10-Q

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

OR

☐ 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

2

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

3

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

4

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

5

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

6

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.

7

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.

8

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.

9

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	$	—

10

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
Provision for credit losses		—		21
Balance at end of period	$	152	$	152

As of March 31, 2023, the entire allowance for credit losses is related to legacy Ra Medical receivables.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company reduced the carrying value of inventories for those items that were potentially excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors. There were no inventory obsolescence charges for the three months ended March 31, 2023 and 2022.

Effective June 6, 2022, the Company’s board of directors approved a staggered reduction in force (“RIF”). On September 2, 2022, the Company completed the RIF. The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to the Company in furtherance of the board of directors’ review of strategic alternatives. As a result of the RIF, the Company paused all engineering and manufacturing activities during the third quarter of 2022.

Prior to the RIF (as defined above), the Company’s catheters were manufactured in-house and each catheter was tested at various stages of the manufacturing process for adherence to quality standards. Catheters that did not meet functionality specification at each test point were destroyed and immediately written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations. Once manufactured, completed catheters that passed quality assurance, were sent to a third-party for sterilization and sealed in a sterile container. Upon return from the third-party sterilizer, a sample of catheters from each batch were re-tested. If the sample tests were successful, the batch was accepted into finished goods inventory. If the sample tests were unsuccessful, the entire batch was written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows: 

Machinery and equipment	2-10 years
Computer hardware and software	2-5 years
VIVO DEMO/Clinical Systems	2 years
Furniture and fixtures	5 years

Leasehold improvements are depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease.

11

The Company periodically reviews the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering long-term views on its intended use of each class of property and equipment and the planned level of improvements to maintain and enhance assets within those classes. 

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the account balances and any resulting gain or loss is recognized in income for the period. The cost of repairs and maintenance is expensed as incurred, whereas significant betterments are capitalized.

Impairment of Long-Lived Assets

The Company periodically reviews its long-lived assets for impairment when certain events or changes in circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. There were no impairment charges for long-lived assets for the three months ended March 31, 2023 and 2022.

Goodwill

Goodwill, which represents the excess of purchase price of Catheter over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company first has the option to assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using a combination of an income and market approach. To determine fair values, the Company is required to make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations including the rate of future revenue growth, capital requirements, and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. These assumptions require significant judgement. Pursuant to Accounting Standards Update (''ASU'') 2017-04, Simplifying the Test for Goodwill Impairment, the single step is to determine the estimated fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. The Company also completes a reconciliation between the implied equity valuation prepared and the Company’s market capitalization. The majority of the inputs used in the discounted cash flow model are unobservable and thus are considered to be Level 3 inputs. The inputs for the market capitalization calculation are considered Level 1 inputs. There were impairment charges of $56.1 million recognized during the three months ended March 31, 2023, see Note 8, Goodwill, for additional details.

Royalty Liability

On January 9, 2023, prior to the consummation of the Merger, Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Catheter's Chairman of the Board of Directors and, currently, Ra Medical's Executive Chairman of the Board of Directors, to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device, commencing upon the first commercial sale, through December 31, 2035. The royalty payable has an estimated fair value of approximately $7.9 million as of March 31, 2023. The fair value was calculated using a discounted cash flow method which utilized a discount rate of 27%.

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Product Warranty

Products were warrantied against defects in material and workmanship when properly used for their intended purpose and appropriately maintained. Accordingly, the Company generally replaced catheters that kinked or failed to calibrate. The product warranty liability was determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor. The product warranty liability also includes the estimated costs of a product recall.

The warranty accrual is included in accrued expenses in the accompanying unaudited condensed consolidated balance sheets. Warranty expenses are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals resulted from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statements of operations for each period.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

 Revenue Recognition

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), and all related appropriate guidance. The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

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The Company measures revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation. Under Topic 606, revenue is recognized when a customer obtains control of promised goods. To achieve this core principal, the Company applies the following five steps:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the Company satisfies a performance obligation

Subsequent to the Merger, the Company’s primary product is the VIVO System. The VIVO System 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. In addition to the VIVO System, customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System to complete the intended output of the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets represents the Company’s primary performance obligation. The Company recognizes revenue upon the delivery of the VIVO system. The Company also provides customers with the option to pay for software upgrades in advance at the time of the contract's inception. Software upgrades are stand-ready services, whereby the Company will provide software upgrade services to the customer when and as upgrades are available. Terms of the period covered by the payment of software upgrades in advance can range from one year to multiple years. Customers have the option to renew terms covered by software upgrades at the end of each term. The stand-ready software upgrades represent the Company's second separate performance obligation and revenue is recognized over the term of the period.

The Company invoices the customers after physical possession and control of the VIVO System is transferred to the customer and recognizes revenue upon delivery. The timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract. The Company invoices customers who pay for software upgrades in advance in conjunction with the invoice for the delivery of the VIVO System, and subsequent renewals of software upgrades are invoiced at the inception of the term. Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under Topic 606. Similar to the delivery of the VIVO System, the timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract.

Legacy Ra Medical Revenue

The Company generated revenue from the sales of products and services. Product sales consisted of the sales of catheters for use with the DABRA laser system. The Company paused selling commercial products in late 2020 and was only selling catheters for use in the atherectomy clinical trial prior to the discontinuation of such sales in June 2022. The Company’s sales agreements generally did not include right-of-return provisions for any form of consideration, including partial refund or credit against amounts owed to the Company. Services and other revenues primarily consisted of billable services, including fees related to DABRA laser commercial usage agreements.

The Company accounted for a contract with a customer when it had a legally enforceable contract with the customer, the arrangement identified the rights of the parties, the contract had commercial substance, and the Company determined it was probable that it would collect the contract consideration. The Company recognized revenue when control of the promised goods or services transferred to customers, in an amount that reflected the consideration the Company expected to be entitled to in exchange for those goods or services. Taxes collected from customers relating to goods or services and remitted to governmental authorities were excluded from revenue.

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When engaged in commercial sales, the Company entered into a DABRA laser commercial usage agreement or DABRA laser placement acknowledgement with each customer that was supplied a DABRA laser, collectively the “usage agreement”, which provided for specific terms of continued use of the DABRA laser, including a nominal periodic fee. The terms of a usage agreement typically allowed the Company to place a DABRA laser at a customer’s specified location without a specified contract term. Under the usage agreement terms, the Company retained all ownership rights to the DABRA laser and was permitted to request the return of the equipment within 10 business days of notification. While the laser periodic fees were nominal, the usage agreement provided the Company the exclusive rights to supply related single-use catheters to the customer which aggregated the majority of the product sales revenue. There were no specified minimum purchase commitments for the catheters.

The Company recognized revenue associated with the usage agreements and catheter supply arrangements in accordance with Topic 606 since (i) the contract primarily included variable payments, (ii) the catheters were priced at their standalone selling price, and (iii) the laser equipment was insignificant in the context of the contract. Revenue was recognized when the performance obligation was satisfied which was generally upon shipment of the catheter.

The Company had $85 thousand and $9 thousand in product sales during the three months ended March 31, 2023 and 2022, respectively.

Shipping and Handling Costs

Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

Advertising and Marketing

Advertising costs are expensed as incurred and included in sales and marketing expense. Advertising costs were $0.2 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively.

Patents

The Company expenses patent costs, including related legal costs, as incurred and records such costs as selling, general and administrative expenses in the accompanying statements of operations.

Research and Development

Major components of research and development costs include personnel expenses, stock-based compensation, consulting, supplies and clinical trial expenses. Research and development expenses are charged to operations in the period incurred.

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Stock-Based Compensation

The Company records stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with the authoritative guidance for stock-based compensation. The Company evaluates whether an award should be classified and accounted for as a liability award or equity award for all stock-based compensation awards granted. The cost of an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing valuation model (“Black-Scholes model”) which incorporates various assumptions including expected term, volatility and risk-free interest rate, and is recognized as expense on a straight-line basis over the requisite service period of the award, which is generally the vesting period of the respective award. Share-based compensation for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

As a result of the Merger, all unvested legacy Catheter stock options were subject to accelerated vesting and therefore became fully vested, as of the closing date of the business combination. Ra Medical recognized the fair value of the replacement options as included in consideration transferred to the extent they do not exceed the fair value of the equivalent Catheter options. Any incremental fair value was recognized in compensation expense in the post-combination period, with this recognized as a Day 1 expense due to the Catheter options becoming fully vested concurrent with the closing of the business combination.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other expense, respectively.

Basic and Diluted Net Loss Per Share of Common Stock

The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents include warrants, stock options and non-vested restricted stock awards and restricted stock units using the treasury stock method, Series A Convertible Preferred Stock, Series X Convertible Preferred Stock, along with the effect, if any, from outstanding convertible securities. See Note 11, Net loss per share.

Net loss attributable to common stockholders consists of net income or loss, as adjusted for actual and deemed dividends declared. The Company recorded a deemed dividend for the modification of existing warrants and issuance of new warrants during the three months ended March 31, 2023 of $0.8 million. The deemed dividend is added to the net loss in determining the net loss available to common stockholders.

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Recently Announced Accounting Pronouncements

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2022-03 on its unaudited condensed consolidated financial statements.

As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies.

Note 3. Business Combination

On January 9, 2023, the Company completed the acquisition of Catheter (the "Merger") for the purpose of acquiring Catheter’s existing and developing product lines based on unique electrophysiology technology.

Pursuant to the Merger Agreement, all Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $25.2 million, were converted into a right to receive 14,649.591 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock. Additionally, all outstanding stock options to purchase Catheter common stock were assumed and converted into options to purchase approximately 753,699 shares of the Company's common stock.

The total purchase consideration for the Merger was $82.9 million which represents the sum of the (i) estimated fair value of the 14,649.591 Series X Convertible Preferred Stock issued and (ii) the portion of the estimated fair value of $3.1 million representing the Company stock options issued as replacement of Catheter share-based payment awards as required under Topic 805.

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The fair value of the Series X Convertible Preferred Stock includes certain discounts applied to the closing stock price of the Company, on January 9, 2023, of $6.41 per share.

The following table summarizes the preliminary estimated fair value of the consideration associated with the Merger (in thousands, except share data):

Description	Fair Value as of January 9, 2023
Fair value of 14,649.591 Series X convertible preferred stock issued	$	79,840
Fair value of Catheter’s fully vested stock options		3,085
Total Purchase Price	$	82,925

The Merger is being accounted for as a business combination in accordance with Topic 805. The Company estimated the fair values of the assets acquired and liabilities assumed in the Merger. These values have been prepared based on preliminary estimates of the fair value of the consideration paid, assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. 

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The following table summarizes the preliminary purchase price allocations relating to the Merger (in thousands): 

Description	Fair Value
Assets acquired:
Cash and cash equivalents	$	15
Accounts receivable		71
Inventories		52
Prepaid expenses and other current assets		23
Property and equipment, net		26
Lease right-of-use assets		119
Other assets		8
Developed technology		35,080
Customer relationships		220
Trademarks		1,700
Goodwill		56,086
Total assets acquired	$	93,400
Liabilities assumed:
Accounts payable	$	922
Accrued expenses		1,389
Lease liability - current portion		37
Interest payable		198
Convertible promissory note		250
Lease liability - net of current portion		87
Royalties payable		7,592
Total liabilities assumed		10,475
Total purchase price	$	82,925

All intangible assets acquired are subject to amortization and their associated estimated acquisition date fair values and estimated useful lives are as follows (in thousands except for estimated useful life which is in years):

Intangible Assets	Estimated Fair Value		Estimated Useful Life
Developed technology- Vivo	$	8,020		8
Developed technology- LockeT		27,060		6
Customer relationships		220		5
Trademark- Vivo		1,480		9
Trademark- LockeT		220		8
	$	37,000

Topic 805 requires that an acquirer in a business combination report provisional amounts when measurements are incomplete as of the end of the reporting period covering the business combination. In accordance with Topic 805, the acquirer has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The measurement period provides companies with a reasonable period of time to determine the value of the identifiable assets acquired, liabilities assumed, and the consideration transferred for the acquiree. In accordance with Topic 805, the measurement period ends as soon as the acquirer receives all necessary information about the facts and circumstances that existed as of the acquisition date for the provisional amounts or has otherwise learned that more information is not obtainable. However, the measurement period cannot exceed one year from the acquisition date. Topic 805 requires that measurement period adjustments be recognized in the reporting period in which the adjustment amount is determined.

In accordance with ASC Topic 805-10-25-15, the acquirer in a business combination has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The measurement period provides companies with a reasonable period of time to determine the value of identifiable tangible and intangible assets acquired, liabilities assumed, and the consideration transferred for the acquiree. In accordance with ASC Topic 805-10-25-14, the measurement period ends when the acquirer receives all necessary information about the facts and circumstances that existed as of the acquisition date for the provisional amounts (or otherwise learns that more information is not obtainable); however, the measurement period cannot exceed one year from the acquisition date.

As of the date of this Quarterly Report, management is still in the process of evaluating the estimated fair value of the consideration transferred in the Merger. In addition, management is still evaluating the allocation of the acquisition purchase price to the tangible and intangible assets acquired, liabilities assumed, and the resulting goodwill.  Management’s analysis of these items has not yet been completed because of the inherent complexities of estimating fair values of (1) the Company’s Series X Preferred Stock, for which no readily determinable fair value exists, issued in the Merger, and (2) assets and technologies developed by Catheter, an early-stage company with limited commercial history.  Therefore, the business combination amounts presented in Note 3 were determined by management based on its consideration of all currently available information; however, management has not fully completed its business combination analysis and such amounts must be considered provisional amounts.  Notwithstanding the above, as described in Note 8, management determined that there were indicators of asset impairment during the quarterly period ended March 31, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill.

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Transaction costs incurred in connection with this business combination amounted to approximately $1.7 million during the three months ended March 31, 2023.

Pro Forma Financial Information

The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2022. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods. The following information for the three months ended March 31, 2023 and 2022 is presented in thousands except for the per share data:

	Three Months Ended March 31,
	2023			2022
Revenues	$	88		$	95
Net loss		(66,570	)		(6,967	)
Net loss attributable to common stockholders		(67,370	)		(6,967	)
Basic and diluted net loss per share – on a pro forma basis (unaudited)	$	(13.56	)		(2.17	)

Note 4. Royalties Payable

LockeT Royalty

On January 9, 2023, the Company entered into an agreement with the Convertible Promissory Noteholders (“Noteholders”) to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device ("LockeT"), commencing upon the first commercial sale, through December 31, 2035. The royalty payable has an estimated fair value of approximately $7.4 million. The remaining accrued interest for the notes not converted at closing of the Merger was paid on February 9, 2023.

AMIGO System Royalty

During 2006 and 2007, Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Catheter's AMIGO System receiving a total of $1.6 million from the foundation.

The agreement calls for the payment of the following sales-based royalties, by Catheter, to the foundation, upon successful commercialization of the AMIGO System:

Royalty Percentage	Until Royalty Payment Reaches a Total of
4%	$	1,589,500
2%	$	3,179,000
1%		In perpetuity

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There was no royalty expense recorded for the three months ended March 31, 2023 and 2022, respectively in relation to the AMIGO System. No royalties have been paid or are currently payable under the agreements.

See table below for roll forward of the royalty payable for the three months ended March 31, 2023:

Balance at beginning of period	$	—
AMIGO royalty payable recognized in connection with the Merger		160
LockeT royalty payable recognized in connection with the Merger		7,432
Accretion of LockeT royalty payable		513
Balance at end of period	$	8,105

Note 5. Inventories

Inventories consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Raw materials	$	38	$	—
Finished goods		32		—
Inventories	$	70	$	—

Note 6. Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	March 31, 2023			December 31, 2022
Machinery and equipment	$	20		$	—
Computer hardware and software		14			—
VIVO DEMO/Clinical Systems		52			—
Property and equipment, gross		86			—
Accumulated depreciation		(30	)		—
Property and equipment, net	$	56		$	—

Depreciation expense was $7 thousand and $115 thousand for the for the three months ended March 31, 2023 and 2022, respectively.

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Note 7. Intangible Assets

The following table summarizes the Company’s intangible assets as of March 31, 2023:

	Estimated Useful Life in Years		Gross Carrying Amount at January 9, 2023		Accumulated Amortization			Net Book Value at Net Book Value at March 31, 2023
Developed technology ‐ Vivo		8	$	8,020	$	(251	)	$	7,769
Developed technology ‐ Locket		6		27,060		(1,127	)		25,933
Customer relationships		5		220		(11	)		209
Trademarks/trade names ‐ Vivo		9		1,480		(41	)		1,439
Trademarks/trade names ‐ Locket		8		220		(7	)		213
			$	37,000	$	(1,437	)	$	35,563

As of December 31, 2022 the Company did not have any intangible assets.

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense, included within selling, general and administrative expenses, relating to the purchased intangible assets was $1.4 million and $0 for the three months ended March 31, 2023 and 2022, respectively.

Note 8. Goodwill

In connection with the Merger, the excess of the purchase price over the estimated fair value of the net assets assumed of $56.1 million was recognized as goodwill.

The Company tests Goodwill for impairment at the reporting unit level annually in the fourth quarter or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. Due to a sustained decrease in the Company’s share price during the three months ended March 31, 2023, the Company concluded that in accordance with ASC 350 a triggering event occurred indicating that potential impairment exists and required the Company to assess if impairment exists as of March 31, 2023, and if so, the extend of the impairment. In accordance with ASC 350, the Company performed a quantitative goodwill impairment test, which resulted in the carrying amount of the reporting unit exceeding the estimated fair value of the reporting unit, indicating that the goodwill of the reporting unit was impaired. The Company recorded an impairment charge of $56.1 million related to goodwill for the three months ended March 31, 2023. The Company utilized a combination of an income and market approach to assess the fair value of the reporting unit as of March 31, 2023. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions while the guideline public company market approach considered marketplace earnings multiples from within a peer public company group. The Company recorded the impairment charge of $56.1 million within loss on impairment of goodwill in the condensed consolidated statement of operations. As of March 31, 2023, cumulative goodwill impairment charges of $56.1 million were incurred related to the Company’s single reporting unit.

The following is a roll forward of goodwill as of and for the three months ended March 31, 2023:

Beginning balance, January 1, 2023	$	-
Goodwill recognized in connection with the Merger (Note 3)		56,086
Impairment charge		(56,086	)
Ending balance, March 31, 2023	$	-

Note 9. Accrued Expenses

Resignation of CEO

On April 17, 2023, the Company received the resignation of Will McGuire from his positions as Chief Executive Officer and Secretary, and as a member of the Board of Directors, effective April 28, 2023, for personal reasons, see Note 18, Subsequent Events. The Board of Directors has established a search committee consisting of Susanne Meline and James Caruso to identify a new Chief Executive Officer. Until a new Chief Executive Officer is identified, David Jenkins, Executive Chairman of the Board, will serve as interim Chief Executive Officer and as the Company’s principal executive officer, effective April 28, 2023.

