rmed_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 001-38677

Ra Medical Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware		38-3661826
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1670 Highway 160 West, Suite 205 Fort Mill, South Carolina		29708
(Address of principal executive offices)		(Zip Code)

(973) 691-2000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered under Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common stock, par value $0.0001 per share		RMED		NYSE American

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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 ☐ No ☒

As of the close of business on May 30, 2023, the registrant had 5,367,674 shares of common stock, par value $0.0001 per share, outstanding.

RA MEDICAL SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page(s)

PART I. FINANCIAL INFORMATION.		3

ITEM 1.	FINANCIAL STATEMENTS.	3

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	36

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	47

ITEM 4.	CONTROLS AND PROCEDURES.	47

PART II. — OTHER INFORMATION.		48

ITEM 1.	LEGAL PROCEEDINGS.	48

ITEM 1A .	RISK FACTORS	49

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	49

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	49

ITEM 4.	MINE SAFETY DISCLOSURES.	49

ITEM 5.	OTHER INFORMATION.	49

ITEM 6.	EXHIBITS.	50

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RA MEDICAL SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and par value data)

(Unaudited)

	March 31, 2023			December 31, 2022
ASSETS
Current Assets
Cash and cash equivalents	$	12,218		$	15,859
Accounts receivable, net		80			—
Inventories		70			—
Prepaid expenses and other current assets		388			977
Total current assets		12,756			16,836
Property and equipment, net		56			—
Operating lease right-of-use assets		129			—
Intangible assets, net		35,563			—
Other non-current assets		5			—
TOTAL ASSETS	$	48,509		$	16,836

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	580		$	92
Accrued expenses		3,822			7,484
Current portion of operating lease liabilities		51			—
Total current liabilities		4,453			7,576
Royalties payable		8,105			—
Operating lease liabilities		88			—
Total liabilities		12,646			7,576
Commitments and contingencies (see Note 16)
Stockholders' Equity
Series A preferred stock, $0.0001 par value, 10,000,000 shares authorized; 7,203 and 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—			—
Series X preferred stock, $0.0001 par value, 15,404 shares authorized; 14,650 and 12,675 shares issued and outstanding, respectively at March 31, 2023 and 0 shares issued and outstanding at December 31, 2022		—			—
Common stock, $0.0001 par value, 300,000,000 shares authorized; 5,267,092 and 2,160,950 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		—			—
Additional paid-in capital		307,400			214,397
Accumulated deficit		(271,537	)		(205,137	)
Total stockholders' equity		35,863			9,260
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	48,509		$	16,836

See accompanying notes to unaudited condensed consolidated financial statements

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RA MEDICAL SYSTEMS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

	For the Three Months Ended March 31,
	2023			2022
Revenues
Product sales	$	85		$	9
Cost of revenues
Product sales		10			31
Service and other		—			64
Total cost of revenues		10			95
Gross profit (loss)		75			(86	)
Operating expenses
Selling, general and administrative		10,233			2,302
Research and development		240			3,115
Loss on impairment of goodwill		56,086			—
Total operating expenses		66,559			5,417
Operating loss		(66,484	)		(5,503	)
Other income, net
Interest income		69			—
Other income, net		15			8
Total other income, net		84			8
Loss from operations before income taxes		(66,400	)		(5,495	)
Income taxes		—			—
Net loss	$	(66,400	)	$	(5,495	)
Deemed dividends from the warrant inducement offer		(800	)		-
Net loss attributable to common stockholders	$	(67,200	)	$	(5,495)
Net loss per share attributable to common stockholders, basic and diluted	$	(24.65	)	$	(13.71	)
Weighted average common shares used in computing net loss per share, basic and diluted		2,726,442			400,749

See accompanying notes to unaudited condensed consolidated financial statements

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RA MEDICAL SYSTEMS, INC.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(Unaudited)

