UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From to
Commission file number:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of the close of business on November 9, 2022, the registrant had
RA MEDICAL SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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83 |
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Item 3. |
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84 |
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Item 4. |
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84 |
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Item 5. |
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84 |
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Item 6. |
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85 |
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87 |
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2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RA MEDICAL SYSTEMS, INC.
Condensed Balance Sheets
(in thousands, except par value data)
(Unaudited)
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September 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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— |
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Inventories |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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— |
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Operating lease right-of-use assets |
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Other long-term assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of operating lease liability |
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Total current liabilities |
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Operating lease liability |
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Total liabilities |
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Commitments and contingencies (Note 12) |
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Stockholders’ Equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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See accompanying notes to unaudited condensed financial statements.
3
RA MEDICAL SYSTEMS, INC.
Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues |
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Product sales |
$ |
— |
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$ |
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$ |
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$ |
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Cost of revenues |
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Product sales |
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— |
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Service and other |
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— |
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Total cost of revenues |
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— |
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Gross loss |
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— |
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Operating expenses |
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Selling, general and administrative |
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Research and development |
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Restructuring and impairment (Note 13) |
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— |
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— |
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Total operating expenses |
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Operating loss |
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Other income, net |
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Loss from continuing operations before income taxes |
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( |
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( |
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Income taxes |
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— |
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— |
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— |
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— |
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Loss from continuing operations |
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Discontinued operations |
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Income from discontinued operations before income taxes |
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— |
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— |
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Income taxes |
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— |
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— |
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— |
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— |
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Income from discontinued operations |
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— |
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— |
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Net loss |
$ |
( |
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$ |
( |
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$ |
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$ |
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Net (loss) income per share, basic and diluted |
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Continuing operations |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Discontinued operations |
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— |
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— |
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Total net loss per share, basic and diluted |
$ |
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$ |
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$ |
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$ |
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Weighted average number of shares used in computing net (loss) income per share, basic and diluted |
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See accompanying notes to unaudited condensed financial statements.
4
RA MEDICAL SYSTEMS, INC.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
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Nine Months Ended September 30, |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Non-cash restructuring and impairment |
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— |
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Depreciation and amortization |
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Stock-based compensation |
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Loss (gain) on sales and disposals of property and equipment |
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Gain on sale of discontinued operations |
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— |
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( |
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Gain on extinguishment of promissory note |
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— |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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( |
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( |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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( |
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( |
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Other liabilities |
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( |
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( |
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Deferred revenue |
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— |
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( |
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Net cash used in operating activities |
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( |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Proceeds from sale of discontinued operations |
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— |
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Payment of fees related to sale of discontinued operations |
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— |
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( |
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Proceeds from sales of property and equipment |
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— |
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Purchases of property and equipment |
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— |
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( |
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Net cash provided by investing activities |
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— |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Net proceeds from issuance of common stock and warrants |
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Payments of offering costs related to the issuance of common stock and warrants |
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( |
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( |
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Net proceeds from exercise of warrants |
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— |
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Proceeds from issuance of common stock in connection with the employee stock purchase plan |
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Payments on equipment financing |
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— |
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( |
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Net cash provided by financing activities |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
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( |
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CASH AND CASH EQUIVALENTS, beginning of period |
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CASH AND CASH EQUIVALENTS, end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Unpaid offering costs |
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$ |
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$ |
— |
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Net proceeds receivable from sales of common stock |
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$ |
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$ |
— |
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Proceeds receivable from sales of property and equipment |
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$ |
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$ |
— |
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Amounts accrued for purchases of property and equipment |
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$ |
— |
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$ |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Cash payments for income taxes |
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$ |
— |
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$ |
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Cash payments for interest |
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$ |
— |
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$ |
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See accompanying notes to unaudited condensed financial statements.
5
RA MEDICAL SYSTEMS, INC.
Condensed Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at December 31, 2021 |
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$ |
— |
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$ |
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$ |
( |
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$ |
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Common stock and warrants issued, net |
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— |
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— |
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Warrants exercised |
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— |
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— |
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Restricted stock awards cancelled |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balances at March 31, 2022 |
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— |
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( |
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Common stock issued pursuant to the vesting of restricted stock units and purchases under the employee stock purchase plan |
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— |
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— |
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— |
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Restricted stock awards cancelled |
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( |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balances at June 30, 2022 |
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— |
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( |
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Warrants exercised |
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— |
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— |
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Common stock and warrants issued, net |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balances at September 30, 2022 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at December 31, 2020 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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Common stock issued, net |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balances at March 31, 2021 |
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— |
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( |
) |
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Common stock issued, net |
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— |
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— |
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Common stock issued pursuant to the vesting of restricted stock units and purchases under the employee stock purchase plan |
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— |
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— |
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|
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balances at June 30, 2021 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Common stock issued, net |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Warrant issued |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balances at September 30, 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See accompanying notes to unaudited condensed financial statements.
6
RA MEDICAL SYSTEMS, INC.