In connection with Mr. McGuire’s resignation, he and the Company entered into a second amendment to his change in control and severance agreement, which among other things, clarified that the amount of Mr. McGuire’s severance payment would be based on his 2022 base salary and bonus opportunity, and provided that he would not receive Cobra coverage following his termination of employment. Mr. McGuire will receive a severance payment of approximately $1.75 million pursuant to his change in control and severance agreement. Because management believed a loss was probable under related agreements, as of March 31, 2023, the Company accrued for $1.75 million in relation to the severance.

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Accrued expenses and accrued severance consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Legal expenses	$	177	$	5,195
Offering costs		1,356		1,356
Compensation and related benefits		63		369
Warranty expenses		192		192
Accrued severance (see Note 18)		1,750		—
Other accrued expenses		284		372
Accrued expenses	$	3,822	$	7,484

Activity in the product warranty accrual is included in accrued expenses in the unaudited condensed consolidated balance sheets and consisted of the following (in thousands):

	Three Months Ended March 31, 2023		Year Ended December 31, 2022
Balance at beginning of period	$	192	$	195
Claims satisfied		—		(3	)
Balance at end of period	$	192	$	192

The accrued warranty balances at March 31, 2023 and December 31, 2022 relate to the voluntary recall of catheters, which was initiated in September 2019.

Note 10. Leases

For the three months ended March 31, 2023 and 2022, operating lease expense and cash paid were $15 thousand and $108 thousand, respectively, and $16 thousand and $110 thousand, respectively. Variable costs were insignificant for the three months ended March 31, 2023 and 2022.

The Company's lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived an imputed rate, which was used in a portfolio approach to discount its real estate lease liabilities. Management used an estimated incremental borrowing rate of 11.09% for all leases that commenced prior to January 1, 2023. For leases entered into during the three months ended March 31, 2023, management used an estimated incremental borrowing rate of 10.00%.

Lease Terms and Discount Rate

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases, as of March 31, 2023:

Weighted average remaining lease term (in years) – operating leases	2.51
Weighted average discount rate – operating leases	10.91	%

California Operating Lease

The Company had an operating lease for office and manufacturing space which required it to pay base rent and certain utilities. Monthly rent expense was recognized on a straight-line basis over the term of the lease which expires in 2027. At March 31, 2022, the remaining lease term was 5.75 years. The operating lease was included on the condensed balance sheets at the present value of the lease payments at a 7% discount rate which approximates the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment, as the lease did not provide an implicit rate.

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On October 24, 2022, the Company entered into a lease termination agreement (the “Lease Termination Agreement”) with the landlord, pursuant to which it terminated the lease agreement for its office and manufacturing space in Carlsbad, California, effective October 28, 2022. In accordance with the terms of the Lease Termination Agreement, the Company agreed to (i) release its right to the security deposit of approximately $36 thousand previously paid to the landlord and (ii) pay a $0.3 million lease termination fee to the landlord. As a result of the Lease Termination Agreement, the Company wrote-off its operating lease right-of-use asset, operating lease liability and security deposit, resulting in a non-cash gain of approximately $0.1 million. The lease termination fee of $0.3 million was paid on October 31, 2022.

South Carolina Office Lease Agreement

On September 27, 2022, Catheter entered into a lease agreement for office space located in Fort Mill, South Carolina. The space will be used for office and general use. The term of the lease is 38 months which began on October 1, 2022, and which includes two months of free rental from the commencement date of the lease. The lease contains two separate 36 month renewal periods, which require 180 days notice of the Company's intention to exercise. As of the date of these financial statements, the Company does not intend to exercise either of the two extension options. Total rent is $3,773 per month for the first ten months following the two months of free rental, with annual increases on the anniversary of the effective date. The Company has adopted the practical expedient under Topic 842, which permits the Company to account for each separate lease component of a contract and its associated non-lease components as a single lease payment. As a result, beginning at lease inception on October 1, 2022, the Company will recognize both the lease payments and associated common area maintenance payments as a single lease payment. The Company estimated an incremental borrowing rate of 11.09% for this lease agreement.

New Jersey Office Lease Agreement

On December 7, 2022, Catheter entered into a lease agreement for office space located in Augusta, New Jersey. The space will be used for office and general use. The term of the lease is 24 months which began on January 1, 2023. The lease contains one 24 month renewal period, which requires 9 months’ notice if the Company intends to exercise. Total rent is $1,207 per month throughout the term of the lease agreement.

Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows:

Period ending December 31:	Operating Lease
Remainder of 2023	$	62
2024		65
2025		49
Total minimum lease payments		176
Less effects of discounting		(53	)
Present value of future minimum lease payments	$	123

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Right-of-use lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	As of March 31, 2023		As of December 31, 2022
Assets
Lease right-of-use assets	$	129	$	—
Total lease assets		129		—
Liabilities
Current liabilities:
Lease liability - current portion		51		—
Non-current liabilities:
Lease liability, net of current portion		88		—
Total lease liability	$	139	$	—

Note 11. Net Loss per Share

The Company’s outstanding warrants to purchase common stock have participation rights to any dividends that may be declared in the future and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2023 consisted of Series A convertible preferred stock of 7,203 shares, Series X convertible preferred stock of 12,675 shares, warrants of 11,148,858, stock options of 452,908, restricted stock awards of 556, and restricted stock units of 26.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2022 consisted of warrants of 1,126,599, stock options of 2,128, restricted stock awards of 3,298, restricted stock units of 993 and Employee Stock Purchase Plan shares of 333.

Net loss attributable to common stockholders consists of net loss, as adjusted for deemed dividends.  The Company recorded a deemed dividend for the modification of existing warrants and issuance of the Series E warrants of $0.8 million during the three months ended March 31, 2023.

Note 12. Equity Offerings

Public Offering

On February 8, 2022, the Company completed the Offering in which it issued and sold (i) 190,700 shares of common stock, (ii) 480,052 warrants to purchase one share of common stock at an exercise price of $25.00 that were immediately exercisable and expire one year from the date of issuance, or Series A warrants, and (iii) 480,052 warrants to purchase one share of common stock at an exercise price of $25.00 that were immediately exercisable and expire seven years from the date of issuance, or Series B warrants, and (iv) 289,352 pre-funded warrants to purchase one share of common stock at an exercise price of $0.005 per share that were immediately exercisable and expire twenty years from the date of issuance. In addition, the Company granted the underwriters of the Offering a 45-day option (the “Overallotment Option”) to purchase up to (i) 72,000 additional shares of common stock, (ii) 72,000 additional Series A warrants and/or (iii) 72,000 additional Series B warrants, solely to cover overallotments.

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The Series A warrants and Series B warrants were valued at approximately $11.6 million using the Black-Scholes model based on the following assumptions:

	Series A			Series B
Risk-free interest rate		0.91	%		1.93	%
Volatility		131.07	%		85.38	%
Expected dividend yield		0.00	%		0.00	%
Expected life (in years)		1.0			7.0

Pursuant to the exercise of the Overallotment Option in February 2022, the Company issued 24,902 shares of common stock, 72,000 Series A warrants and 72,000 Series B warrants, net of underwriting discounts. On various dates in February 2022 and March 2022, the Company issued 289,352 shares of common stock upon the exercise of all of the pre-funded warrants issued in the Offering. In addition, in March 2022, the Company issued 1,000 shares of common stock in connection with the exercise of 500 each of Series A warrants and Series B warrants issued in the Offering. In July 2022, the Company issued 800 shares of common stock in connection with the exercise of 800 Series A warrants issued in the Offering.

Net proceeds received from the Offering were approximately $11.5 million, after deducting underwriter commissions and fees withheld of approximately $1.1 million. In addition, the Company incurred offering expenses paid or payable of $1.8 million.

The Company entered into an agreement with a former placement agent that, subject to satisfaction of the requirements contained therein, called for a cash tail fee payable based on capital raised from certain investors for a definitive time following the expiration of the agreement. The accrued cash tail fee of approximately $0.9 million related to the Offering is included in accrued expenses in the condensed consolidated balance sheet as of December 31, 2022 and March 31, 2023. Additionally, the agreement called for the issuance of a warrant to purchase approximately 33,000 shares of common stock at an exercise price of $31.25 per share. Such warrant would be immediately exercisable and expire five years from the date issued. This warrant was originally valued at approximately $0.4 million on the date of the Offering using the Black-Scholes model based on the following assumptions: expected volatility of 93.25%, risk-free interest rate of 1.81%, expected dividend yield of 0% and an expected term of 5 years. On the date of the Warrant Repricing, this warrant was revalued at approximately $0.4 million using the Black-Scholes model based on the following assumptions: expected volatility of 98.9%, risk-free interest rate of 2.87%, expected dividend yield of 0% and an expected term of 4.6 years. This warrant has not been issued by the Company as of the date of this Quarterly Report.

Warrant Inducement Offer

On January 9, 2023, the Company reduced the exercise price of certain existing warrants (the “Existing Warrants”), exercisable for 331,608 shares of the Company’s common stock held by a certain investor (the “Investor”), with exercise prices ranging from $14.00 to $526.50 per share to $4.00 per share (the “Warrant Repricing”). In connection with the Warrant Repricing, the Company entered into a warrant inducement offer letter (the “Inducement Letter”), with the Investor pursuant to which it would exercise up to all of the 331,608 Existing Warrants (the “Inducement Offer”). In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, the Company received approximately $1.3 million in gross proceeds. The Company paid the placement agent aggregate cash fees of approximately $0.2 million related to the Inducement Offer which represented 8.0% of the gross proceeds received from the Inducement Offer plus other offering costs resulting in net proceeds to the Company of $1.1 million.  In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, the Company issued the Investor a new Series E common stock purchase warrant, or Series E Warrant (the “Series E Warrant”), to purchase 331,608 shares of common stock at an exercise price of $4.00 per share. The Series E Warrant is exercisable for five years from the date of stockholder approval. Exercise of the Series E Warrant in full was subject to approval of the pre-closing holders of Ra Medical’s stockholders which was obtained at the Stockholders’ Meeting. The incremental fair value of the repriced warrants amounted to $0.3 million and the fair value of Series E warrant totaled $1.9 million.  The relative fair values of such amounts were recorded to additional paid-in capital concurrent with the exercise of the Existing Warrants.

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As a result of the Warrant Repricing and Inducement Offer, the Company presents a deemed dividend for the modification of Existing Warrants and issuance of the Series E Warrants during the three months ended March 31, 2023 of $0.8 million. The deemed divided was included in net loss attributable to common stockholders in the calculation of net loss per share in the condensed consolidated statements of operations.

As of March 31, 2023, the Company had 11,148,858 shares of common stock reserved for issuance pursuant to the warrants issued by the Company at a weighted average exercise price of $5.39.

Private Placement

On January 9, 2023, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) for a private placement (“Private Placement”), with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $8.0 million, (a) Class A units at a price that is the lower of $3.00 per unit and 90% of the 5 day volume weighted average price of the Company’s common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants (as each are defined below), each consisting of one share of common stock, one Series F common stock purchase warrant, or Series F Warrant, and one Series G common stock purchase warrant, or Series G Warrant, and together with the Series F Warrants (the “PIPE Warrants”) and (b) Class B units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock (the “PIPE Preferred Stock”), par value $0.0001, and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock (each share of which is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by the lower of $3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate. The closing under the Securities Purchase Agreement and the sale and issuance of the Class A units and Class B units (and the issuance of any underlying common stock) were approved at the Stockholders’ Meeting. At the closing of the Private Placement, the Company issued 497,908 Class A units for proceeds of approximately $0.9 million and 7,203 Class B units for proceeds of approximately $7.1 million which are convertible into up to 4,501,060 shares of common stock, as well as the issuance of warrants described below.

The PIPE Warrants, including 4,999,093 Series F warrants and 4,999,093 Series G warrants, are exercisable at an exercise price of $3.00 per share, subject to adjustments as provided under the terms of the PIPE Warrants. The PIPE Warrants are exercisable at any time on or after the closing date of the Private Placement until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99%, or the Maximum Percentage, of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99%. The Series F Warrants have a term of two years from the date of stockholder approval, and the Series G Warrants have a term of six years from the date of stockholder approval. The Series F Warrants and Series G Warrants were approved at the Stockholders’ Meeting.

The Series F warrants and Series G warrants were valued in aggregate at approximately $5.5 million using the Black-Scholes model based on the following assumptions:

	Series F	Series G
Risk-free interest rate	3.8 %	3.4 %
Volatility	80.0 %	74.0 %
Expected dividend yield	0.0 %	0.0 %
Expected life (in years)	2.0	6.0

The proceeds from the Securities Purchase Agreement were allocated to the equity instruments issued based on their relative fair values and recorded in additional paid-in capital.

Shares of PIPE Preferred Stock, the conversion of which was approved at the Stockholders’ Meeting, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

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Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion.

Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights.

The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of common stock, the shares issuable upon exercise of the Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock.

Note 13. Preferred Stock

Series X Convertible Preferred Stock

As described in Note 3, above, pursuant to the Merger Agreement, all Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $25.2 million, were converted into a right to receive 14,649.591 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock.

Series X Preferred Stock has no voting rights prior to the conversion into Common Stock. While there are no voting rights of the Series X Preferred Stock, there are protective rights regarding the sales of the company, change of control, etc.

On March 21, 2023, the Company held a special meeting of stockholders (the “Stockholders’ Meeting”), at which the stockholders approved, among other things, the issuance of 1,974,905 shares of common stock upon the conversion of 1,974.905 of Series X Preferred Stock which were issued upon the closing of the Merger see Note 3, Business Combination. The remaining 12,674.687 shares of Series X Preferred Stock are expected to remain outstanding until at least July 9, 2024, and will convert thereafter up to 12,674,687 shares of common stock, only if the Company meets the initial listing standards of the NYSE American or another national securities exchange or are delisted from the NYSE American.

Also, through at least July 9, 2024, the ability to convert the Series X Preferred Stock will be subject to a beneficial ownership conversion “blocker” that prevents the holder from acquiring shares of Ra Medical common stock by converting the Series X Preferred Stock to the extent that such shares would result in the holder having, post-conversion, beneficial ownership of common stock above a pre-set threshold (the “Beneficial Ownership Blocker”).

Series A Convertible Preferred Stock

As described in Note 12, on January 9, 2023, the Company entered into a Securities Purchase Agreement for a Private Placement, with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $8.0 million, (a) Class A units at a price that is the lower of $3.00 per unit and 90% of the 5 day volume weighted average price of the Company’s common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, each consisting of one share of common stock, one Series F common stock purchase warrant, or Series F Warrant, and one Series G common stock purchase warrant, or Series G Warrant, and together with the Series F Warrants (the “PIPE Warrants”) and (b) Class B units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock (the “PIPE Preferred Stock”), par value $0.0001, and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock (each share of which is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by the lower of $3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate. The closing under the Securities Purchase Agreement and the sale and issuance of the Class A units and Class B units (and the issuance of any underlying common stock) were approved at the Stockholders’ Meeting. At the closing of the Private Placement, the Company issued 497,908 Class A units for proceeds of approximately $0.9 million and 7,203 Class B units for proceeds of approximately $7.1 million which are convertible into up to 4,501,060 shares of common stock, as well as the issuance of certain warrants.

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Shares of PIPE Preferred Stock, the conversion of which was approved at the Stockholders’ Meeting, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion.

Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights.

The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of common stock, the shares issuable upon exercise of the Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock.

Note 14. Stock-Based Compensation

2018 Equity Incentive Plan

In September 2018, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”) which provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, performance-based stock awards and other forms of equity compensation to the Company’s employees, directors and consultants. Stock options granted under the 2018 Plan generally vest one-fourth on the first anniversary of the vesting commencement date with the balance vesting monthly over the remaining three years. Restricted stock units granted under the 2018 Plan generally vest one third on the first anniversary of the vesting commencement date and one sixth every six months thereafter such that the award will be fully vested on the third anniversary of the vesting commencement date. As of March 31, 2023 and December 31, 2022, 9,041 and 8,552 shares of common stock, respectively, were reserved for future issuance pursuant to the 2018 Plan. The number of shares available for issuance under the 2018 Plan also includes an annual increase on the first day of each fiscal year equal to the lesser of (1) 1,305 shares; (2) 5% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or 3) such other amount as the Company’s board of directors may determine.

2020 Inducement Equity Incentive Plan

In March 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Plan”) for the purpose of attracting, retaining and incentivizing employees in furtherance of the Company’s success. The 2020 Plan was adopted without stockholder approval pursuant to Rule 303A.08 of the New York Stock Exchange. The 2020 Plan is used to offer equity awards as material inducements for new employees to join the Company. Upon adoption of the 2020 Plan, 640 shares of common stock were reserved for the granting of inducement stock options, restricted stock awards, restricted stock units and other forms of equity awards. As of March 31, 2023 and December 31, 2022, 181 shares of common stock were reserved for future issuance under the 2020 Plan.

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Stock Options Assumed in Merger (See Note 3, Business Combination)

At the closing of the Merger, (a) each outstanding share of Catheter common stock and $25,215,000 in Catheter convertible promissory notes were converted into the right to receive 14,649.591 of Ra Medical Series X Convertible Preferred Stock, and b) each outstanding option to purchase Catheter common stock that had not previously been exercised prior to the closing of the Merger was assumed and converted into options to purchase 753,699 shares of Ra Medical Common Stock (“Replacement Options”). Additionally, no Catheter options were amended in connection with the Merger. All the Replacement Options vested in accordance with the original terms of the grants in place at the time of the Merger. As a result, $3,085,000 of purchase price consideration, which represented the estimated fair value of Catheter’s assumed stock options, and $1,374,000 of stock-based compensation expense, which represents the excess of the estimated fair value of the Replacement Options over the assumed Catheter stock options, were recognized upon the closing of the Merger.

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2023:

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		990		$	11,405
Options assumed in Catheter Merger		753,699		$	1		—		—
Options exercised		(301,746	)	$	1		—		—
Canceled/forfeited		(35	)	$	1,525		—		—
Outstanding at March 31, 2023		452,908		$	26		3.40	$	—
Vested and expected to vest at March 31, 2023		452,908		$	26		3.40	$	—
Exercisable at March 31, 2023		452,824		$	26		3.40	$	—

The Company did not grant any stock options during the three months ended March 31, 2023.