	Series A Preferred Stock				Series X Preferred Stock					Common Stock					Additional Paid-In		Accumulated			Total Stockholders'
	Shares		Amount		Shares			Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2022		—	$	—		—		$	—		2,160,950		$	—	$	214,397	$	(205,137	)	$	9,260
Common stock issued upon exercise of options		—		—		—			—		301,746			—		179		—			179
Restricted stock awards cancelled		—		—		—			—		(25	)		—		—		—			—
Stock-based compensation		—		—		—			—		—			—		1,394		—			1,394
Issuance of Series X preferred stock in merger		—		—		14,650			—		—			—		82,925		—			82,925
Conversion of Series X preferred stock		—		—		(1,975	)		—		1,974,905			—		—		—			—
Issuance of instruments in connection with private placement, net		7,203		—		—			—		497,908			—		7,360		—			7,360
Common stock issued upon exercise of warrants, net		—		—		—			—		331,608			—		1,145		—			1,145
Net loss		—		—		—			—		—			—		—		(66,400	)		(66,400	)
Balance at March 31, 2023		7,203	$	—		12,675		$	—		5,267,092		$	—	$	307,400	$	(271,537	)	$	35,863

	Series A Preferred Stock				Series X Preferred Stock				Common Stock					Additional Paid-In		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at December 31, 2021		—	$	—		—	$	—		140,200		$	—	$	191,945	$	(178,272	)	$	13,673
Common stock and warrants issued, net		—		—		—		—		504,958			—		9,740		—			9,740
Warrants exercised		—		—		—		—		1,000			—		25		—			25
Vesting of restricted stock units and awards		—		—		—		—		159			—		—		—			—
Restricted stock awards cancelled		—		—		—		—		(289	)		—		—		—			—
Stock-based compensation		—		—		—		—		—			—		165		—			165
Net loss		—		—		—		—		—			—		—		(5,495	)		(5,495	)
Balance at March 31, 2022		—	$	—		—	$	—		646,028		$	—	$	201,875	$	(183,767	)	$	18,108

See accompanying notes to unaudited condensed consolidated financial statements

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RA MEDICAL SYSTEMS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(66,400	)	$	(5,495	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment of goodwill		56,086			—
Depreciation and amortization expense		1,444			186
Stock-based compensation		1,394			165
Accretion of royalties payable		513			—
Loss on disposals of property and equipment		—			36
Changes in operating assets and liabilities:
Accounts receivable		(9	)		(5	)
Inventories		(18	)		(73	)
Prepaid expenses and other assets		612			(240	)
Right-of-use asset and liability		5			(65	)
Other non-current assets		3			—
Accounts payable		(434	)		(256	)
Accrued expenses		(5,051	)		(2,822	)
Accrued interest - related parties		(198	)		—
Net cash used in operating activities		(12,053	)		(8,569	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(37	)		—
Cash acquired as part of business combination		15			—
Net cash used in investing activities		(22	)		—

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants		179			12,670
Payments of offering costs related to the issuance of common stock and warrants		—			(1,519	)
Proceeds from exercise of warrants		1,326			25
Payments of costs related to the exercise of warrants		(181	)		—
Payments of convertible promissory notes		(250	)		—
Proceeds from the private placement of securities		8,000			—
Payments of offering costs related to the private placement of securities		(640	)		—
Net cash provided by financing activities		8,434			11,176
NET CHANGE IN CASH AND CASH EQUIVALENTS		(3,641	)		2,607
CASH AND CASH EQUIVALENTS, beginning of period		15,859			15,045
CASH AND CASH EQUIVALENTS, end of period	$	12,218		$	17,652
SUPPLEMENTAL CASH FLOW INFORMATION
Unpaid offering costs	$	—		$	1,411
Non-cash consideration for Catheter acquisition (Note 3)	$	82,925		$	—
Cash payments for interest	$	181		$	—

See accompanying notes to unaudited condensed consolidated financial statements

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Note 1. Organization and Nature of Operations

The Company

Ra Medical Systems, Inc. ("Ra Medical" or 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 paused all engineering and manufacturing activities during the third quarter of 2022, including the development of a version of the DABRA catheter that is compatible with a standard interventional guidewire. The Company 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. The Company suspended sales of DABRA during the year ended December 31, 2022 and currently has no plans to commercialize DABRA 2.0. The Company was formed on September 4, 2002 in the state of California and reincorporated in Delaware on July 14, 2018.