Notes to Unaudited Condensed Financial Statements
Note 1. Organization
The Company
Ra Medical Systems, Inc. (the “Company”) is a medical device company that owns intellectual property related to an advanced excimer laser-based platform for use in the treatment of vascular immune-mediated inflammatory diseases. Its excimer laser and single-use catheter system, together referred to as the DABRA Excimer Laser System, (“DABRA”), is used as a tool in the treatment of peripheral artery disease. The Company was formed on September 4, 2002 in the state of California and reincorporated in Delaware on July 14, 2018.
Pending Merger
On September 12, 2022, the Company announced entering into an Agreement and Plan of Merger (the “Merger Agreement”) with a privately-held Delaware corporation, Catheter Precision, Inc. (“Catheter”), a medical device and technology company focused in the field of cardiac electrophysiology. Under the terms of the Merger Agreement, Catheter will become a wholly owned subsidiary of the Company in a stock-for-stock reverse merger transaction (the “Merger”). If completed, the Merger will result in a combined publicly traded company that will focus on the cardiac electrophysiology market. The Company’s board of directors and the board of directors of Catheter have approved the Merger, which is currently expected to close before the end of 2022 or early 2023, subject to satisfying certain closing conditions, including the receipt of shareholder approval by both companies.
The Company expects that it will need to raise additional financing in an amount of between $
Reverse Stock Split
NYSE American
On August 31, 2022, the Company received a deficiency letter (the “Letter”) from NYSE American indicating that it was not in compliance with NYSE American continued listing standards as set forth in Section 1003(f)(v) of the NYSE American Company Guide because its shares of common stock had been selling for a substantial period of time at a low price per share, which NYSE American determined to be a 30 trading day average price of less than $
Reduction in Force and Operations
As previously reported, the Company’s board of directors approved a reduction in force (“RIF”) under which approximately
As a result of the RIF, the discontinuation of enrollment in the clinical study and the board of directors’ review of strategic alternatives, the Company has paused all engineering and manufacturing activities, including the development of a
7
version of the DABRA catheter that is compatible with a standard interventional guidewire. The Company has also paused research to prove the feasibility of using a DABRA-derived catheter technology to fracture calcium in arteries in a procedure known as lithotripsy. On July 5, 2022, the Company announced the receipt of FDA 510(k) clearance for the DABRA 2.0 catheter as part of the DABRA Excimer Laser System. This catheter includes a braided over jacket to make the catheter more robust and more kink-resistant when navigating tortuous anatomy. This catheter also has a six-month shelf life as a result of multiple design and manufacturing remediations implemented to address prior limitations. The Company has suspended sales of DABRA and currently has no plans to commercialize the DABRA 2.0, pending the closing of the Merger.
Going Concern
The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. As of September 30, 2022, the Company had an accumulated deficit of $
Management continues to monitor operating costs and seeks to reduce the Company’s current liabilities. Such actions may impair the Company’s ability to proceed with certain strategic activities, and the Company may be unsuccessful at negotiating existing liabilities to the Company’s benefit. If these efforts are unsuccessful, or the Merger is not completed, the Company’s cash position could be negatively impacted and the Company may, among other things, be required to seek other sources of financing, consummate another strategic transaction or be required to liquidate its assets and dissolve the Company. If the Merger is completed, the combined entity may not have sufficient cash to fund its operations for next year. Catheter has historically generated negative cash flows from operations. Catheter’s expected revenue growth may not be achieved, and expenditures to achieve growth may exceed expectations. Because of the significant uncertainty regarding the Company’s future plans, the Company is not able to accurately predict the impact of a potential change in its business strategy and future funding requirements.
Management believes that, based on the Company’s liquidity resources and the significant uncertainty regarding its future plans, there is substantial doubt about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of the financial statements. The Company’s independent registered public accounting firm expressed substantial doubt regarding the Company’s ability to continue as a going concern in its report on the Company’s financial statements as of and for the year ended December 31, 2021.
Although the Company improved its liquidity resources during the nine months ended September 30, 2022 through a private placement, proceeds from warrant exercises and sales of common stock under the At-The-Market Sales Agreement with Ladenburg Thalmann & Co., Inc. (the “ATM Agreement”) resulting in total net cash proceeds of $
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.
COVID-19
The global effects of COVID-19 have created significant volatility, uncertainty and economic disruption. Although restrictions have been recently eased around the world, the COVID-19 pandemic is still ongoing, and the ultimate effects of COVID-19 on the Company’s business, operations and financial condition are unknown at this time. The Company expects that patient follow-up in its atherectomy clinical trial may continue to be affected by the uncertainty relating to COVID-19, as patients may continue to elect to postpone follow-up visits and physicians’ offices may intermittently close or operate at a reduced capacity in response to COVID-19. The extent to which COVID-19 impacts the Company’s business will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain it or treat its impact, among others.
8
Note 2. Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed balance sheets, results of operations, cash flows and statements of stockholders’ equity for the periods presented. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 24, 2022, and as amended on July 13, 2022.
Use of Estimates
The preparation of interim unaudited condensed financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the interim unaudited condensed financial statements and accompanying notes. The amounts reported could differ under different estimates and assumptions. On an ongoing basis, management evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.
Fair Value Measurements
Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier value hierarchy is used to identify inputs used in measuring fair value as follows:
Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 – Inputs other than the quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
The hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when