Restricted Stock Units

The following is a summary of the restricted stock unit activity for the 2018 Plan for the three months ended March 31, 2023:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		61		$	450.46
Vested		(26	)	$	333.00
Forfeited		(9	)	$	1,129.10
Outstanding at March 31, 2023		26		$	1,912.56

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Restricted Stock Awards

A summary of the restricted stock award activity for the three months ended March 31, 2023 is presented below:

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		948		$	248.48
Vested		—		$	—
Forfeited		(392	)	$	177.90
Outstanding at March 31, 2023		556		$	298.23

Employee Stock Purchase Plan

In September 2018, the Company’s board of directors adopted the 2018 Employee Stock Purchase Plan (the “ESPP”) which permitted eligible employees to purchase the Company’s common stock at a discount through payroll deductions during defined offering periods. Eligible employees could elect to withhold up to 15% of their base earnings to purchase shares of the Company’s common stock at a price equal to 85% of the fair market value on the first day of the offering period or the purchase date, whichever was lower. The number of shares of common stock reserved for issuance under the ESPP automatically increased on January 1 of each fiscal year by the lesser of (1) 237 shares, (2) 1.25% of the total number of shares outstanding on December 31 of the preceding fiscal year, or (3) such other amount as the Company’s board of directors may determine.

For the three months ended March 31, 2023 and 2022, cash received from the exercise of purchase rights under the ESPP was approximately $0 and $0.1 million, respectively. The Company paused the ESPP in May 2022.

As of March 31, 2023, the Company had issued 950 shares of common stock since inception of the ESPP, and no shares were reserved for future issuance.

Stock-based compensation expense recorded in operating expenses was as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Selling, general and administrative	$	1,394	$	113
Research and development		—		49
Stock-based compensation in operating expenses	$	1,394	$	162

Stock-based compensation of approximately $0 and $3 thousand was capitalized to property and equipment and inventory during the three months ended March 31, 2023 and 2022, respectively.

Total unrecognized estimated stock-based compensation expense by award type and the remaining weighted average recognition period over which such expense is expected to be recognized at March 31, 2023 was as follows:

	Unrecognized Expense (in thousands)		Remaining Weighted Average Recognition Period (in years)
Stock options	$	62		—
Restricted stock awards	$	96		0.6
Restricted stock units	$	7		0.8

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Note 15. Income Taxes

The following table summarizes the Company’s effective tax rate for the periods indicated: 

	Three Months Ended March 31,			Year Ended December 31,
	2023			2022
Reported income tax expense rate		0	%	(0.1	%)

The Company did not record an income tax provision for the three months ended March 31, 2023 and 2022. The Company recorded an income tax expense for the twelve months ended December 31, 2022, primarily due to minimum state taxes.

At December 31, 2022, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $54.5 million and $47.8 million, respectively. The state NOL carryforwards begin expiring in 2030. Use of these NOL carryforwards may be significantly limited under the tax rules regarding the use of losses 27 following an ownership change under Internal Revenue Code (“IRC”) Section 382. Management performed a Section 382 analysis regarding the limitation of net operating losses through December 31, 2020 and determined that ownership changes occurred in May 2020. The Company believes further ownership changes occurred during each of the years ended December 31, 2022 and 2021. Accordingly, utilization of the Company’s NOLs is subject to an annual limitation for federal tax purposes under IRC Section 382. Due to the changes in control, the Company estimated that all of its $54.5 million federal NOL carryforwards are effectively eliminated, in accordance with IRC Section 382. In addition, $40.8 million of its $47.8 million in state NOL carryforwards is also eliminated. As a result of these eliminations, the Company’s federal and state NOLs were reduced to zero and $6.9 million, respectively, before taking into consideration the valuation allowance.

In addition, for all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is not more likely than not that its net deferred tax assets will not be realized. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance.

The acquisition of Catheter Precision Inc was treated as a stock purchase for U.S. tax purposes in the first quarter of 2023. As such, the Company recorded deferred tax assets and liabilities on its U.S. tax attributes. The Company continues to use its deferred tax liabilities as a source of income against a portion of its deferred tax assets. A valuation allowance was recorded for the portion of the deferred tax assets that are not more-likely-than-not to be realized.

As part of the Tax Cuts and Jobs Act of 2017 (TCJA), beginning with the Company's 2022 tax year, the Company is required to capitalize research and development expenses, as defined under Internal Revenue Code section 174. For expenses that are incurred for research and development in the U.S., the amounts will be amortized over 5 years, and expenses that are incurred for research and experimentation outside the U.S. will be amortized over 15 years. This provision has not had a significant impact to the consolidated financial statements.

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Note 16. Commitments and Contingencies

Securities Class Action

On June 7, 2019, a putative securities class action complaint captioned Derr v. Ra Medical Systems, Inc., et al, (Civil Action no. 19CV1079 LAB NLS) was filed in the U.S. District Court for the Southern District of California against the Company, certain current and former officers and directors, and certain underwriters of the Company’s initial public offering. Following the appointment of a lead plaintiff and the filing of a subsequent amended complaint, the lawsuit alleges that the defendants made material misstatements or omissions in the Company’s registration statement in violation of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and between September 27, 2018 and November 27, 2019, inclusive, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). On March 11, 2020, lead plaintiffs voluntarily dismissed the underwriter defendants without prejudice. On March 13, 2020, defendants filed a motion to dismiss the amended complaint. On March 24, 2021, the court issued an order granting defendants’ motion to dismiss claims under the Securities Act in full and certain claims under the Exchange Act and denying defendants’ motion to dismiss certain Exchange Act claims. Plaintiffs filed their second amended complaint on April 19, 2021, realleging the Securities Act claims and certain of the previously dismissed Exchange Act claims. On June 10, 2021, defendants moved to dismiss the second amended complaint. On November 12, 2021, following a private settlement mediation with the lead plaintiffs, the parties executed a stipulation of settlement that resolved the claims asserted in the securities class action. The settlement provides for a payment to the plaintiff class of $10.0 million. On March 18, 2022, the Company paid approximately $0.6 million towards the settlement to satisfy its self-insured retention/deductible. The Company’s insurers paid the remainder of the settlement. The proposed settlement required both preliminary and final approval by the court. On February 11, 2022, the court granted preliminary approval of the settlement, scheduled a hearing on final approval of the settlement and denied the pending motion to dismiss without prejudice. On May 2, 2022, plaintiffs filed a motion for final approval of the settlement and plan of allocation, and lead counsel filed a motion for an award of attorneys’ fees and reimbursement of litigation expenses. On September 23, 2022, the court granted final approval of the settlement, certified the settlement class, granted in part lead counsel’s motion for an award of attorneys’ fees and reimbursement of litigation expenses, dismissed plaintiffs’ claims with prejudice, and entered final judgment.

Shareholder Derivative Litigation

On October 1, 2019, a shareholder derivative complaint captioned Noel Borg v. Dean Irwin, et al (Civil Action no. 1:99-cm-09999) was filed in the U.S. District Court for the District of Delaware against certain current and former officers and directors, purportedly on behalf of the Company, which is named as a nominal defendant in the action. The complaint alleges breaches of fiduciary duty, unjust enrichment, waste, and violations of Section 14(a) of the Exchange Act. On October 21, 2019, pursuant to the parties’ stipulation, the court stayed the derivative lawsuit until the related class action is resolved. On November 10, 2022, the plaintiff filed a notice voluntarily dismissing the case without prejudice.

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Settlement Agreements with the Department of Justice and Participating States

As previously announced on December 28, 2020, the Company entered into a settlement agreement with the U.S., acting through the Department of Justice (“DOJ”) and on behalf of the Office of Inspector General, and other settlement agreements with certain state attorneys general, collectively the “Settlement Agreements”, to resolve investigations and a related civil action concerning its marketing of the DABRA laser system and DABRA-related remuneration to certain physicians.

Pursuant to the terms of the Settlement Agreements, (a) if the Company’s revenue exceeds $10 million in any of fiscal years 2021-2024, the Company is also required to pay for the corresponding year: $500,000 for 2021, $750,000 for 2022, $1 million for 2023, and $1.25 million for 2024; (b) if the Company is acquired or is otherwise involved in a change in control transaction (as defined in the Settlement Agreement) before the end of 2024, the Company was required to pay an additional settlement amount of $5 million, plus 4% of the value attributed to the Company in the transaction, so long as the attributed value is in excess of $100 million, with the total change in control payment never to exceed $28 million; and (c) if the Company’s obligations under the Settlement Agreements are avoided by bankruptcy, the U.S. may rescind the releases and bring an action against the Company in which the Company agrees is not subject to an automatic stay, is not subject to any statute of limitations, estoppel or laches defense, and is a valid claim in the amount of $56 million, minus any prior change in control payments. As a result of the Merger, the Company recorded $5.0 million related to the Settlement Agreements as of December 31, 2022, which is included in accrued expenses in the accompanying balance sheet as of December 31, 2022.

In February 2023, the Company made payments of $4.7 million and $0.3 million to the DOJ and the participating states, respectively, pursuant to the terms of the Settlement Agreements.

Filing of Complaint

On September 29, 2022, a purported stockholder of the Company filed a complaint captioned David Nguyen v. Ra Medical Systems, Inc. et al. (Civil Action no. 3:22-cv-01470-BEN-MSB) in the U.S. District Court for the Southern District of California against us and our current directors. The complaint alleges violations of Sections 14(a) and 20(a) of the Exchange Act based on alleged deficiencies in our preliminary proxy, filed with the SEC on September 23, 2022. On February 7, 2023, plaintiff filed a notice voluntarily dismissing the case without prejudice.

Other Litigation

In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.

Note 17. Employee Benefit Plan

In January 2019, the Company established a defined contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”). Under the terms of the 401(k) Plan, all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100% of each employee’s contribution up to 3% and 50% of contributions between 3% and 5%, with the match-eligible contribution limited to 4% of the employee’s eligible compensation. The Company cancelled the 401(k) Plan effective March 10, 2023. The Company’s expense related to the matching contributions was approximately $0 and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

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Note 18. Subsequent Events

Resignation of CEO

On April 17, 2023, the Company received the resignation of Will McGuire from his positions as Chief Executive Officer and Secretary, and as a member of the Board of Directors, effective April 28, 2023, for personal reasons.  The Board of Directors has established a search committee consisting of Susanne Meline and James Caruso to identify a new Chief Executive Officer. Until a new Chief Executive Officer is identified, David Jenkins, Executive Chairman of the Board, will serve as interim Chief Executive Officer and as the Company’s principal executive officer, effective April 28, 2023.

In connection with Mr. McGuire’s resignation, he and the Company entered into a second amendment to his change in control and severance agreement, which among other things, clarified that the amount of Mr. McGuire’s severance payment would be based on his 2022 base salary and bonus opportunity, and provided that he would not receive Cobra coverage following his termination of employment. Mr. McGuire will receive a severance payment of approximately $1.75 million pursuant to his change in control and severance agreement. As of March 31, 2023, the Company determined that it was probable that the change in control would occur. Because management believed a loss was probable under related agreements, as of March 31, 2023 the Company accrued for $1.75 million in relation to the severance. The Company paid the severance in full on May 12, 2023.

Entry into Lease Agreement

On March 19, 2023, the Company entered into a 36 month lease agreement in Park City, Utah effective May 1, 2023. The rent expense under the agreement is $3,203 per month.

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

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available. This section should be read in conjunction with our unaudited condensed financial statements and related notes included in Part I, Item 1 of this report. The statements contained in this Quarterly Report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements can be identified by words such as “believe,” “anticipate,” “may,” “might,” “can,” “could,” “continue,” “depends,” “expect,” “expand,” “forecast,” “intend,” “predict,” “plan,” “rely,” “should,” “will,” “may,” “seek,” or the negative of these terms or and other similar expressions, although not all forward-looking statements contain these words. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including, but not limited to, those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022. These forward-looking statements reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report and are subject to risks and uncertainties. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.

This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.

References to “we”, “us”, “our” and “the Company” refer to Ra Medical Systems, Inc.

Overview

Ra Medical Systems, Inc., or Ra Medical, was reincorporated in Delaware in July 2018. Ra Medical was initially formed to develop, commercialize and market its advanced excimer laser-based platform for use in the treatment of vascular and dermatological immune-mediated inflammatory diseases.

On January 9, 2023, Ra Medical completed its acquisition of Catheter Precision, Inc., (“Catheter”), a privately held Delaware corporation pursuant to an Amended and Restated Agreement and Plan of Merger, or the Merger Agreement. Under the terms of the Merger Agreement, Catheter merged into a wholly owned subsidiary of Ra Medical, in a stock-for-stock and notes payable merger transaction, or the Merger (we refer to the post-merger combined company as the “Company”).  The total estimated purchase consideration for the Merger was $82.9 million which represents the sum of the (i) estimated fair value of the 14,649.591 Series X Convertible Preferred Stock issued and (ii) portion of the estimated fair value of the $3.1 million representing the Company stock options issued as replacement of Cather share-based payment awards.

The Company’s primary business focus now relates to Catheter’s historical business and products. Catheter’s primary product is the View into Ventricular Onset or VIVO^TM, (“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.

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Pre-Merger Operations

Ra Medical owns intellectual property related to an advanced excimer laser-based platform for use in the treatment of vascular immune-mediated inflammatory diseases. The Destruction of Arteriosclerotic Blockages by laser Radiation Ablation, or DABRA, laser and single-use catheter, together referred to as the DABRA Excimer Laser System or DABRA, was developed as a tool in the treatment of Peripheral Artery Disease which commonly occurs in the legs. Ra Medical also previously marketed the Pharos laser which was used to treat proliferative skin conditions. Ra Medical completed the sale of its Pharos laser business, or Dermatology Business, to STRATA Skin Sciences, Inc. on August 16, 2021.

As previously reported, the board of directors approved a reduction in force, or RIF, effective June 6, 2022, under which approximately 65% of Ra Medical’s full-time employees were immediately terminated and provided one-time severance payments totaling approximately $0.6 million. In August and September 2022, an additional 20% of Ra Medical’s employees were terminated and provided one-time severance payments totaling approximately $0.3 million. The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to Ra Medical during the board of directors’ review of strategic alternatives.

As a result of the RIF and the board of directors’ review of strategic alternatives, Ra Medical paused all engineering activities in June 2022. On July 5, 2022, Ra Medical 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. Ra Medical has ceased marketing the DABRA Excimer Laser System and does not currently intend to commercialize the DABRA 2.0 catheter.

As previously reported, Ra Medical’s strategy was to pursue an atherectomy indication for use, which the FDA defines to include a prespecified improvement in luminal patency. Ra Medical received an Investigational Device Exemption, or IDE, approval in January 2020, and the study was approved for up to 10 clinical sites and 100 subjects. In February 2022, the FDA approved a protocol amendment, raising the enrollment limit from a maximum of 100 subjects to 125 subjects. 

On June 6, 2022, Ra Medical ceased enrollment in the atherectomy clinical study at 108 subjects, with the intent to satisfy the FDA’s data requirements to support an atherectomy indication by completing the six-month follow-up by the end of 2022 or early 2023. However, due to the Merger, Ra Medical closed all clinical sites subsequent to the Merger in January 2023, and it has no plans to pursue the atherectomy indication with the FDA.

Post-Merger Operations

Looking forward, we do not expect to use our legacy DABRA-related assets or continue Ra Medical’s legacy lines of business, but instead expect to shift the focus of our operations to Catheter’s product lines. Accordingly, our current activities primarily relate to Catheter’s historical business, which comprises the design, manufacture and sale of new and innovative medical technologies focused in the field of cardiac electrophysiology, or EP.

Our primary product is the VIVO™ System. We are focused on the design, market development and usage adoption of our VIVO System by cardiac electrophysiologists to enhance their ability to diagnose and treat cardiac arrhythmias. We have completed development, received regulatory clearance, and initiated sales of the VIVO System in the U.S. and Europe.

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Our business strategy is to become the leading medical imaging company in the field of cardiac electrophysiology, and we are dedicated to developing and delivering electrophysiology products to provide patients, hospitals, and physicians with novel technologies and solutions to improve the lives of patients with cardiac arrhythmias. We aim to establish VIVO as an integral tool used by cardiac electrophysiologists during ablation treatment of ventricular arrhythmias by reducing procedure time and patient complications and increasing procedural success.

We have received United States Food and Drug Administration, or FDA, clearance to market and promote the VIVO System in the United States as a pre-procedure planning tool for patients with structurally normal hearts undergoing ablation treatment for idiopathic ventricular arrhythmias. VIVO allows for the acquisition, analysis, display and storage of cardiac electrophysiological data and maps for analysis by a physician. We began a limited commercial launch of VIVO in 2021 and to date, VIVO has been utilized in more than 850 procedures in the U.S. and EU by over 30 physicians, with no reported device-related complications.

We have been cleared to label the VIVO System with the CE Mark in the EU and certain other countries. The CE Mark designation, which affirms the product’s conformity with European health, safety, and environmental protection standards, allows us to market that product in countries that are members of the EU and the European Free Trade Association. Catheter has commenced limited sales of the VIVO System in Europe and the UK through independent distributors. Catheter’s international distributors are supported by two EU based full time and one part time employee.

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 marketed the AMIGO® Remote Catheter System, or 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. Amigo was designed for use during the ablation procedure, to allow the physician to remotely navigate standard commercially available catheters, with stability and precision, and maintains catheter locations within the heart while decreasing radiation exposure and avoiding long periods standing bedside in heavy protective lead aprons. AMIGO has been used in over 2,000 procedures in the U.S. and Europe and has been well received by leading experts in the field of EP. We own the intellectual property related to AMIGO, and this product is under consideration for future research and development of a generation 2 product.

Recent Developments

Settlement Agreements with the Department of Justice and Participating States

On December 28, 2020, Ra Medical entered into a settlement agreement with the U.S., acting through the DOJ and on behalf of the OIG, and other settlement agreements with certain state attorneys general, collectively the Settlement Agreements, to resolve investigations and a related civil action concerning its marketing of the DABRA laser system and DABRA-related remuneration to certain physicians. Pursuant to the terms of the Settlement Agreements, if Ra Medical was acquired or was otherwise involved in a change in control transaction (as defined in the Settlement Agreements) before the end of 2024, Ra Medical was required to pay a settlement amount of $5.0 million. As a result of the Merger, Ra Medical made payments of $4.7 million and $0.3 million to the DOJ and participating states, respectively, in February 2023. Such amounts were included in accrued expenses in the balance sheet at December 31, 2022.

