Business Context and Reporting Period
Catheter Precision, Inc. is presented in this filing under its then-legal registrant name, Ra Medical Systems, Inc. The unaudited Form 10-Q covers the three months ended March 31, 2023. On January 9, 2023, the Company completed its acquisition of Catheter Precision and shifted its primary focus from the legacy DABRA laser business to cardiac electrophysiology products, principally the VIVO 3D cardiac-mapping system and LockeT, a suture-retention device.
Catheter’s results are consolidated from the January 9, 2023 acquisition date. The Company had 5,367,674 common shares outstanding as of May 30, 2023, although the March 31 balance sheet reported 5,267,092 shares outstanding.
Key Financial Metrics
| Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 |
|---|---|---|
| Revenue | $85 thousand | $9 thousand |
| Gross profit (loss) | $75 thousand | $(86) thousand |
| Gross margin | Approximately 88% | Negative, based on reported gross loss |
| Operating loss | $(66.5) million | $(5.5) million |
| Net loss | $(66.4) million | $(5.5) million |
| Net loss attributable to common stockholders | $(67.2) million | $(5.5) million |
| Basic and diluted loss per share | $(24.65) | $(13.71) |
| Net cash used in operating activities | $(12.1) million | $(8.6) million |
| Net cash provided by financing activities | $8.4 million | $11.2 million |
| Cash and cash equivalents at period end | $12.2 million | $17.7 million |
Operating expenses included $10.2 million of selling, general and administrative expense, $0.2 million of research and development expense, and a $56.1 million goodwill impairment charge. Other income was $84 thousand. No income tax provision was recorded.
At March 31, 2023, total assets were $48.5 million, including $35.6 million of definite-lived intangible assets. Total liabilities were $12.6 million, including $8.1 million of royalties payable. The filing does not report conventional long-term borrowings at quarter-end; a remaining $250 thousand convertible promissory note was paid during the quarter.
Material Changes Versus the Prior Comparable Period
- Revenue increased by $76 thousand, reflecting initial post-acquisition VIVO product sales. The filing does not provide a directly comparable standalone Catheter revenue figure for the full prior-year quarter.
- Gross profit improved to $75 thousand from a gross loss of $86 thousand, as prior-year costs included service and other costs that were not incurred in the current period.
- SG&A increased by approximately $7.9 million, primarily due to merger-related professional fees, severance, stock-based compensation, acquired intangible-asset amortization, royalty accretion, and other corporate costs.
- Research and development expense declined by approximately $2.9 million because of reductions in personnel, facilities, professional fees, supplies, and clinical-study costs.
- The Company recognized a $56.1 million goodwill impairment charge after a sustained decline in its share price triggered a quantitative impairment test. Goodwill acquired in the merger was reduced to zero.
- Cash declined by $3.6 million during the quarter, despite $8.4 million of financing cash inflows, because operating cash use was $12.1 million.
- The January warrant-repricing transaction generated approximately $1.3 million of gross proceeds. The March private placement generated approximately $8.0 million of gross proceeds, before $0.6 million of related offering costs.
Outlook, Risks, Contingencies, and Unusual Items
- Management expects continuing operating losses and negative operating cash flow as it invests in commercialization. Management believes existing cash reserves will fund operations for the next twelve months beginning May 30, 2023, but states that additional debt or equity financing may be required.
- The Company paid $5.0 million in February 2023 under Department of Justice and participating-state settlement agreements associated with the legacy DABRA business. Future obligations may arise if revenue thresholds are exceeded or under specified change-of-control or bankruptcy circumstances.
- The VIVO system has U.S. FDA clearance and European CE Mark authorization, but commercialization remains limited. LockeT began initial distributor shipments in February 2023, and clinical studies were planned for 2023.
- The merger purchase-price allocation and fair values of consideration, acquired assets, liabilities, and goodwill remain provisional. Final measurement-period adjustments could be material.
- The Company carries an estimated $8.1 million royalty liability. The LockeT royalty is approximately 12% of net sales from first commercial sale through December 31, 2035.
- Legacy Catheter had material weaknesses involving segregation of duties, revenue-recognition timing, and valuation of derivative liabilities. Remediation was ongoing, and management could not yet assert that the weaknesses had been remediated as of March 31, 2023.
- Will McGuire resigned as CEO effective April 28, 2023. David Jenkins became interim CEO, and the Company accrued approximately $1.75 million of severance, which was paid on May 12, 2023.
- Approximately $11.5 million of cash was held at financial institutions above FDIC insurance limits at March 31, 2023, creating concentration risk.
- The Company continues to incur recurring losses and had an accumulated deficit of $271.5 million at March 31, 2023. Its ability to continue operations depends on revenue growth, cost controls, and access to additional capital.
Investor Verification Priorities
- Verify the final accounting for the Catheter Precision acquisition, including the provisional $82.9 million purchase price, intangible-asset valuations, royalty liability, and any subsequent measurement-period adjustments.
- Assess whether VIVO and LockeT sales can scale sufficiently to offset the Company’s operating cash burn.
- Review the terms and potential dilution from Series A and Series X preferred stock and approximately 11.1 million reserved warrant shares, as well as the potential conversion of up to approximately 4.5 million shares underlying the private-placement preferred stock.
- Monitor cash usage, financing needs, and the Company’s ability to raise capital on acceptable terms.
- Confirm remediation of Catheter’s material weaknesses and evaluate the risk of financial-reporting errors or restatements.
- Review the ongoing implications of the DOJ and state settlement agreements, legacy product liabilities, warranty reserves, and any remaining litigation or contingencies.