outlook, risks and unusual items
- Management expects operating losses and negative cash flows to continue as it invests in commercial capabilities. It stated that existing cash is not sufficient to fund operations through the end of May 2025 based on expected revenues and planned expenditures.
- The company is evaluating additional capital transactions and/or bridge loans and stated that it will likely need debt or equity financing to continue operations. Management warned that financing may not be available on timely or favorable terms and that operations could be reduced or suspended if funding is unavailable.
- Management concluded that substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance of the financial statements.
- The company planned to expand its sales force. As of May 1, 2024, it reported hiring nine sales personnel, one clinical support employee, and a new chief operating officer; it also planned to engage a chief commercial officer.
- LockeT was registered with the FDA in February 2023. CE Mark approval was expected in the second half of 2024, subject to regulatory and commercialization risks. LockeT sales are subject to royalties, including approximately 12% of net sales payable to noteholders and additional inventor royalties.
- The company had material weaknesses in internal control over financial reporting relating to segregation of duties, management review, service-provider oversight, royalty accounting and valuation, and revenue-recognition timing. Disclosure controls were therefore deemed ineffective as of March 31, 2024. Management is implementing remediation measures, but the weaknesses were not yet considered remediated.
- Three customers represented more than 90% of consolidated revenue in Q1 2024, creating customer-concentration risk. Approximately $1.2 million of cash exceeded FDIC insurance limits at quarter-end.
- The company reported no outstanding litigation as of March 31, 2024 and no material changes to previously disclosed risk factors. A California sales and use tax audit remained open.
Important facts for investors to verify
- Cash runway, monthly cash burn, and the timing, structure, pricing, and dilution impact of any required financing.
- Whether sales-force expansion and VIVO commercialization produce sustained revenue growth, particularly in the United States.
- Timing and conditions of LockeT CE Mark approval, international shipments, clinical-study results, and future product adoption.
- Potential dilution from 11.042 million warrants, convertible preferred stock, stock options, and additional equity awards.
- Reconciliation and remediation of the material weaknesses, especially revenue recognition and royalty valuation.
- Future royalty obligations and their effect on LockeT economics and cash requirements.