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Warrant Inducement Offer

On January 9, 2023, we reduced the exercise price of certain existing warrants, or the Existing Warrants, exercisable for 331,608 shares of Ra Medical common stock held by a certain investor (the “Investor”), with exercise prices ranging from $14.00 to $526.50 per share to $4.00 per share, or the Warrant Repricing. In connection with the Warrant Repricing, we entered into a warrant inducement offer letter, or the Inducement Letter, with the Investor pursuant to which it would exercise up to all of the 331,608 Existing Warrants, or the Inducement Offer. In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, we received approximately $1.3 million in gross proceeds. We paid the placement agent aggregate cash fees of approximately $0.2 million related to the Inducement Offer which represented 8.0% of the gross proceeds received from the Inducement Offer plus other offering costs. In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, we issued the Investor a new Series E common stock purchase warrant, or Series E Warrant, to purchase 331,608 shares of common stock at an exercise price of $4.00 per share. The Series E Warrant is exercisable for five years from the date of stockholder approval. Exercise of the Series E Warrant in full was approved by Ra Medical’s stockholders at the special Stockholders’ Meeting held on March 21, 2023. The incremental fair value of the repriced warrants amounted to $0.3 million and the fair value of Series E warrant totaled $1.9 million.  The relative fair values of such amounts were recorded to additional paid-in capital concurrent with the exercise of the Existing Warrants.

Securities Purchase Agreement

On January 9, 2023, we entered into a Securities Purchase Agreement, or the Securities Purchase Agreement, for a private placement, or the Private Placement, with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $8.0 million, (a) Class A Units at a price that was the lower of $3.00 per unit and 90% of the 5 day volume weighted average price of our common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants (as each are defined below), each consisting of one share of common stock, one Series F Common Stock Purchase Warrant, or Series F Warrant, and one Series G Common Stock Purchase Warrant, or Series G Warrant, and together with the Series F Warrant the PIPE Warrants, and (b) Class B Units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock, par value $0.0001, or the PIPE Preferred Stock, and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock, each share of which is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by the lower of $3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate. The closing under the Securities Purchase Agreement and the sale and issuance of the Class A Units and Class B Units (and the issuance of any underlying common stock) was approved at the special Stockholders’ Meeting held March 21, 2023. At the closing of the Private Placement, we issued 497,908 Class A Units for proceeds of approximately $0.9 million and 4,501,060 Class B Units for proceeds of approximately $7.1 million.

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The PIPE Warrants are exercisable at an exercise price of $3.00 per share, subject to adjustments as provided under the terms of the PIPE Warrants. The PIPE Warrants are exercisable at any time on or after the closing date of the Private Placement until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99%, or the Maximum Percentage, of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99%. The Series F Warrants have a term of two years from the date of stockholder approval, and the Series G Warrants have a term of six years from the date of stockholder approval. Stockholder approval of the Series F Warrants and Series G Warrants was obtained at the special Stockholders’ Meeting held on March 21, 2023.

Shares of PIPE Preferred Stock, the conversion of which was approved at the special Stockholders’ Meeting held on March 21, 2023, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion.

Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights. However, as long as any shares of PIPE Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the PIPE Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the PIPE Preferred Stock, (b) alter or amend the Certificate of Designation for the PIPE Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of PIPE Preferred Stock, (d) increase the number of authorized shares of PIPE Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing. The PIPE Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company. The holders of PIPE Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of the Company’s common stock would receive if the PIPE Preferred Stock were fully converted (disregarding for such purposes any conversion limitations) to the Company’s common stock, which amounts will be paid pari passu with all holders of the Company’s common stock.

The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of its common stock, the shares issuable upon exercise of the PIPE Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock.  This registration statement was declared effective in April 2023.

We intend to use the net proceeds from the Private Placement to advance the development and commercialization of our novel electrophysiology technologies and solutions and to support general corporate purposes.

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Conversion of Series X Preferred Stock

On March 21, 2023, we held a special meeting of stockholders, or Stockholders’ Meeting, at which the stockholders approved, among other things, the issuance of 1,974,905 shares of our common stock upon the conversion of 1,974.905 of our Series X Preferred Stock which were issued upon the closing of the Merger. The remaining 12,674.687 shares of Series X Preferred Stock are expected to remain outstanding until at least July 9, 2024 and will convert thereafter into up to 12,674,687 shares of common stock, only if we meet the initial listing standards of the NYSE American or another national securities exchange or are delisted from the NYSE American.

Components of our Results of Operations for the Three Months Ended March 31, 2023 and 2022

Net Revenues 

Product sales revenues prior to the Merger consisted of sales of catheters for use with the DABRA laser in our atherectomy clinical trials.

After the Merger, our legacy DABRA laser is no longer in use and we have shifted the focus of our operations to Catheter’s product lines. Accordingly, our current activities primarily relate to Catheter’s historical business which comprises the design, manufacture and sale of new and innovative medical technologies focused in the field of cardiac electrophysiology, or EP.

Our revenues post-Merger primarily consist of the VIVO which 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 EP procedures. In addition to the VIVO System, customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System to complete the intended output of the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets represents the Company’s primary performance obligation. The Company recognizes revenue upon the delivery of the VIVO system. The Company also provides customers with the option to pay for software upgrades in advance at the time of the contract's inception. Software upgrades are stand-ready services, whereby the Company will provide software upgrade services to the customer when and as upgrades are available. Terms of the period covered by the payment of software upgrades in advance can range from one year to multiple years. Customers have the option to renew terms covered by software upgrades at the end of each term. The stand-ready software upgrades represent the Company's second separate performance obligation and revenue is recognized over the term of the period.

Cost of Revenues

Cost of revenues for product sales consisted primarily of costs of components for use in our products, the labor used to produce our products, and the manufacturing overhead that supports production.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses consist of employee-related costs, including salaries, benefits and stock-based compensation expenses. Other SG&A expenses include amortization of intangible assets and accretion of royalties payable acquired in the Merger, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses and facility-related expenses.

Research and Development Expenses

Research and development, or R&D, expenses are expensed as incurred and include the following: product development, certain employee-related expenses, including salaries, benefits and an allocated portion of stock-based compensation expense; cost of clinical studies to support new products and product enhancements, including expanded indications; supplies used for internal R&D and clinical activities; and cost of outside consultants who assist with technology development and clinical affairs.

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Results of Operations for the Three Months Ended March 31, 2023 and 2022

The following table sets forth the results of Ra Medical’s operations for the periods presented (in thousands):

	Three Months Ended March 31,
	2023		2022		Change
Net revenues	$	85	$	9	$	76
Cost of revenues		10		95		(85	)
Selling, general and administrative expenses		10,233		2,302		7,931
Research and development expenses		240		3,115		(2,874	)
Loss on impairment of goodwill		56,086		-		56,086
Other income (expense), net		84		8		76

Net Revenues

The increase in net revenues of approximately $76 thousand for the three months ended March 31, 2023 as compared to the corresponding period in the prior year was due to product sales of the VIVO System, as a result of the Merger that took place in January 2023.

Cost of Revenues

The decrease in cost of revenues of approximately $85 thousand for the three months ended March 31, 2023 as compared to the corresponding period in the prior year was due to the cost of sales of the VIVO System, as a result of the Business Combination that took place in January 2023.

Selling, General and Administrative Expenses

The increase in SG&A expenses of approximately $7.9 million for the three months ended March 31, 2023 as compared to the corresponding period in the prior year was due primarily to the increase in professional fees of approximately  $2.5 million, of which, $1.7 million was incurred in connection with the Merger, an increase in severance related charges of $2.1 million, of which $1.75 million related to Ra Medical’s former Chief Executive Officer, an increase in stock compensation of approximately $1.3 million, of which $1.4 million was related to the one time stock compensation for Catheter stock options assumed in the Merger offset by a partial decrease in stock compensation expenses due to the reduction in force in fiscal year 2022. Additionally, SG&A increased as a result of an increase in depreciation and amortization of approximately $1.9 million that resulted from intangible assets acquired in the Merger, and increase in other selling, general, and administrative expenses of $0.6 million, and was partially offset by a decrease in salaries and benefits of approximately $0.5 million.

Research and Development Expenses

The decrease in R&D expenses of approximately $2.9 million for the three months ended March 31, 2023 as compared to the corresponding period in the prior year was primarily due to a decrease in R&D salaries and benefits expenses of approximately $0.9 million, a decrease in R&D facilities allocation expenses of $0.9 million, a decrease in R&D professional fees of $0.3 million, a decrease in R&D supplies and materials of $0.4 million and a decrease in clinical study costs of $0.2 million.

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Loss on Impairment of Goodwill

Due to a sustained decrease in our share price during the three months ended March 31, 2023, we concluded that in accordance with ASC 350 a triggering event occurred indicating that potential impairment exists that required us to assess if impairment existed as of March 31, 2023. In accordance with ASC 350, we performed a quantitative goodwill impairment test, which resulted in the carrying amount of the reporting unit exceeding the fair value of the reporting unit, indicating that the goodwill of the reporting unit was impaired. We recorded an impairment charge of $56.1 million related to goodwill for the three months ended March 31, 2023. We utilized a combination of an income and market approach to assess the fair value of the reporting unit as of March 31, 2023. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions while the guideline public company market approach considered marketplace earnings multiples from within a peer public company group. We recorded the impairment charge of $56.1 million within Loss on impairment of goodwill in the condensed consolidated statement of operations. As of March 31, 2023, cumulative goodwill impairment charges of $56.1 million were incurred related to our single reporting unit.

In accordance with ASC Topic 805-10-25-15, the acquirer in a business combination has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The measurement period provides companies with a reasonable period of time to determine the value of identifiable tangible and intangible assets acquired, liabilities assumed, and the consideration transferred for the acquiree.  In accordance with ASC Topic 805-10-25-14, the measurement period ends when the acquirer receives all necessary information about the facts and circumstances that existed as of the acquisition date for the provisional amounts (or otherwise learns that more information is not obtainable); however, the measurement period cannot exceed one year from the acquisition date.

As of the date of this Quarterly Report, management is still in the process of evaluating the estimated fair value of the consideration transferred in the Merger.  In addition, management is still evaluating the allocation of the acquisition purchase price to the tangible and intangible assets acquired, liabilities assumed, and the resulting goodwill.  Management’s analysis of these items has not yet been completed because of the inherent complexities of estimating fair values of (1) the Company’s Series X Preferred Stock, for which no readily determinable fair value exists, issued in the Merger, and (2) assets and technologies developed by Catheter, an early-stage company with limited commercial history.  Therefore, the business combination amounts presented in Note 3 were determined by management based on its consideration all currently available information; however, management has not fully completed its business combination analysis and such amounts must be considered provisional amounts.  Notwithstanding the above, as described more fully in Note 8, management determined that there were indicators of asset impairment during the quarterly period ended March 31, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill.

Other Income (Expense), Net

The increase in other income (expense), net of approximately $0.1 million for the three months ended March 31, 2023 as compared to the corresponding period in the prior year was primarily due to an increase in interest income of approximately $69 thousand and an increase in dividend income of approximately $15 thousand.

Liquidity and Capital Resources

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

We expect operating losses and negative cash flows to continue for the foreseeable future as we invest in our 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 our cash. Following the Merger with Catheter, we 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, we paid approximately $5.0 million in settlement costs that had been accrued as of December 31, 2022. See Note 9, Accrued Expenses. We will continue to monitor our operating costs and seek to reduce our current liabilities. Such actions may impair our ability to proceed with certain strategic activities, and we may be unsuccessful at negotiating existing liabilities to the Company’s benefit. In January 2023, we raised gross proceeds of $1.3 million from a Warrant Repricing and, in March 2023, we completed a Private Placement and raised gross proceeds of $8.0 million. See Note 12, Equity Offerings, of our accompanying condensed consolidated financial statements. If expected revenues are not adequate to fund our planned expenditures, or we are unsuccessful at raising cash through future capital transactions, we may be required to reduce our spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that we will be successful in doing so. Accordingly, we may be required to raise additional cash through debt or equity transactions. We may not be able to secure financing in a timely manner or on favorable terms, if at all.

We believe our current cash reserves will be sufficient to fund our operations for the next twelve months, beginning May 30, 2023. The unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows for the Three Months Ended March 31, 2023 and 2022

The following information reflects Ra Medical’s cash flows for operations for the periods presented (in thousands):

	Three Months Ended March 31,
	2023			2022
Net cash provided by (used in):
Operating activities	$	(12,053	)	$	(8,569	)
Investing activities	$	(22	)	$	—
Financing activities	$	8,434		$	11,176
Net change in cash and cash equivalents	$	(3,641	)	$	2,607

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Net Cash Used in Operating Activities

During the three months ended March 31, 2023, net cash used in operating activities of $12.1 million consisted of a net loss of $66.4 million, a decrease in operating assets and liabilities of $5.1 million, partially offset by non-cash expenses of $59.4 million, consisting primarily of a loss on impairment of goodwill of $56.1 million, non-cash stock-based compensation of $1.4 million, depreciation and amortization of $1.4 million and accretion of royalties payable of $0.5 million.

During the three months ended March 31, 2022, net cash used in operating activities of $8.6 million consisted of a net loss of $5.5 million, a decrease in net operating assets and liabilities of $3.5 million and non-cash adjustments to net loss of $0.4 million, consisting primarily of stock-based compensation and depreciation and amortization of $0.2 million each.

Net Cash Used in Investing Activities

During the three months ended March 31, 2023, net cash used in investing activities of $22.0 thousand consisted of purchases of property and equipment of approximately $37.0 thousand, offset by proceeds from cash acquired as part of business combination of approximately $15.0 thousand.

Net Cash Provided by Financing Activities

During the three months ended March 31, 2023, net cash provided by financing activities of $8.4 million, primarily consisted of cash proceeds from the private placement of $8.0 million and proceeds from the exercise of warrants of $1.3 million, offset by the payment of offering costs of $0.6 million.

During the three months ended March 31, 2022, net cash provided by financing activities of $11.2 million primarily consisted of net cash proceeds from the February 2022 public offering.

Off-Balance Sheet Arrangements

We do not engage in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, as a part of our ongoing business. Accordingly, we did not have any off-balance sheet arrangements during any of the periods presented.

Ra Medical’s Critical Accounting Policies and Estimates

The information set forth below relates to Ra Medical’s critical accounting policies and estimates. The discussion and analysis of our financial position and results of operations is based on our interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, which have been prepared in accordance with U.S. GAAP. We believe certain of our accounting policies are critical to understanding our financial position and results of operations.

Management’s discussion and analysis of Ra Medical’s financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We regularly evaluate estimates and assumptions related to business combinations, including the determination of the purchase price and related allocations to the fair value of assets acquired and liabilities assumed, provisions for legal contingencies, income taxes, deferred income tax, asset valuation allowances, valuation of warrant liabilities, share based compensation and revenues. Our estimates are based on current facts, historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

44

We believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Business Combinations

We account for business combinations under the provisions of Accounting Standards Codification (“ASC”) Topic 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. These values have currently been prepared based on preliminary estimates of the fair value of the consideration paid, assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.

Accounting for Long-Lived Assets-Useful Lives

Intangible assets acquired from business combinations are initially measured at their estimated fair values and are then amortized on a straight-line basis over their estimated useful lives. Management evaluates whether events or circumstances have occurred that indicate the remaining useful life or carrying value of the amortizing intangible should be revised and adjusted, if necessary. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date.

Goodwill

Goodwill, which represents the excess of purchase price of Catheter over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. We review goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company first has the option to assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using a combination of an income and market approach. To determine fair values, the Company is required to make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations including the rate of future revenue growth, capital requirements, and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. These assumptions require significant judgement. Pursuant to ASU 2017-04, Simplifying the Test for Goodwill Impairment, the single step is to determine the estimated fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. The Company also completes a reconciliation between the implied equity valuation prepared and the Company’s market capitalization. The majority of the inputs used in the discounted cash flow model are unobservable and thus are considered to be Level 3 inputs. The inputs for the market capitalization calculation are considered Level 1 inputs.

45

Research and Development Expenses

We make estimates of our accrued expenses as of each balance sheet date in our condensed consolidated financial statements based on facts and circumstances known to us at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual accordingly. Services related to research and development projects are expensed as research and development costs at the time such costs are incurred.

Clinical Trial Costs and Accruals

We accrue clinical trial costs based on work performed. In determining the amount to accrue, we rely on estimates of total costs incurred based on enrollment, the completion of clinical trials and other events. We follow this method because we believe reasonable dependable estimates of the costs applicable to various stages of a clinical trial can be made. However, the actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending on a number of factors. Differences between the actual clinical trial costs and the estimated clinical trial costs that we have accrued in any prior period are recognized in the subsequent period in which the actual costs become known. Historically, our estimated accrued expenses have approximated actual expenses incurred; however, material differences could occur in the future.

Stock-Based Compensation

We calculate the cost of awards of equity instruments based on the grant date fair value of the awards issued to employees, members of our board of directors and nonemployee consultants using the Black-Scholes option pricing valuation model, or Black-Scholes model, which incorporates various assumptions including volatility, expected term and risk-free interest rate. The expected term of the options is the estimated period of time until exercise and was determined using the SEC’s safe harbor rules, using an average of vesting and contractual terms, as we did not have sufficient historical experience of similar awards. Expected stock price volatility is based on historical volatilities of certain “guideline” companies, as the Company does not have sufficient historical stock price data. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent term. The estimated fair value of stock-based compensation awards is amortized on a straight-line basis over the relevant vesting period, adjusted for actual forfeitures at the time they occur.

Jobs Act Accounting Election

An emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Executive Chairman of the Board and interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our interim Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

During the quarter ended March 31, 2023, we completed the Merger with Catheter. Subsequent to the Catheter Merger, we have initiated integration activities and an assessment of Catheter’s internal controls. See “Note 3. Business Combination” of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information. In accordance with the SEC's published guidance, we have currently excluded Catheter’s internal control over financial reporting from our evaluation of disclosure controls because we acquired these operations during the current fiscal year. SEC rules require that we complete our assessment of the internal control over financial reporting of Catheter within one year after the date of the acquisition. Following the Merger, the Company is primarily focused on Catheter’s business, and Catheter’s results of operations represented approximately one hundred percent of the operations of the Company for the quarter ended March 31, 2023.

As of December 31, 2022, legacy Catheter’s management determined that material weaknesses existed with regard to Catheter’s internal control over financial reporting. These material weaknesses were specifically identified in relation to (1) segregation of duties, (2) controls surrounding the timing of recognition of revenues, and (3) controls surrounding the determination of the fair value of derivative liabilities.

The Company has expanded its accounting department through new hires in April 2023, as well as engaging a third-party accounting firm to assist the Company in certain accounting matters, including the determination of the fair values of any identified derivative liabilities. These remediation activities are ongoing, and management cannot yet assert that these material weaknesses have been remediated as of March 31, 2023.

Based upon our evaluation, and excluding the legacy Catheter material weaknesses discussed above, our interim Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting other than those related to the Merger with Catheter, which include changes necessitated by the change in the Company’s line of business.  Subsequent to March 31, 2023, the Company hired a new Chief Financial Officer, and as disclosed above, the Company has added to its accounting department and is in the process of remediating certain material weaknesses.