On January 9, 2023, the Company completed its acquisition of Catheter Precision, Inc., previously a privately-held Delaware corporation (“Catheter”), which is focused on the cardiac electrophysiology market and now is a wholly-owned subsidiary of the Company, (the "Merger"). Following the Merger, the Company began focusing on the field of cardiac electrophysiology, see Note 3, Business Combination. Catheter’s primary product is the View into Ventricular Onset, (“VIVO” or “VIVO System”). VIVO is a non-invasive imaging system that offers 3D cardiac mapping to help with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to electrophysiology studies. The VIVO system has achieved a CE Mark allowing it to be commercialized in the European Union and has been placed at several hospitals in Europe. FDA 510(K) clearance in the United States was received and the Company began a limited commercial release of VIVO in 2021.

In addition, our LockeT, a suture retention device, is a sterile, Class I product that was registered with the FDA in February 2023, at which time we began initial shipments to distributors. LockeT is indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure, and it is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently.

Clinical studies for LockeT are planned to begin during 2023. These studies are planned to show the product’s effectiveness and benefits, including faster wound closure, earlier ambulation, potentially leading to early hospital discharge, and cost analysis. This data is intended to provide crucial data for marketing and to expand our indications for use with the FDA.

Prior to 2018, Catheter sold the AMIGO remote catheter system (the “AMIGO” or “AMIGO System”) which provides for accurate positioning, manipulation and stable control of catheters for use by electrophysiologists in the diagnosis and treatment of abnormal heart rhythms known as cardiac arrhythmias. The Company owns the intellectual property related to the AMIGO System.

Reverse Stock Split

On September 20, 2022, the Company’s board of directors approved a reverse stock split ratio of 1-for-50 (the “Reverse Stock Split”). On October 3, 2022, the effective date of the Reverse Stock Split, the number of the Company’s issued and outstanding shares of common stock decreased from 68.2 million shares to 1.4 million shares. The number of authorized shares and par value per common share remained unchanged. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who would otherwise have been entitled to receive a fractional share received a cash payment in lieu thereof. The unaudited condensed consolidated financial statements, which includes the accompanying notes to the unaudited condensed consolidated financial statements, have been retrospectively adjusted to reflect the Reverse Stock Split of the Company’s common stock for all periods presented.

Going Concern

As of March 31, 2023, the Company had cash and cash equivalents of approximately $12.2 million. For the three months ended March 31, 2023, the Company used approximately $12.1 million in cash for operating activities. The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. As of March 31, 2023, the Company had an accumulated deficit of approximately $271.5 million.

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Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company invests in its commercial capabilities. Additional costs associated with the Merger paid during the year ended December 31, 2022 and during the three months ended March 31, 2023 have substantially depleted the Company’s cash. Following the Merger with Catheter, management further reduced staff and other costs while assuming the operating costs of Catheter. Of the Company’s cash flows used in operating activities of $12.1 million, much of these cash outflows are related to the Merger and are non-recurring in nature. Specifically, the Company paid approximately $5.0 million in settlement costs that had been accrued as of December 31, 2022. See Note 9, Accrued Expenses. Management will continue to monitor its operating costs and seek to reduce its current liabilities. Such actions may impair its ability to proceed with certain strategic activities, and it may be unsuccessful at negotiating existing liabilities to the Company’s benefit. In January 2023, the Company raised gross proceeds of $1.3 million from a Warrant Repricing and, in March 2023, the Company completed a Private Placement and raised gross proceeds of $8.0 million See Note 12, Equity Offerings. If expected revenues are not adequate to fund our planned expenditures, or if the Company is unsuccessful at raising cash through future capital transactions, it may be required to reduce its spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that it will be successful in doing so. Accordingly, the Company may be required to raise additional cash through debt or equity transactions. It may not be able to secure financing in a timely manner or on favorable terms, if at all.

Management believes its current cash reserves will be sufficient to fund the Company’s operations for the next twelve months, beginning May 30, 2023. These accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited condensed consolidated financial statements of the Company include the accounts of Ra Medical and Catheter. All intercompany transactions have been eliminated in consolidation. The financial results of Catheter are included in the unaudited condensed consolidated financial statements from the date of completion of the Merger, to March 31, 2023.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP"). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of as of March 31, 2023. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The condensed consolidated financial statements should be read in conjunction with the Company’s audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 28, 2023.