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Securities Class Action

On June 7, 2019, a putative securities class action complaint captioned Derr v. Ra Medical Systems, Inc., et al, (Civil Action no. 19CV1079 LAB NLS) was filed in the U.S. District Court for the Southern District of California against the Company, certain current and former officers and directors, and certain underwriters of the Company’s initial public offering. Following the appointment of a lead plaintiff and the filing of a subsequent amended complaint, the lawsuit alleges that the defendants made material misstatements or omissions in the Company’s registration statement in violation of Sections 11 and 15 of the Securities Act of 1933, or the Securities Act, and between September 27, 2018 and November 27, 2019, inclusive, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, or the Exchange Act. On March 11, 2020, lead plaintiffs voluntarily dismissed the underwriter defendants without prejudice. On March 13, 2020, defendants filed a motion to dismiss the amended complaint. On March 24, 2021, the court issued an order granting defendants’ motion to dismiss claims under the Securities Act in full and certain claims under the Exchange Act and denying defendants’ motion to dismiss certain Exchange Act claims. Plaintiffs filed their second amended complaint on April 19, 2021, realleging the Securities Act claims and certain of the previously dismissed Exchange Act claims. On June 10, 2021, defendants moved to dismiss the second amended complaint. On November 12, 2021, following a private settlement mediation with the lead plaintiffs, the parties executed a stipulation of settlement that resolved the claims asserted in the securities class action. The settlement provides for a payment to the plaintiff class of $10.0 million. On March 18, 2022, the Company paid approximately $0.6 million towards the settlement to satisfy its self-insured retention/deductible. The Company’s insurers paid the remainder of the settlement. The proposed settlement required both preliminary and final approval by the court. On February 11, 2022, the court granted preliminary approval of the settlement, scheduled a hearing on final approval of the settlement and denied the pending motion to dismiss without prejudice. On May 2, 2022, plaintiffs filed a motion for final approval of the settlement and plan of allocation, and lead counsel filed a motion for an award of attorneys’ fees and reimbursement of litigation expenses. On September 23, 2022, the court granted final approval of the settlement, certified the settlement class, granted in part lead counsel’s motion for an award of attorneys’ fees and reimbursement of litigation expenses, dismissed plaintiffs’ claims with prejudice, and entered final judgment.

Shareholder Derivative Litigation

On October 1, 2019, a shareholder derivative complaint captioned Noel Borg v. Dean Irwin, et al (Civil Action no. 1:99-cm-09999) was filed in the U.S. District Court for the District of Delaware against certain current and former officers and directors, purportedly on behalf of the Company, which is named as a nominal defendant in the action. The complaint alleges breaches of fiduciary duty, unjust enrichment, waste, and violations of Section 14(a) of the Exchange Act. On October 21, 2019, pursuant to the parties’ stipulation, the court stayed the derivative lawsuit until the related class action is resolved. On November 10, 2022, the plaintiff filed a notice voluntarily dismissing the case without prejudice.

Settlement Agreements with the Department of Justice and Participating States

On December 28, 2020, the Company entered into a settlement agreement with the U.S., acting through the DOJ and on behalf of the OIG, and other settlement agreements with certain state attorneys general, collectively the Settlement Agreements, to resolve investigations and a related civil action concerning its marketing of the DABRA laser system and DABRA-related remuneration to certain physicians. Pursuant to the terms of the Settlement Agreements, (a) if the Company’s revenue exceeds $10 million in any of fiscal years 2021-2024, the Company also is required to pay for the corresponding year: $0.5 million for 2021, $0.75 million for 2022, $1 million for 2023, and $1.25 million for 2024; (b) if the Company is acquired or is otherwise involved in a change in control transaction before the end of 2024, the Company was required to pay an additional settlement amount of $5 million, plus 4% of the value attributed to the Company in the transaction, so long as the attributed value is in excess of $100 million, with the total change in control payment never to exceed $28 million; and (c) if the Company’s obligations under the Settlement Agreement are avoided by bankruptcy, the U.S. may rescind the releases and bring an action against the Company in which the Company agrees is not subject to an automatic stay, is not subject to any statute of limitations, estoppel or laches defense, and is a valid claim in the amount of $56 million, minus any prior change in control payments. As a result of the merger with Catheter Precision, Inc., the Company made payments of $4.7 million and $0.3 million to the DOJ and participating states, respectively, in February 2023.

48

Filing of Complaint

On September 29, 2022, a purported stockholder of the Company filed a complaint captioned David Nguyen v. Ra Medical Systems, Inc. et al. (Civil Action no. 3:22-cv-01470-BEN-MSB) in the U.S. District Court for the Southern District of California against us and our current directors. The complaint alleges violations of Sections 14(a) and 20(a) of the Exchange Act based on alleged deficiencies in our preliminary proxy, filed with the SEC on September 23, 2022. On February 7, 2023, plaintiff filed a notice voluntarily dismissing the case without prejudice.

Other Litigation

In the normal course of business, we are at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on our results of operations, financial position or cash flows.

ITEM 1A. RISK FACTORS

The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2022, under the heading “Risk Factors.” When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. Except as noted below, there have been no material changes to the Company’s risk factors since the 2022 Form 10-K.

We recently identified material weaknesses in Catheter Precision’s internal controls over financial reporting.

As of December 31, 2022, legacy Catheter’s management determined that material weaknesses existed with regard to Catheter’s internal control over financial reporting. These material weaknesses were specifically identified in relation to (1) segregation of duties, (2) controls surrounding the timing of recognition of revenues, and (3) controls surrounding the determination of the fair value of derivative liabilities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

The Company has expanded its accounting department through new hires in April 2023, as well as engaging a third-party accounting firm to assist the Company in certain accounting matters, including the determination of the fair values of any identified derivative liabilities. These remediation activities are ongoing, and management cannot yet assert that these material weaknesses have been fully remediated. If our remedial measures are insufficient, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting or in our disclosure controls occur in the future, our future consolidated financial statements or other information filed with the SEC may contain material misstatements and could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities.

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

Previously reported on the registrant’s Current Report on Form 8-K/A filed on March 31, 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date
2.2	Amended and Restated Agreement and Plan of Merger, dated January 9, 2023, by and among the Registrant, certain subsidiaries, and Catheter Precision, Inc.	8-K	001-38677	2.1	1/13/2023
3.1.1	Amended and Restated Certificate of Incorporation of the Registrant.	8-K	001-38677	3.1	10/1/2018
3.1.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant. (effective 11/16/20)	8-K	001-38677	3.1	11/17/2020
3.1.3	Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant. (effective 09/30/22)	8-K	001-38677	3.1	9/20/2022
3.1.4	Certificate of Designation of Series X Convertible Preferred Stock.	8-K	001-38677	3.1	1/13/2023
3.1.5	Certificate of Designation of Series A Preferred Stock.	8-K	001-38677	3.2	1/13/2023
3.2.1	Amended and Restated Bylaws of the Registrant.	8-K	001-38677	3.2	10/1/2018
3.2.2	Amendment to Amended and Restated Bylaws of the Registrant.	8-K	001-38677	3.1	8/17/2022
4.1	Specimen common stock certificate of the Registrant.	S-1	333-226191	4.1	7/16/2018
4.2	Description of Capital Stock.	10-K	001-38677	4.2	3/28/2023
4.3	Form of warrant issued in May 2020.	8-K	001-38677	4.1	5/22/2020
4.4	Form of pre-funded warrant issued in May 2020.	8-K	001-38677	4.2	5/22/2020
4.5	Form of placement agent warrant issued in May 2020.	8-K	001-38677	4.3	5/22/2020

50

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date
4.6	Form of warrant offered in July 2020.	S-1	333-239887	4.3	7/16/2020
4.7	Form of pre-funded warrant issued in July 2020.	S-1	333-239887	4.4	7/16/2020
4.8	Form of placement agent warrant offered in July 2020.	S-1	333-239887	4.5	7/16/2020
4.9	[omitted.]
4.10	Form of Series B Warrant offered in February 2022.	S-1/A	333-262195	4.9	2/3/2022
4.11	[omitted.]	S-1/A	333-262195	4.10	2/3/2022
4.12	Warrant Agency Agreement, dated February 8, 2022, by and between the Registrant and American Stock & Trust Company LLC.	8-K	001-38677	4.4	2/9/2022
4.12.1	Amendment No. 1, dated July 22, 2022, to February 8, 2022 Warrant Agency Agreement by and between the Company and American Stock Transfer & Trust Company, LLC.	10-Q	001-38677	4.7	8/15/2022
4.13	Form of Series E Warrant offered in January 2023.	8-K	001-38677	4.1	1/13/2023
4.14	Form of Series F Warrant issued in March 2023.	8-K	001-38677	4.2	1/13/2023
4.15	Form of Series G Warrant issued in March 2023.	8-K	001-38677	4.3	1/13/2023
10.1	[omitted.]
10.10.1	Amendment to Change in Control and Severance Agreement, dated as of January 9, 2023, by and between Ra Medical Systems, Inc. and Jonathan Will McGuire.	8-K	001-38677	10.6	1/13/2023
10.16.1	Notice of Suspension of Corporate Integrity Agreement, dated January 11, 2023.	10-K	001-38677	10.16.1	3/28/2023

51

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date
10.20	Form of Amended and Restated Support Agreement, dated January 9, 2023, by and among the Company, Catheter Precision, Inc. and directors, officers and certain shareholders of the Company.	8-K	001-38677	10.1	1/13/2023
10.21	Form of Lock-Up Agreement, dated January 9, 2023, by and among the Company; Catheter Precision, Inc.; directors, officers, and certain stockholders of the Company; and certain stockholders of Catheter.	8-K	001-38677	10.2	1/13/2023
10.24	Securities Purchase Agreement, dated January 9, 2023, by and among the Company and Armistice Master Fund Ltd. (“January 2023 SPA”).	8-K	001-38677	10.4	1/13/2023

-	Ex. A to January 2023 SPA (form of Certificate of Designation of Series A Convertible Preferred Stock).	8-K	001-38677	3.2	1/13/2023
-	Ex. B to January 2023 SPA (form of Registration Rights Agreement).	8-K	001-38677	10.5	1/13/2023
-	Ex. C to January 2023 SPA (form of Series F Warrant).	8-K	001-38677	4.2	1/13/2023
-	Ex. D to January 2023 SPA (form of Series G Warrant).	8-K	001-38677	4.3	1/13/2023

10.25	Registration Rights Agreement, dated January 9, 2023.	8-K	001-38677	10.5	1/13/2023
10.26	Warrant Inducement Offer Letter, dated January 9, 2023.	8-K	001-38677	10.3	1/13/2023
10.27.1	Debt Settlement Agreement and Release including certain royalty rights with David A. Jenkins, dated January 9, 2023.	10-K	001-38677	10.27.1	3/28/23

52

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date
10.27.2	Debt Settlement Agreement and Release including certain royalty rights with Daniel C. Stanzione, Sr. Irrevocable Trust Dated December 31, 2007, dated January 9, 2023.	10-K	001-38677	10.27.2	3/28/23
10.27.3	Debt Settlement Agreement and Release including certain royalty rights with Fatboy Capital, L.P., dated January 9, 2023.	10-K	001-38677	10.27.3	3/28/23
31.1*	Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

*

Filed herewith.

The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (Exchange Act), and is not to be incorporated by reference into any filing of Ra Medical Systems, Inc. under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RA MEDICAL SYSTEMS, INC. (Registrant)
Date:  June 2, 2023	By;	/s/ David A. Jenkins
		Executive Chairman of the Board and Interim Chief Executive Officer (Principal Executive Officer)
Date: June 2, 2023	By:	/s/ Steve K. Passey
		Steve K. Passey
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

54

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David A. Jenkins, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the three-month period ended March 31, 2023 of Ra Medical Systems, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 2, 2023

/s/ David A. Jenkins

David A. Jenkins

Executive Chairman of the Board and

Interim Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven K. Passey, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the three-month period ended March 31, 2023 of Ra Medical Systems, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 2, 2023

/s/ Steven K. Passey

Steven K. Passey

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, David A. Jenkins, Executive Chairman of the Board and Interim Chief Executive Officer of Ra Medical Systems, Inc. (the “Company”), hereby certify, that, to my knowledge:

1.	the Quarterly Report on Form 10-Q for the three-month period ended March 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 2, 2023

/s/ David A. Jenkins

David A. Jenkins

Executive Chairman of the Board and

Interim Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Steven K. Passey, Chief Financial Officer of Ra Medical Systems, Inc. (the “Company”), hereby certify, that, to my knowledge:

1.	the Quarterly Report on Form 10-Q for the three-month period ended March 31, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 2, 2023

/s/ Steven K. Passey

Steven K. Passey

Chief Financial Officer

(Principal Financial Officer)

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 30, 2023
Cover [Abstract]
Entity Registrant Name	Ra Medical Systems, Inc.
Entity Central Index Key	0001716621
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Mar. 31, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		5,367,674
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-38677
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	38-3661826
Entity Interactive Data Current	Yes
Entity Address Address Line 1	1670 Highway 160 West, Suite 205
Entity Address City Or Town	Fort Mill
Entity Address State Or Province	SC
Entity Address Postal Zip Code	29708
City Area Code	973
Local Phone Number	691-2000
Trading Symbol	RMED
Security Exchange Name	NYSE
Security 12b Title	Common stock, par value $0.0001 per share

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current Assets
Cash and cash equivalents	$ 12,218	$ 15,859
Accounts receivable, net	80	0
Inventories	70	0
Prepaid expenses and other current assets	388	977
Total current assets	12,756	16,836
Property and equipment, net	56	0
Operating lease right-of-use assets	129	0
Intangible assets, net	35,563	0
Other non-current assets	5	0
TOTAL ASSETS	48,509	16,836
Current Liabilities
Accounts payable	580	92
Accrued expenses	3,822	7,484
Current portion of operating lease liabilities	51	0
Total current liabilities	4,453	7,576
Royalties payable	8,105	0
Operating lease liabilities	88	0
Total liabilities	12,646	7,576
Stockholders' Equity
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	0	0
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
Series X Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	0	0
Series A Preferred Stock [Member]
Stockholders' Equity
Preferred stock value	$ 0	$ 0

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Common stock, shares authorized	300,000,000	300,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares issued	5,267,092	2,160,950
Common stock, shares outstanding	5,267,092	2,160,950
Series X preferred stock [Member]
Preferred stock, shares authorized	15,404,000	15,404,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares issued	14,650	0
Preferred stock, shares Outstanding	12,675	0
Series A Preferred Stock [Member]
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares issued	7,203,000	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues
Product sales	$ 85	$ 9
Cost of revenues
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	0
Total operating expenses	66,559	5,417
Operating loss	(66,484)	(5,503)
Other income, net
Interest income	69	0
Other income, net	15	8
Total other income, net	(84)	(8)
Loss from operations before income taxes	(66,400)	(5,495)
Income taxes	(0)	(0)
Net loss	(66,400)	(5,495)
Deemed dividends from the warrant inducement offer	(800)	0
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
Product Sales [Member]
Other income, net
Product sales	$ 10	$ 31
Service and Other [Member]
Other income, net
Product sales	$ 0	$ 64

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Series A Preferred Stock [Member]	Common Stock	Series X preferred stock [Member]	Additional Paid-in Capital	Accumulated Deficit
Balance, shares at Dec. 31, 2021			140,200
Balance, amount at Dec. 31, 2021	$ 13,673	$ 0	$ 0	$ 0	$ 191,945	$ (178,272)
Common stock and warrants issued, net, shares			504,958
Common stock and warrants issued, net, amount	9,740	0	$ 0	0	9,740	0
Warrants exercised, shares			1,000
Warrants exercised, amount	25	0	$ 0	0	25	0
Vesting of restricted stock units and awards, shares			159
Vesting of restricted stock units and awards, amount	0	0	$ 0	0	0	0
Restricted stock awards cancelled, shares			(289)
Restricted stock awards cancelled, amount	0	0	$ 0	0	0	0
Stock-based compensation	165	0	0	0	165	0
Net Income (Loss)	(5,495)	0	0	0	0	(5,495)
Balance, amount at Mar. 31, 2022	18,108	0	$ 0	0	201,875	(183,767)
Balance, shares at Mar. 31, 2022			646,028
Balance, shares at Dec. 31, 2022			2,160,950
Balance, amount at Dec. 31, 2022	9,260	0	$ 0	0	214,397	(205,137)
Restricted stock awards cancelled, shares			(25)
Restricted stock awards cancelled, amount	0	0	$ 0	0	0	0
Stock-based compensation	1,394	0	0	0	1,394	0
Net Income (Loss)	(66,400)	0	$ 0	0	0	(66,400)
Common stock issued upon exercise of options, shares			301,746
Common stock issued upon exercise of options, amount	179	0	$ 0	$ 0	179	0
Issuance of Series X preferred stock in merger, shares				14,650
Issuance of Series X preferred stock in merger, amount	82,925	0	$ 0	$ 0	82,925	0
Conversion of Series X preferred stock, shares			1,974,905	(1,975)
Conversion of Series X preferred stock, amount	0	$ 0	$ 0	$ 0	0	0
Issuance of instruments in connection with private placement, net, shares		7,203	497,908
Issuance of instruments in connection with private placement, net, amount	7,360	$ 0	$ 0	0	7,360	0
Common stock issued upon exercise of warrants, net, shares			331,608
Common stock issued upon exercise of warrants, net, amount	1,145	0	$ 0	0	1,145	0
Balance, amount at Mar. 31, 2023	$ 35,863	$ 0	$ 0	$ 0	$ 307,400	$ (271,537)
Balance, shares at Mar. 31, 2023		7,203	5,267,092	12,675

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 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	0
Depreciation and amortization expense	1,444	186
Stock-based compensation	1,394	165
Accretion of royalties payable	513	0
Loss on disposals of property and equipment	0	(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)	0
Accounts payable	(434)	(256)
Accrued expenses	(5,051)	(2,822)
Accrued interest - related parties	(198)	0
Net cash used in operating activities	(12,053)	(8,569)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(37)	0
Cash acquired as part of business combination	(15)	0
Net cash used in investing activities	(22)	0
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	0	1,519
Proceeds from exercise of warrants	1,326	25
Payments of costs related to the exercise of warrants	(181)	0
Payments of convertible promissory notes	(250)	0
Proceeds from the private placement of securities	8,000	0
Payments of offering costs related to the private placement of securities	(640)	0
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	0	1,411
Non-cash consideration for Catheter acquisition (Note 3)	82,925	0
Cash payments for interest	$ 181	$ 0

XML

Organization and Nature of Operations

3 Months Ended

Mar. 31, 2023

Organization and Nature of Operations

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.

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.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

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.

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.

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	$	—

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
Provision for credit losses		—		21
Balance at end of period	$	152	$	152

As of March 31, 2023, the entire allowance for credit losses is related to legacy Ra Medical receivables.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company reduced the carrying value of inventories for those items that were potentially excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors. There were no inventory obsolescence charges for the three months ended March 31, 2023 and 2022.

Effective June 6, 2022, the Company’s board of directors approved a staggered reduction in force (“RIF”). On September 2, 2022, the Company completed the RIF. The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to the Company in furtherance of the board of directors’ review of strategic alternatives. As a result of the RIF, the Company paused all engineering and manufacturing activities during the third quarter of 2022.

Prior to the RIF (as defined above), the Company’s catheters were manufactured in-house and each catheter was tested at various stages of the manufacturing process for adherence to quality standards. Catheters that did not meet functionality specification at each test point were destroyed and immediately written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations. Once manufactured, completed catheters that passed quality assurance, were sent to a third-party for sterilization and sealed in a sterile container. Upon return from the third-party sterilizer, a sample of catheters from each batch were re-tested. If the sample tests were successful, the batch was accepted into finished goods inventory. If the sample tests were unsuccessful, the entire batch was written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows: 

Machinery and equipment	2-10 years
Computer hardware and software	2-5 years
VIVO DEMO/Clinical Systems	2 years
Furniture and fixtures	5 years

Leasehold improvements are depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease.

The Company periodically reviews the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering long-term views on its intended use of each class of property and equipment and the planned level of improvements to maintain and enhance assets within those classes. 

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the account balances and any resulting gain or loss is recognized in income for the period. The cost of repairs and maintenance is expensed as incurred, whereas significant betterments are capitalized.

Impairment of Long-Lived Assets

The Company periodically reviews its long-lived assets for impairment when certain events or changes in circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. There were no impairment charges for long-lived assets for the three months ended March 31, 2023 and 2022.

Goodwill

Goodwill, which represents the excess of purchase price of Catheter over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company first has the option to assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using a combination of an income and market approach. To determine fair values, the Company is required to make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations including the rate of future revenue growth, capital requirements, and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. These assumptions require significant judgement. Pursuant to Accounting Standards Update (''ASU'') 2017-04, Simplifying the Test for Goodwill Impairment, the single step is to determine the estimated fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. The Company also completes a reconciliation between the implied equity valuation prepared and the Company’s market capitalization. The majority of the inputs used in the discounted cash flow model are unobservable and thus are considered to be Level 3 inputs. The inputs for the market capitalization calculation are considered Level 1 inputs. There were impairment charges of $56.1 million recognized during the three months ended March 31, 2023, see Note 8, Goodwill, for additional details.

Royalty Liability

On January 9, 2023, prior to the consummation of the Merger, Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Catheter's Chairman of the Board of Directors and, currently, Ra Medical's Executive Chairman of the Board of Directors, to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device, commencing upon the first commercial sale, through December 31, 2035. The royalty payable has an estimated fair value of approximately $7.9 million as of March 31, 2023. The fair value was calculated using a discounted cash flow method which utilized a discount rate of 27%.

Product Warranty

Products were warrantied against defects in material and workmanship when properly used for their intended purpose and appropriately maintained. Accordingly, the Company generally replaced catheters that kinked or failed to calibrate. The product warranty liability was determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor. The product warranty liability also includes the estimated costs of a product recall.

The warranty accrual is included in accrued expenses in the accompanying unaudited condensed consolidated balance sheets. Warranty expenses are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals resulted from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statements of operations for each period.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

 Revenue Recognition

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), and all related appropriate guidance. The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The Company measures revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation. Under Topic 606, revenue is recognized when a customer obtains control of promised goods. To achieve this core principal, the Company applies the following five steps:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the Company satisfies a performance obligation

Subsequent to the Merger, the Company’s primary product is the VIVO System. The VIVO System 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. In addition to the VIVO System, customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System to complete the intended output of the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets represents the Company’s primary performance obligation. The Company recognizes revenue upon the delivery of the VIVO system. The Company also provides customers with the option to pay for software upgrades in advance at the time of the contract's inception. Software upgrades are stand-ready services, whereby the Company will provide software upgrade services to the customer when and as upgrades are available. Terms of the period covered by the payment of software upgrades in advance can range from one year to multiple years. Customers have the option to renew terms covered by software upgrades at the end of each term. The stand-ready software upgrades represent the Company's second separate performance obligation and revenue is recognized over the term of the period.

The Company invoices the customers after physical possession and control of the VIVO System is transferred to the customer and recognizes revenue upon delivery. The timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract. The Company invoices customers who pay for software upgrades in advance in conjunction with the invoice for the delivery of the VIVO System, and subsequent renewals of software upgrades are invoiced at the inception of the term. Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under Topic 606. Similar to the delivery of the VIVO System, the timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract.

Legacy Ra Medical Revenue

The Company generated revenue from the sales of products and services. Product sales consisted of the sales of catheters for use with the DABRA laser system. The Company paused selling commercial products in late 2020 and was only selling catheters for use in the atherectomy clinical trial prior to the discontinuation of such sales in June 2022. The Company’s sales agreements generally did not include right-of-return provisions for any form of consideration, including partial refund or credit against amounts owed to the Company. Services and other revenues primarily consisted of billable services, including fees related to DABRA laser commercial usage agreements.

The Company accounted for a contract with a customer when it had a legally enforceable contract with the customer, the arrangement identified the rights of the parties, the contract had commercial substance, and the Company determined it was probable that it would collect the contract consideration. The Company recognized revenue when control of the promised goods or services transferred to customers, in an amount that reflected the consideration the Company expected to be entitled to in exchange for those goods or services. Taxes collected from customers relating to goods or services and remitted to governmental authorities were excluded from revenue.

When engaged in commercial sales, the Company entered into a DABRA laser commercial usage agreement or DABRA laser placement acknowledgement with each customer that was supplied a DABRA laser, collectively the “usage agreement”, which provided for specific terms of continued use of the DABRA laser, including a nominal periodic fee. The terms of a usage agreement typically allowed the Company to place a DABRA laser at a customer’s specified location without a specified contract term. Under the usage agreement terms, the Company retained all ownership rights to the DABRA laser and was permitted to request the return of the equipment within 10 business days of notification. While the laser periodic fees were nominal, the usage agreement provided the Company the exclusive rights to supply related single-use catheters to the customer which aggregated the majority of the product sales revenue. There were no specified minimum purchase commitments for the catheters.

The Company recognized revenue associated with the usage agreements and catheter supply arrangements in accordance with Topic 606 since (i) the contract primarily included variable payments, (ii) the catheters were priced at their standalone selling price, and (iii) the laser equipment was insignificant in the context of the contract. Revenue was recognized when the performance obligation was satisfied which was generally upon shipment of the catheter.

The Company had $85 thousand and $9 thousand in product sales during the three months ended March 31, 2023 and 2022, respectively.

Shipping and Handling Costs

Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

Advertising and Marketing

Advertising costs are expensed as incurred and included in sales and marketing expense. Advertising costs were $0.2 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively.

Patents

The Company expenses patent costs, including related legal costs, as incurred and records such costs as selling, general and administrative expenses in the accompanying statements of operations.

Research and Development

Major components of research and development costs include personnel expenses, stock-based compensation, consulting, supplies and clinical trial expenses. Research and development expenses are charged to operations in the period incurred.

Stock-Based Compensation

The Company records stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with the authoritative guidance for stock-based compensation. The Company evaluates whether an award should be classified and accounted for as a liability award or equity award for all stock-based compensation awards granted. The cost of an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing valuation model (“Black-Scholes model”) which incorporates various assumptions including expected term, volatility and risk-free interest rate, and is recognized as expense on a straight-line basis over the requisite service period of the award, which is generally the vesting period of the respective award. Share-based compensation for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

As a result of the Merger, all unvested legacy Catheter stock options were subject to accelerated vesting and therefore became fully vested, as of the closing date of the business combination. Ra Medical recognized the fair value of the replacement options as included in consideration transferred to the extent they do not exceed the fair value of the equivalent Catheter options. Any incremental fair value was recognized in compensation expense in the post-combination period, with this recognized as a Day 1 expense due to the Catheter options becoming fully vested concurrent with the closing of the business combination.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other expense, respectively.

Basic and Diluted Net Loss Per Share of Common Stock

The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents include warrants, stock options and non-vested restricted stock awards and restricted stock units using the treasury stock method, Series A Convertible Preferred Stock, Series X Convertible Preferred Stock, along with the effect, if any, from outstanding convertible securities. See Note 11, Net loss per share.

Net loss attributable to common stockholders consists of net income or loss, as adjusted for actual and deemed dividends declared. The Company recorded a deemed dividend for the modification of existing warrants and issuance of new warrants during the three months ended March 31, 2023 of $0.8 million. The deemed dividend is added to the net loss in determining the net loss available to common stockholders.

Recently Announced Accounting Pronouncements

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2022-03 on its unaudited condensed consolidated financial statements.

As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies.

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Business Combination

3 Months Ended

Mar. 31, 2023

Business Combination

Business Combination

Note 3. Business Combination

On January 9, 2023, the Company completed the acquisition of Catheter (the "Merger") for the purpose of acquiring Catheter’s existing and developing product lines based on unique electrophysiology technology.

Pursuant to the Merger Agreement, all Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $25.2 million, were converted into a right to receive 14,649.591 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock. Additionally, all outstanding stock options to purchase Catheter common stock were assumed and converted into options to purchase approximately 753,699 shares of the Company's common stock.

The total purchase consideration for the Merger was $82.9 million which represents the sum of the (i) estimated fair value of the 14,649.591 Series X Convertible Preferred Stock issued and (ii) the portion of the estimated fair value of $3.1 million representing the Company stock options issued as replacement of Catheter share-based payment awards as required under Topic 805.

The fair value of the Series X Convertible Preferred Stock includes certain discounts applied to the closing stock price of the Company, on January 9, 2023, of $6.41 per share.

The following table summarizes the preliminary estimated fair value of the consideration associated with the Merger (in thousands, except share data):

Description	Fair Value as of January 9, 2023
Fair value of 14,649.591 Series X convertible preferred stock issued	$	79,840
Fair value of Catheter’s fully vested stock options		3,085
Total Purchase Price	$	82,925

The Merger is being accounted for as a business combination in accordance with Topic 805. The Company estimated the fair values of the assets acquired and liabilities assumed in the Merger. These values have been prepared based on preliminary estimates of the fair value of the consideration paid, assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. 

The following table summarizes the preliminary purchase price allocations relating to the Merger (in thousands): 

Description	Fair Value
Assets acquired:
Cash and cash equivalents	$	15
Accounts receivable		71
Inventories		52
Prepaid expenses and other current assets		23
Property and equipment, net		26
Lease right-of-use assets		119
Other assets		8
Developed technology		35,080
Customer relationships		220
Trademarks		1,700
Goodwill		56,086
Total assets acquired	$	93,400
Liabilities assumed:
Accounts payable	$	922
Accrued expenses		1,389
Lease liability - current portion		37
Interest payable		198
Convertible promissory note		250
Lease liability - net of current portion		87
Royalties payable		7,592
Total liabilities assumed		10,475
Total purchase price	$	82,925

All intangible assets acquired are subject to amortization and their associated estimated acquisition date fair values and estimated useful lives are as follows (in thousands except for estimated useful life which is in years):

Intangible Assets	Estimated Fair Value		Estimated Useful Life
Developed technology- Vivo	$	8,020		8
Developed technology- LockeT		27,060		6
Customer relationships		220		5
Trademark- Vivo		1,480		9
Trademark- LockeT		220		8
	$	37,000

Topic 805 requires that an acquirer in a business combination report provisional amounts when measurements are incomplete as of the end of the reporting period covering the business combination. In accordance with Topic 805, the acquirer has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The measurement period provides companies with a reasonable period of time to determine the value of the identifiable assets acquired, liabilities assumed, and the consideration transferred for the acquiree. In accordance with Topic 805, the measurement period ends as soon as the acquirer receives all necessary information about the facts and circumstances that existed as of the acquisition date for the provisional amounts or has otherwise learned that more information is not obtainable. However, the measurement period cannot exceed one year from the acquisition date. Topic 805 requires that measurement period adjustments be recognized in the reporting period in which the adjustment amount is determined.

In accordance with ASC Topic 805-10-25-15, the acquirer in a business combination has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The measurement period provides companies with a reasonable period of time to determine the value of identifiable tangible and intangible assets acquired, liabilities assumed, and the consideration transferred for the acquiree. In accordance with ASC Topic 805-10-25-14, the measurement period ends when the acquirer receives all necessary information about the facts and circumstances that existed as of the acquisition date for the provisional amounts (or otherwise learns that more information is not obtainable); however, the measurement period cannot exceed one year from the acquisition date.

As of the date of this Quarterly Report, management is still in the process of evaluating the estimated fair value of the consideration transferred in the Merger. In addition, management is still evaluating the allocation of the acquisition purchase price to the tangible and intangible assets acquired, liabilities assumed, and the resulting goodwill.  Management’s analysis of these items has not yet been completed because of the inherent complexities of estimating fair values of (1) the Company’s Series X Preferred Stock, for which no readily determinable fair value exists, issued in the Merger, and (2) assets and technologies developed by Catheter, an early-stage company with limited commercial history.  Therefore, the business combination amounts presented in Note 3 were determined by management based on its consideration of all currently available information; however, management has not fully completed its business combination analysis and such amounts must be considered provisional amounts.  Notwithstanding the above, as described in Note 8, management determined that there were indicators of asset impairment during the quarterly period ended March 31, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill.

Transaction costs incurred in connection with this business combination amounted to approximately $1.7 million during the three months ended March 31, 2023.

Pro Forma Financial Information

The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2022. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods. The following information for the three months ended March 31, 2023 and 2022 is presented in thousands except for the per share data:

	Three Months Ended March 31,
	2023			2022
Revenues	$	88		$	95
Net loss		(66,570	)		(6,967	)
Net loss attributable to common stockholders		(67,370	)		(6,967	)
Basic and diluted net loss per share – on a pro forma basis (unaudited)	$	(13.56	)		(2.17	)

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Royalties Payable

3 Months Ended

Mar. 31, 2023

Royalties Payable

Royalties Payable

Note 4. Royalties Payable

LockeT Royalty

On January 9, 2023, the Company entered into an agreement with the Convertible Promissory Noteholders (“Noteholders”) to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device ("LockeT"), commencing upon the first commercial sale, through December 31, 2035. The royalty payable has an estimated fair value of approximately $7.4 million. The remaining accrued interest for the notes not converted at closing of the Merger was paid on February 9, 2023.

AMIGO System Royalty

During 2006 and 2007, Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Catheter's AMIGO System receiving a total of $1.6 million from the foundation.

The agreement calls for the payment of the following sales-based royalties, by Catheter, to the foundation, upon successful commercialization of the AMIGO System:

Royalty Percentage	Until Royalty Payment Reaches a Total of
4%	$	1,589,500
2%	$	3,179,000
1%		In perpetuity

There was no royalty expense recorded for the three months ended March 31, 2023 and 2022, respectively in relation to the AMIGO System. No royalties have been paid or are currently payable under the agreements.

See table below for roll forward of the royalty payable for the three months ended March 31, 2023:

Balance at beginning of period	$	—
AMIGO royalty payable recognized in connection with the Merger		160
LockeT royalty payable recognized in connection with the Merger		7,432
Accretion of LockeT royalty payable		513
Balance at end of period	$	8,105

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Inventories

3 Months Ended

Mar. 31, 2023

Inventories

Inventories

Note 5. Inventories

Inventories consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Raw materials	$	38	$	—
Finished goods		32		—
Inventories	$	70	$	—

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Property and Equipment

3 Months Ended

Mar. 31, 2023

Property and Equipment

Property and Equipment

Note 6. Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	March 31, 2023			December 31, 2022
Machinery and equipment	$	20		$	—
Computer hardware and software		14			—
VIVO DEMO/Clinical Systems		52			—
Property and equipment, gross		86			—
Accumulated depreciation		(30	)		—
Property and equipment, net	$	56		$	—

Depreciation expense was $7 thousand and $115 thousand for the for the three months ended March 31, 2023 and 2022, respectively.

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Intangible Assets

3 Months Ended

Mar. 31, 2023

Intangible Assets

Intangible Assets

Note 7. Intangible Assets

The following table summarizes the Company’s intangible assets as of March 31, 2023:

	Estimated Useful Life in Years		Gross Carrying Amount at January 9, 2023		Accumulated Amortization			Net Book Value at Net Book Value at March 31, 2023
Developed technology ‐ Vivo		8	$	8,020	$	(251	)	$	7,769
Developed technology ‐ Locket		6		27,060		(1,127	)		25,933
Customer relationships		5		220		(11	)		209
Trademarks/trade names ‐ Vivo		9		1,480		(41	)		1,439
Trademarks/trade names ‐ Locket		8		220		(7	)		213
			$	37,000	$	(1,437	)	$	35,563

As of December 31, 2022 the Company did not have any intangible assets.

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense, included within selling, general and administrative expenses, relating to the purchased intangible assets was $1.4 million and $0 for the three months ended March 31, 2023 and 2022, respectively.

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Goodwill

3 Months Ended

Mar. 31, 2023

Goodwill

Goodwill

Note 8. Goodwill

In connection with the Merger, the excess of the purchase price over the estimated fair value of the net assets assumed of $56.1 million was recognized as goodwill.

The Company tests Goodwill for impairment at the reporting unit level annually in the fourth quarter or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. Due to a sustained decrease in the Company’s share price during the three months ended March 31, 2023, the Company concluded that in accordance with ASC 350 a triggering event occurred indicating that potential impairment exists and required the Company to assess if impairment exists as of March 31, 2023, and if so, the extend of the impairment. In accordance with ASC 350, the Company performed a quantitative goodwill impairment test, which resulted in the carrying amount of the reporting unit exceeding the estimated fair value of the reporting unit, indicating that the goodwill of the reporting unit was impaired. The Company recorded an impairment charge of $56.1 million related to goodwill for the three months ended March 31, 2023. The Company utilized a combination of an income and market approach to assess the fair value of the reporting unit as of March 31, 2023. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions while the guideline public company market approach considered marketplace earnings multiples from within a peer public company group. The Company recorded the impairment charge of $56.1 million within loss on impairment of goodwill in the condensed consolidated statement of operations. As of March 31, 2023, cumulative goodwill impairment charges of $56.1 million were incurred related to the Company’s single reporting unit.