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Use of Estimates

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s unaudited condensed consolidated financial statements are based upon a number of estimates including, but not limited to, the accounting for the Catheter business combination (Note 3), allowance for credit losses, evaluation of impairment of long-lived assets, valuation of long-lived assets and their associated estimated useful lives, reserves for warranty costs, evaluation of probable loss contingencies, fair value of preferred stock and warrants issued, and the fair value of equity awards granted.

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash equivalents represent highly liquid investments with maturities of 90 days or less at the date of purchase. Credit risk related to cash and cash equivalents are based on the creditworthiness of the financial institutions at which these funds are held. The Company has cash balances at financial institutions which throughout the year may exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements.

Segment Reporting

The Company operates in one business segment, which is the marketing, sales and development of medical technologies focused in the field of cardiac electrophysiology.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in readily available checking and money market accounts. The Company maintains deposits in financial institutions in excess of federally insured limits of $250,000, in the amount of $11.5 million at March 31, 2023. To reduce its risk associated with the failure of such financial institution, the Company evaluates the rating of the financial institution in which it holds deposits. Any material loss that the Company may experience in the future could have an adverse effect on its ability to pay its operational expenses or make other payments and may require the Company to move its cash to other high quality financial institutions. Currently, the Company is reviewing its bank relationships in order to mitigate its risk to ensure that its exposure is limited or reduced to the FDIC protection limits.

Foreign Currency Transaction Gain or Loss

The Company measures the foreign currency denominated assets and liabilities at the transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are converted at historical rates.

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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.

Fair Value of Financial Instruments

Cash equivalents, prepaid expenses, trade accounts receivable, accounts payable, and accrued expenses are reported on the unaudited condensed consolidated balance sheets at carrying value which approximates fair value due to the short-term maturities of these instruments.

As of March 31, 2023 and December 31, 2022, respectively, the Company had cash equivalents measured at fair value on a recurring basis using Level 1 inputs. As of March 31, 2023, cash equivalents of $11.7 million were comprised of $11.4 million in a money market mutual fund, $0.3 million of money market funds, and $20 thousand of certificates of deposit. As of December 31, 2022, cash equivalents of $1.7 million were comprised of $1.4 million of money market funds and $0.3 million of certificates of deposit.

Accounts Receivable

Trade accounts receivable are presented net of allowances for credit losses. Prior to the legacy Ra Medical discontinuation of sales of catheters in June 2022, the Company sold its catheters directly to distributors or physicians and maintained an allowance for credit losses for balances that appeared to have specific collection issues. The collection process was based on the age of the invoice and required attempted contacts with the customer at specified intervals. Delinquent accounts receivable were charged against the allowance for credit losses once the Company determined the amounts were uncollectible. The factors considered in reaching this determination were the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers deteriorated, resulting in an impairment of their ability to make payments, additional allowances might have been required.

As a result of and in connection with the Merger, the Company's revenue streams are derived from the legacy Catheter revenue streams, and as such the accounts receivable policy for the post-Merger entity is described below.

The Company records accounts receivable at the invoiced amount less an allowance for any expected uncollectible accounts. In evaluating the Company’s ability to collect outstanding receivable balances, the Company considers many factors, including the age of the balance, collection history, and current economic trends. Bad debts are written off after all reasonable collection efforts have been made.

The following table shows the activity in the accounts receivable for the periods presented (in thousands):

	March 31, 2023		December 31, 2022
Accounts receivable, net - balance at beginning of period	$	—	$	21
Accounts receivable acquired in business combination		80		—
Change in provision for credit losses		—		(21	)
Accounts receivable, net - balance at end of period	$	80	$	—

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The following table shows the activity in the allowance for credit losses for the periods presented (in thousands):

March 31,

2023

December 31,

2022

Balance at beginning of period

152

131

SEC Form 10-Q filed by Ra Medical Systems Inc.