The following is a roll forward of goodwill as of and for the three months ended March 31, 2023:

Beginning balance, January 1, 2023	$	-
Goodwill recognized in connection with the Merger (Note 3)		56,086
Impairment charge		(56,086	)
Ending balance, March 31, 2023	$	-

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Accrued Expenses

3 Months Ended

Mar. 31, 2023

Accrued Expenses

Accrued Expenses

Note 9. Accrued Expenses

Resignation of CEO

On April 17, 2023, the Company received the resignation of Will McGuire from his positions as Chief Executive Officer and Secretary, and as a member of the Board of Directors, effective April 28, 2023, for personal reasons, see Note 18, Subsequent Events. The Board of Directors has established a search committee consisting of Susanne Meline and James Caruso to identify a new Chief Executive Officer. Until a new Chief Executive Officer is identified, David Jenkins, Executive Chairman of the Board, will serve as interim Chief Executive Officer and as the Company’s principal executive officer, effective April 28, 2023.

In connection with Mr. McGuire’s resignation, he and the Company entered into a second amendment to his change in control and severance agreement, which among other things, clarified that the amount of Mr. McGuire’s severance payment would be based on his 2022 base salary and bonus opportunity, and provided that he would not receive Cobra coverage following his termination of employment. Mr. McGuire will receive a severance payment of approximately $1.75 million pursuant to his change in control and severance agreement. Because management believed a loss was probable under related agreements, as of March 31, 2023, the Company accrued for $1.75 million in relation to the severance.

Accrued expenses and accrued severance consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
Legal expenses	$	177	$	5,195
Offering costs		1,356		1,356
Compensation and related benefits		63		369
Warranty expenses		192		192
Accrued severance (see Note 18)		1,750		—
Other accrued expenses		284		372
Accrued expenses	$	3,822	$	7,484

Activity in the product warranty accrual is included in accrued expenses in the unaudited condensed consolidated balance sheets and consisted of the following (in thousands):

	Three Months Ended March 31, 2023		Year Ended December 31, 2022
Balance at beginning of period	$	192	$	195
Claims satisfied		—		(3	)
Balance at end of period	$	192	$	192

The accrued warranty balances at March 31, 2023 and December 31, 2022 relate to the voluntary recall of catheters, which was initiated in September 2019.

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Leases

3 Months Ended

Mar. 31, 2023

Leases

Leases

Note 10. Leases

For the three months ended March 31, 2023 and 2022, operating lease expense and cash paid were $15 thousand and $108 thousand, respectively, and $16 thousand and $110 thousand, respectively. Variable costs were insignificant for the three months ended March 31, 2023 and 2022.

The Company's lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived an imputed rate, which was used in a portfolio approach to discount its real estate lease liabilities. Management used an estimated incremental borrowing rate of 11.09% for all leases that commenced prior to January 1, 2023. For leases entered into during the three months ended March 31, 2023, management used an estimated incremental borrowing rate of 10.00%.

Lease Terms and Discount Rate

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases, as of March 31, 2023:

Weighted average remaining lease term (in years) – operating leases	2.51
Weighted average discount rate – operating leases	10.91	%

California Operating Lease

The Company had an operating lease for office and manufacturing space which required it to pay base rent and certain utilities. Monthly rent expense was recognized on a straight-line basis over the term of the lease which expires in 2027. At March 31, 2022, the remaining lease term was 5.75 years. The operating lease was included on the condensed balance sheets at the present value of the lease payments at a 7% discount rate which approximates the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment, as the lease did not provide an implicit rate.

On October 24, 2022, the Company entered into a lease termination agreement (the “Lease Termination Agreement”) with the landlord, pursuant to which it terminated the lease agreement for its office and manufacturing space in Carlsbad, California, effective October 28, 2022. In accordance with the terms of the Lease Termination Agreement, the Company agreed to (i) release its right to the security deposit of approximately $36 thousand previously paid to the landlord and (ii) pay a $0.3 million lease termination fee to the landlord. As a result of the Lease Termination Agreement, the Company wrote-off its operating lease right-of-use asset, operating lease liability and security deposit, resulting in a non-cash gain of approximately $0.1 million. The lease termination fee of $0.3 million was paid on October 31, 2022.

South Carolina Office Lease Agreement

On September 27, 2022, Catheter entered into a lease agreement for office space located in Fort Mill, South Carolina. The space will be used for office and general use. The term of the lease is 38 months which began on October 1, 2022, and which includes two months of free rental from the commencement date of the lease. The lease contains two separate 36 month renewal periods, which require 180 days notice of the Company's intention to exercise. As of the date of these financial statements, the Company does not intend to exercise either of the two extension options. Total rent is $3,773 per month for the first ten months following the two months of free rental, with annual increases on the anniversary of the effective date. The Company has adopted the practical expedient under Topic 842, which permits the Company to account for each separate lease component of a contract and its associated non-lease components as a single lease payment. As a result, beginning at lease inception on October 1, 2022, the Company will recognize both the lease payments and associated common area maintenance payments as a single lease payment. The Company estimated an incremental borrowing rate of 11.09% for this lease agreement.

New Jersey Office Lease Agreement

On December 7, 2022, Catheter entered into a lease agreement for office space located in Augusta, New Jersey. The space will be used for office and general use. The term of the lease is 24 months which began on January 1, 2023. The lease contains one 24 month renewal period, which requires 9 months’ notice if the Company intends to exercise. Total rent is $1,207 per month throughout the term of the lease agreement.

Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows:

Period ending December 31:	Operating Lease
Remainder of 2023	$	62
2024		65
2025		49
Total minimum lease payments		176
Less effects of discounting		(53	)
Present value of future minimum lease payments	$	123

Right-of-use lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	As of March 31, 2023		As of December 31, 2022
Assets
Lease right-of-use assets	$	129	$	—
Total lease assets		129		—
Liabilities
Current liabilities:
Lease liability - current portion		51		—
Non-current liabilities:
Lease liability, net of current portion		88		—
Total lease liability	$	139	$	—

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Net Loss per Share

3 Months Ended

Mar. 31, 2023

Net Loss per Share

Net Loss per Share

Note 11. Net Loss per Share

The Company’s outstanding warrants to purchase common stock have participation rights to any dividends that may be declared in the future and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2023 consisted of Series A convertible preferred stock of 7,203 shares, Series X convertible preferred stock of 12,675 shares, warrants of 11,148,858, stock options of 452,908, restricted stock awards of 556, and restricted stock units of 26.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2022 consisted of warrants of 1,126,599, stock options of 2,128, restricted stock awards of 3,298, restricted stock units of 993 and Employee Stock Purchase Plan shares of 333.

Net loss attributable to common stockholders consists of net loss, as adjusted for deemed dividends.  The Company recorded a deemed dividend for the modification of existing warrants and issuance of the Series E warrants of $0.8 million during the three months ended March 31, 2023.

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Equity Offerings

3 Months Ended

Mar. 31, 2023

Equity Offerings

Equity Offerings

Note 12. Equity Offerings

Public Offering

On February 8, 2022, the Company completed the Offering in which it issued and sold (i) 190,700 shares of common stock, (ii) 480,052 warrants to purchase one share of common stock at an exercise price of $25.00 that were immediately exercisable and expire one year from the date of issuance, or Series A warrants, and (iii) 480,052 warrants to purchase one share of common stock at an exercise price of $25.00 that were immediately exercisable and expire seven years from the date of issuance, or Series B warrants, and (iv) 289,352 pre-funded warrants to purchase one share of common stock at an exercise price of $0.005 per share that were immediately exercisable and expire twenty years from the date of issuance. In addition, the Company granted the underwriters of the Offering a 45-day option (the “Overallotment Option”) to purchase up to (i) 72,000 additional shares of common stock, (ii) 72,000 additional Series A warrants and/or (iii) 72,000 additional Series B warrants, solely to cover overallotments.

The Series A warrants and Series B warrants were valued at approximately $11.6 million using the Black-Scholes model based on the following assumptions:

	Series A			Series B
Risk-free interest rate		0.91	%		1.93	%
Volatility		131.07	%		85.38	%
Expected dividend yield		0.00	%		0.00	%
Expected life (in years)		1.0			7.0

Pursuant to the exercise of the Overallotment Option in February 2022, the Company issued 24,902 shares of common stock, 72,000 Series A warrants and 72,000 Series B warrants, net of underwriting discounts. On various dates in February 2022 and March 2022, the Company issued 289,352 shares of common stock upon the exercise of all of the pre-funded warrants issued in the Offering. In addition, in March 2022, the Company issued 1,000 shares of common stock in connection with the exercise of 500 each of Series A warrants and Series B warrants issued in the Offering. In July 2022, the Company issued 800 shares of common stock in connection with the exercise of 800 Series A warrants issued in the Offering.

Net proceeds received from the Offering were approximately $11.5 million, after deducting underwriter commissions and fees withheld of approximately $1.1 million. In addition, the Company incurred offering expenses paid or payable of $1.8 million.

The Company entered into an agreement with a former placement agent that, subject to satisfaction of the requirements contained therein, called for a cash tail fee payable based on capital raised from certain investors for a definitive time following the expiration of the agreement. The accrued cash tail fee of approximately $0.9 million related to the Offering is included in accrued expenses in the condensed consolidated balance sheet as of December 31, 2022 and March 31, 2023. Additionally, the agreement called for the issuance of a warrant to purchase approximately 33,000 shares of common stock at an exercise price of $31.25 per share. Such warrant would be immediately exercisable and expire five years from the date issued. This warrant was originally valued at approximately $0.4 million on the date of the Offering using the Black-Scholes model based on the following assumptions: expected volatility of 93.25%, risk-free interest rate of 1.81%, expected dividend yield of 0% and an expected term of 5 years. On the date of the Warrant Repricing, this warrant was revalued at approximately $0.4 million using the Black-Scholes model based on the following assumptions: expected volatility of 98.9%, risk-free interest rate of 2.87%, expected dividend yield of 0% and an expected term of 4.6 years. This warrant has not been issued by the Company as of the date of this Quarterly Report.

Warrant Inducement Offer

On January 9, 2023, the Company reduced the exercise price of certain existing warrants (the “Existing Warrants”), exercisable for 331,608 shares of the Company’s common stock held by a certain investor (the “Investor”), with exercise prices ranging from $14.00 to $526.50 per share to $4.00 per share (the “Warrant Repricing”). In connection with the Warrant Repricing, the Company entered into a warrant inducement offer letter (the “Inducement Letter”), with the Investor pursuant to which it would exercise up to all of the 331,608 Existing Warrants (the “Inducement Offer”). In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, the Company received approximately $1.3 million in gross proceeds. The Company paid the placement agent aggregate cash fees of approximately $0.2 million related to the Inducement Offer which represented 8.0% of the gross proceeds received from the Inducement Offer plus other offering costs resulting in net proceeds to the Company of $1.1 million.  In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, the Company issued the Investor a new Series E common stock purchase warrant, or Series E Warrant (the “Series E Warrant”), to purchase 331,608 shares of common stock at an exercise price of $4.00 per share. The Series E Warrant is exercisable for five years from the date of stockholder approval. Exercise of the Series E Warrant in full was subject to approval of the pre-closing holders of Ra Medical’s stockholders which was obtained at the Stockholders’ Meeting. The incremental fair value of the repriced warrants amounted to $0.3 million and the fair value of Series E warrant totaled $1.9 million.  The relative fair values of such amounts were recorded to additional paid-in capital concurrent with the exercise of the Existing Warrants.

As a result of the Warrant Repricing and Inducement Offer, the Company presents a deemed dividend for the modification of Existing Warrants and issuance of the Series E Warrants during the three months ended March 31, 2023 of $0.8 million. The deemed divided was included in net loss attributable to common stockholders in the calculation of net loss per share in the condensed consolidated statements of operations.

As of March 31, 2023, the Company had 11,148,858 shares of common stock reserved for issuance pursuant to the warrants issued by the Company at a weighted average exercise price of $5.39.

Private Placement

On January 9, 2023, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) for a private placement (“Private Placement”), with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $8.0 million, (a) Class A units at a price that is the lower of $3.00 per unit and 90% of the 5 day volume weighted average price of the Company’s common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants (as each are defined below), each consisting of one share of common stock, one Series F common stock purchase warrant, or Series F Warrant, and one Series G common stock purchase warrant, or Series G Warrant, and together with the Series F Warrants (the “PIPE Warrants”) and (b) Class B units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock (the “PIPE Preferred Stock”), par value $0.0001, and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock (each share of which is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by the lower of $3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate. The closing under the Securities Purchase Agreement and the sale and issuance of the Class A units and Class B units (and the issuance of any underlying common stock) were approved at the Stockholders’ Meeting. At the closing of the Private Placement, the Company issued 497,908 Class A units for proceeds of approximately $0.9 million and 7,203 Class B units for proceeds of approximately $7.1 million which are convertible into up to 4,501,060 shares of common stock, as well as the issuance of warrants described below.

The PIPE Warrants, including 4,999,093 Series F warrants and 4,999,093 Series G warrants, are exercisable at an exercise price of $3.00 per share, subject to adjustments as provided under the terms of the PIPE Warrants. The PIPE Warrants are exercisable at any time on or after the closing date of the Private Placement until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99%, or the Maximum Percentage, of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99%. The Series F Warrants have a term of two years from the date of stockholder approval, and the Series G Warrants have a term of six years from the date of stockholder approval. The Series F Warrants and Series G Warrants were approved at the Stockholders’ Meeting.

The Series F warrants and Series G warrants were valued in aggregate at approximately $5.5 million using the Black-Scholes model based on the following assumptions:

	Series F	Series G
Risk-free interest rate	3.8 %	3.4 %
Volatility	80.0 %	74.0 %
Expected dividend yield	0.0 %	0.0 %
Expected life (in years)	2.0	6.0

The proceeds from the Securities Purchase Agreement were allocated to the equity instruments issued based on their relative fair values and recorded in additional paid-in capital.

Shares of PIPE Preferred Stock, the conversion of which was approved at the Stockholders’ Meeting, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion.

Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights.

The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of common stock, the shares issuable upon exercise of the Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock.

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Preferred Stock

3 Months Ended

Mar. 31, 2023

Preferred Stock

Preferred Stock

Note 13. Preferred Stock

Series X Convertible Preferred Stock

As described in Note 3, above, pursuant to the Merger Agreement, all Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $25.2 million, were converted into a right to receive 14,649.591 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock.

Series X Preferred Stock has no voting rights prior to the conversion into Common Stock. While there are no voting rights of the Series X Preferred Stock, there are protective rights regarding the sales of the company, change of control, etc.

On March 21, 2023, the Company held a special meeting of stockholders (the “Stockholders’ Meeting”), at which the stockholders approved, among other things, the issuance of 1,974,905 shares of common stock upon the conversion of 1,974.905 of Series X Preferred Stock which were issued upon the closing of the Merger see Note 3, Business Combination. The remaining 12,674.687 shares of Series X Preferred Stock are expected to remain outstanding until at least July 9, 2024, and will convert thereafter up to 12,674,687 shares of common stock, only if the Company meets the initial listing standards of the NYSE American or another national securities exchange or are delisted from the NYSE American.

Also, through at least July 9, 2024, the ability to convert the Series X Preferred Stock will be subject to a beneficial ownership conversion “blocker” that prevents the holder from acquiring shares of Ra Medical common stock by converting the Series X Preferred Stock to the extent that such shares would result in the holder having, post-conversion, beneficial ownership of common stock above a pre-set threshold (the “Beneficial Ownership Blocker”).

Series A Convertible Preferred Stock

As described in Note 12, on January 9, 2023, the Company entered into a Securities Purchase Agreement for a Private Placement, with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $8.0 million, (a) Class A units at a price that is the lower of $3.00 per unit and 90% of the 5 day volume weighted average price of the Company’s common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, each consisting of one share of common stock, one Series F common stock purchase warrant, or Series F Warrant, and one Series G common stock purchase warrant, or Series G Warrant, and together with the Series F Warrants (the “PIPE Warrants”) and (b) Class B units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock (the “PIPE Preferred Stock”), par value $0.0001, and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock (each share of which is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by the lower of $3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate. The closing under the Securities Purchase Agreement and the sale and issuance of the Class A units and Class B units (and the issuance of any underlying common stock) were approved at the Stockholders’ Meeting. At the closing of the Private Placement, the Company issued 497,908 Class A units for proceeds of approximately $0.9 million and 7,203 Class B units for proceeds of approximately $7.1 million which are convertible into up to 4,501,060 shares of common stock, as well as the issuance of certain warrants.

Shares of PIPE Preferred Stock, the conversion of which was approved at the Stockholders’ Meeting, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion.

Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights.

The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of common stock, the shares issuable upon exercise of the Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock.

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StockBased Compensation

3 Months Ended

Mar. 31, 2023

StockBased Compensation

Stock-Based Compensation

Note 14. Stock-Based Compensation

2018 Equity Incentive Plan

In September 2018, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”) which provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, performance-based stock awards and other forms of equity compensation to the Company’s employees, directors and consultants. Stock options granted under the 2018 Plan generally vest one-fourth on the first anniversary of the vesting commencement date with the balance vesting monthly over the remaining three years. Restricted stock units granted under the 2018 Plan generally vest one third on the first anniversary of the vesting commencement date and one sixth every six months thereafter such that the award will be fully vested on the third anniversary of the vesting commencement date. As of March 31, 2023 and December 31, 2022, 9,041 and 8,552 shares of common stock, respectively, were reserved for future issuance pursuant to the 2018 Plan. The number of shares available for issuance under the 2018 Plan also includes an annual increase on the first day of each fiscal year equal to the lesser of (1) 1,305 shares; (2) 5% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or 3) such other amount as the Company’s board of directors may determine.

2020 Inducement Equity Incentive Plan

In March 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Plan”) for the purpose of attracting, retaining and incentivizing employees in furtherance of the Company’s success. The 2020 Plan was adopted without stockholder approval pursuant to Rule 303A.08 of the New York Stock Exchange. The 2020 Plan is used to offer equity awards as material inducements for new employees to join the Company. Upon adoption of the 2020 Plan, 640 shares of common stock were reserved for the granting of inducement stock options, restricted stock awards, restricted stock units and other forms of equity awards. As of March 31, 2023 and December 31, 2022, 181 shares of common stock were reserved for future issuance under the 2020 Plan.

Stock Options Assumed in Merger (See Note 3, Business Combination)

At the closing of the Merger, (a) each outstanding share of Catheter common stock and $25,215,000 in Catheter convertible promissory notes were converted into the right to receive 14,649.591 of Ra Medical Series X Convertible Preferred Stock, and b) each outstanding option to purchase Catheter common stock that had not previously been exercised prior to the closing of the Merger was assumed and converted into options to purchase 753,699 shares of Ra Medical Common Stock (“Replacement Options”). Additionally, no Catheter options were amended in connection with the Merger. All the Replacement Options vested in accordance with the original terms of the grants in place at the time of the Merger. As a result, $3,085,000 of purchase price consideration, which represented the estimated fair value of Catheter’s assumed stock options, and $1,374,000 of stock-based compensation expense, which represents the excess of the estimated fair value of the Replacement Options over the assumed Catheter stock options, were recognized upon the closing of the Merger.

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2023:

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		990		$	11,405
Options assumed in Catheter Merger		753,699		$	1		—		—
Options exercised		(301,746	)	$	1		—		—
Canceled/forfeited		(35	)	$	1,525		—		—
Outstanding at March 31, 2023		452,908		$	26		3.40	$	—
Vested and expected to vest at March 31, 2023		452,908		$	26		3.40	$	—
Exercisable at March 31, 2023		452,824		$	26		3.40	$	—

The Company did not grant any stock options during the three months ended March 31, 2023.

Restricted Stock Units

The following is a summary of the restricted stock unit activity for the 2018 Plan for the three months ended March 31, 2023:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		61		$	450.46
Vested		(26	)	$	333.00
Forfeited		(9	)	$	1,129.10
Outstanding at March 31, 2023		26		$	1,912.56

Restricted Stock Awards

A summary of the restricted stock award activity for the three months ended March 31, 2023 is presented below:

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		948		$	248.48
Vested		—		$	—
Forfeited		(392	)	$	177.90
Outstanding at March 31, 2023		556		$	298.23

Employee Stock Purchase Plan

In September 2018, the Company’s board of directors adopted the 2018 Employee Stock Purchase Plan (the “ESPP”) which permitted eligible employees to purchase the Company’s common stock at a discount through payroll deductions during defined offering periods. Eligible employees could elect to withhold up to 15% of their base earnings to purchase shares of the Company’s common stock at a price equal to 85% of the fair market value on the first day of the offering period or the purchase date, whichever was lower. The number of shares of common stock reserved for issuance under the ESPP automatically increased on January 1 of each fiscal year by the lesser of (1) 237 shares, (2) 1.25% of the total number of shares outstanding on December 31 of the preceding fiscal year, or (3) such other amount as the Company’s board of directors may determine.

For the three months ended March 31, 2023 and 2022, cash received from the exercise of purchase rights under the ESPP was approximately $0 and $0.1 million, respectively. The Company paused the ESPP in May 2022.

As of March 31, 2023, the Company had issued 950 shares of common stock since inception of the ESPP, and no shares were reserved for future issuance.

Stock-based compensation expense recorded in operating expenses was as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Selling, general and administrative	$	1,394	$	113
Research and development		—		49
Stock-based compensation in operating expenses	$	1,394	$	162

Stock-based compensation of approximately $0 and $3 thousand was capitalized to property and equipment and inventory during the three months ended March 31, 2023 and 2022, respectively.

Total unrecognized estimated stock-based compensation expense by award type and the remaining weighted average recognition period over which such expense is expected to be recognized at March 31, 2023 was as follows:

	Unrecognized Expense (in thousands)		Remaining Weighted Average Recognition Period (in years)
Stock options	$	62		—
Restricted stock awards	$	96		0.6
Restricted stock units	$	7		0.8

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Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

Note 15. Income Taxes

The following table summarizes the Company’s effective tax rate for the periods indicated: 

	Three Months Ended March 31,			Year Ended December 31,
	2023			2022
Reported income tax expense rate		0	%	(0.1	%)

The Company did not record an income tax provision for the three months ended March 31, 2023 and 2022. The Company recorded an income tax expense for the twelve months ended December 31, 2022, primarily due to minimum state taxes.

At December 31, 2022, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $54.5 million and $47.8 million, respectively. The state NOL carryforwards begin expiring in 2030. Use of these NOL carryforwards may be significantly limited under the tax rules regarding the use of losses 27 following an ownership change under Internal Revenue Code (“IRC”) Section 382. Management performed a Section 382 analysis regarding the limitation of net operating losses through December 31, 2020 and determined that ownership changes occurred in May 2020. The Company believes further ownership changes occurred during each of the years ended December 31, 2022 and 2021. Accordingly, utilization of the Company’s NOLs is subject to an annual limitation for federal tax purposes under IRC Section 382. Due to the changes in control, the Company estimated that all of its $54.5 million federal NOL carryforwards are effectively eliminated, in accordance with IRC Section 382. In addition, $40.8 million of its $47.8 million in state NOL carryforwards is also eliminated. As a result of these eliminations, the Company’s federal and state NOLs were reduced to zero and $6.9 million, respectively, before taking into consideration the valuation allowance.

In addition, for all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is not more likely than not that its net deferred tax assets will not be realized. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance.

The acquisition of Catheter Precision Inc was treated as a stock purchase for U.S. tax purposes in the first quarter of 2023. As such, the Company recorded deferred tax assets and liabilities on its U.S. tax attributes. The Company continues to use its deferred tax liabilities as a source of income against a portion of its deferred tax assets. A valuation allowance was recorded for the portion of the deferred tax assets that are not more-likely-than-not to be realized.

As part of the Tax Cuts and Jobs Act of 2017 (TCJA), beginning with the Company's 2022 tax year, the Company is required to capitalize research and development expenses, as defined under Internal Revenue Code section 174. For expenses that are incurred for research and development in the U.S., the amounts will be amortized over 5 years, and expenses that are incurred for research and experimentation outside the U.S. will be amortized over 15 years. This provision has not had a significant impact to the consolidated financial statements.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies

Commitments and Contingencies

Note 16. Commitments and Contingencies

Securities Class Action

On June 7, 2019, a putative securities class action complaint captioned Derr v. Ra Medical Systems, Inc., et al, (Civil Action no. 19CV1079 LAB NLS) was filed in the U.S. District Court for the Southern District of California against the Company, certain current and former officers and directors, and certain underwriters of the Company’s initial public offering. Following the appointment of a lead plaintiff and the filing of a subsequent amended complaint, the lawsuit alleges that the defendants made material misstatements or omissions in the Company’s registration statement in violation of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and between September 27, 2018 and November 27, 2019, inclusive, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). On March 11, 2020, lead plaintiffs voluntarily dismissed the underwriter defendants without prejudice. On March 13, 2020, defendants filed a motion to dismiss the amended complaint. On March 24, 2021, the court issued an order granting defendants’ motion to dismiss claims under the Securities Act in full and certain claims under the Exchange Act and denying defendants’ motion to dismiss certain Exchange Act claims. Plaintiffs filed their second amended complaint on April 19, 2021, realleging the Securities Act claims and certain of the previously dismissed Exchange Act claims. On June 10, 2021, defendants moved to dismiss the second amended complaint. On November 12, 2021, following a private settlement mediation with the lead plaintiffs, the parties executed a stipulation of settlement that resolved the claims asserted in the securities class action. The settlement provides for a payment to the plaintiff class of $10.0 million. On March 18, 2022, the Company paid approximately $0.6 million towards the settlement to satisfy its self-insured retention/deductible. The Company’s insurers paid the remainder of the settlement. The proposed settlement required both preliminary and final approval by the court. On February 11, 2022, the court granted preliminary approval of the settlement, scheduled a hearing on final approval of the settlement and denied the pending motion to dismiss without prejudice. On May 2, 2022, plaintiffs filed a motion for final approval of the settlement and plan of allocation, and lead counsel filed a motion for an award of attorneys’ fees and reimbursement of litigation expenses. On September 23, 2022, the court granted final approval of the settlement, certified the settlement class, granted in part lead counsel’s motion for an award of attorneys’ fees and reimbursement of litigation expenses, dismissed plaintiffs’ claims with prejudice, and entered final judgment.

Shareholder Derivative Litigation

On October 1, 2019, a shareholder derivative complaint captioned Noel Borg v. Dean Irwin, et al (Civil Action no. 1:99-cm-09999) was filed in the U.S. District Court for the District of Delaware against certain current and former officers and directors, purportedly on behalf of the Company, which is named as a nominal defendant in the action. The complaint alleges breaches of fiduciary duty, unjust enrichment, waste, and violations of Section 14(a) of the Exchange Act. On October 21, 2019, pursuant to the parties’ stipulation, the court stayed the derivative lawsuit until the related class action is resolved. On November 10, 2022, the plaintiff filed a notice voluntarily dismissing the case without prejudice.

Settlement Agreements with the Department of Justice and Participating States

As previously announced on December 28, 2020, the Company entered into a settlement agreement with the U.S., acting through the Department of Justice (“DOJ”) and on behalf of the Office of Inspector General, and other settlement agreements with certain state attorneys general, collectively the “Settlement Agreements”, to resolve investigations and a related civil action concerning its marketing of the DABRA laser system and DABRA-related remuneration to certain physicians.

Pursuant to the terms of the Settlement Agreements, (a) if the Company’s revenue exceeds $10 million in any of fiscal years 2021-2024, the Company is also required to pay for the corresponding year: $500,000 for 2021, $750,000 for 2022, $1 million for 2023, and $1.25 million for 2024; (b) if the Company is acquired or is otherwise involved in a change in control transaction (as defined in the Settlement Agreement) before the end of 2024, the Company was required to pay an additional settlement amount of $5 million, plus 4% of the value attributed to the Company in the transaction, so long as the attributed value is in excess of $100 million, with the total change in control payment never to exceed $28 million; and (c) if the Company’s obligations under the Settlement Agreements are avoided by bankruptcy, the U.S. may rescind the releases and bring an action against the Company in which the Company agrees is not subject to an automatic stay, is not subject to any statute of limitations, estoppel or laches defense, and is a valid claim in the amount of $56 million, minus any prior change in control payments. As a result of the Merger, the Company recorded $5.0 million related to the Settlement Agreements as of December 31, 2022, which is included in accrued expenses in the accompanying balance sheet as of December 31, 2022.

In February 2023, the Company made payments of $4.7 million and $0.3 million to the DOJ and the participating states, respectively, pursuant to the terms of the Settlement Agreements.

Filing of Complaint

On September 29, 2022, a purported stockholder of the Company filed a complaint captioned David Nguyen v. Ra Medical Systems, Inc. et al. (Civil Action no. 3:22-cv-01470-BEN-MSB) in the U.S. District Court for the Southern District of California against us and our current directors. The complaint alleges violations of Sections 14(a) and 20(a) of the Exchange Act based on alleged deficiencies in our preliminary proxy, filed with the SEC on September 23, 2022. On February 7, 2023, plaintiff filed a notice voluntarily dismissing the case without prejudice.

Other Litigation

In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.

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Employee Benefit Plan

3 Months Ended

Mar. 31, 2023

Employee Benefit Plan

Employee Benefit Plan

Note 17. Employee Benefit Plan

In January 2019, the Company established a defined contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”). Under the terms of the 401(k) Plan, all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100% of each employee’s contribution up to 3% and 50% of contributions between 3% and 5%, with the match-eligible contribution limited to 4% of the employee’s eligible compensation. The Company cancelled the 401(k) Plan effective March 10, 2023. The Company’s expense related to the matching contributions was approximately $0 and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events

Subsequent Events

Note 18. Subsequent Events

Resignation of CEO

On April 17, 2023, the Company received the resignation of Will McGuire from his positions as Chief Executive Officer and Secretary, and as a member of the Board of Directors, effective April 28, 2023, for personal reasons.  The Board of Directors has established a search committee consisting of Susanne Meline and James Caruso to identify a new Chief Executive Officer. Until a new Chief Executive Officer is identified, David Jenkins, Executive Chairman of the Board, will serve as interim Chief Executive Officer and as the Company’s principal executive officer, effective April 28, 2023.

In connection with Mr. McGuire’s resignation, he and the Company entered into a second amendment to his change in control and severance agreement, which among other things, clarified that the amount of Mr. McGuire’s severance payment would be based on his 2022 base salary and bonus opportunity, and provided that he would not receive Cobra coverage following his termination of employment. Mr. McGuire will receive a severance payment of approximately $1.75 million pursuant to his change in control and severance agreement. As of March 31, 2023, the Company determined that it was probable that the change in control would occur. Because management believed a loss was probable under related agreements, as of March 31, 2023 the Company accrued for $1.75 million in relation to the severance. The Company paid the severance in full on May 12, 2023.

Entry into Lease Agreement

On March 19, 2023, the Company entered into a 36 month lease agreement in Park City, Utah effective May 1, 2023. The rent expense under the agreement is $3,203 per month.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

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.

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.

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	$	—

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
Provision for credit losses		—		21
Balance at end of period	$	152	$	152

As of March 31, 2023, the entire allowance for credit losses is related to legacy Ra Medical receivables.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company reduced the carrying value of inventories for those items that were potentially excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors. There were no inventory obsolescence charges for the three months ended March 31, 2023 and 2022.

Effective June 6, 2022, the Company’s board of directors approved a staggered reduction in force (“RIF”). On September 2, 2022, the Company completed the RIF. The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to the Company in furtherance of the board of directors’ review of strategic alternatives. As a result of the RIF, the Company paused all engineering and manufacturing activities during the third quarter of 2022.

Prior to the RIF (as defined above), the Company’s catheters were manufactured in-house and each catheter was tested at various stages of the manufacturing process for adherence to quality standards. Catheters that did not meet functionality specification at each test point were destroyed and immediately written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations. Once manufactured, completed catheters that passed quality assurance, were sent to a third-party for sterilization and sealed in a sterile container. Upon return from the third-party sterilizer, a sample of catheters from each batch were re-tested. If the sample tests were successful, the batch was accepted into finished goods inventory. If the sample tests were unsuccessful, the entire batch was written off, with the expense recorded in cost of revenues in the unaudited condensed consolidated statements of operations.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows: 

Machinery and equipment	2-10 years
Computer hardware and software	2-5 years
VIVO DEMO/Clinical Systems	2 years
Furniture and fixtures	5 years

Leasehold improvements are depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease.

The Company periodically reviews the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering long-term views on its intended use of each class of property and equipment and the planned level of improvements to maintain and enhance assets within those classes. 

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the account balances and any resulting gain or loss is recognized in income for the period. The cost of repairs and maintenance is expensed as incurred, whereas significant betterments are capitalized.

Impairment of Long-lived Assets

The Company periodically reviews its long-lived assets for impairment when certain events or changes in circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. There were no impairment charges for long-lived assets for the three months ended March 31, 2023 and 2022.

Goodwill

Goodwill, which represents the excess of purchase price of Catheter over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company first has the option to assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using a combination of an income and market approach. To determine fair values, the Company is required to make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations including the rate of future revenue growth, capital requirements, and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. These assumptions require significant judgement. Pursuant to Accounting Standards Update (''ASU'') 2017-04, Simplifying the Test for Goodwill Impairment, the single step is to determine the estimated fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. The Company also completes a reconciliation between the implied equity valuation prepared and the Company’s market capitalization. The majority of the inputs used in the discounted cash flow model are unobservable and thus are considered to be Level 3 inputs. The inputs for the market capitalization calculation are considered Level 1 inputs. There were impairment charges of $56.1 million recognized during the three months ended March 31, 2023, see Note 8, Goodwill, for additional details.

Royalty Liability

On January 9, 2023, prior to the consummation of the Merger, Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Catheter's Chairman of the Board of Directors and, currently, Ra Medical's Executive Chairman of the Board of Directors, to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device, commencing upon the first commercial sale, through December 31, 2035. The royalty payable has an estimated fair value of approximately $7.9 million as of March 31, 2023. The fair value was calculated using a discounted cash flow method which utilized a discount rate of 27%.

Product Warranty

Products were warrantied against defects in material and workmanship when properly used for their intended purpose and appropriately maintained. Accordingly, the Company generally replaced catheters that kinked or failed to calibrate. The product warranty liability was determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor. The product warranty liability also includes the estimated costs of a product recall.

The warranty accrual is included in accrued expenses in the accompanying unaudited condensed consolidated balance sheets. Warranty expenses are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals resulted from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense.

Revenue Recognition

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), and all related appropriate guidance. The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The Company measures revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation. Under Topic 606, revenue is recognized when a customer obtains control of promised goods. To achieve this core principal, the Company applies the following five steps:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the Company satisfies a performance obligation

Subsequent to the Merger, the Company’s primary product is the VIVO System. The VIVO System 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. In addition to the VIVO System, customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System to complete the intended output of the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets represents the Company’s primary performance obligation. The Company recognizes revenue upon the delivery of the VIVO system. The Company also provides customers with the option to pay for software upgrades in advance at the time of the contract's inception. Software upgrades are stand-ready services, whereby the Company will provide software upgrade services to the customer when and as upgrades are available. Terms of the period covered by the payment of software upgrades in advance can range from one year to multiple years. Customers have the option to renew terms covered by software upgrades at the end of each term. The stand-ready software upgrades represent the Company's second separate performance obligation and revenue is recognized over the term of the period.

The Company invoices the customers after physical possession and control of the VIVO System is transferred to the customer and recognizes revenue upon delivery. The timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract. The Company invoices customers who pay for software upgrades in advance in conjunction with the invoice for the delivery of the VIVO System, and subsequent renewals of software upgrades are invoiced at the inception of the term. Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under Topic 606. Similar to the delivery of the VIVO System, the timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract.

Legacy Ra Medical Revenue

The Company generated revenue from the sales of products and services. Product sales consisted of the sales of catheters for use with the DABRA laser system. The Company paused selling commercial products in late 2020 and was only selling catheters for use in the atherectomy clinical trial prior to the discontinuation of such sales in June 2022. The Company’s sales agreements generally did not include right-of-return provisions for any form of consideration, including partial refund or credit against amounts owed to the Company. Services and other revenues primarily consisted of billable services, including fees related to DABRA laser commercial usage agreements.

The Company accounted for a contract with a customer when it had a legally enforceable contract with the customer, the arrangement identified the rights of the parties, the contract had commercial substance, and the Company determined it was probable that it would collect the contract consideration. The Company recognized revenue when control of the promised goods or services transferred to customers, in an amount that reflected the consideration the Company expected to be entitled to in exchange for those goods or services. Taxes collected from customers relating to goods or services and remitted to governmental authorities were excluded from revenue.

When engaged in commercial sales, the Company entered into a DABRA laser commercial usage agreement or DABRA laser placement acknowledgement with each customer that was supplied a DABRA laser, collectively the “usage agreement”, which provided for specific terms of continued use of the DABRA laser, including a nominal periodic fee. The terms of a usage agreement typically allowed the Company to place a DABRA laser at a customer’s specified location without a specified contract term. Under the usage agreement terms, the Company retained all ownership rights to the DABRA laser and was permitted to request the return of the equipment within 10 business days of notification. While the laser periodic fees were nominal, the usage agreement provided the Company the exclusive rights to supply related single-use catheters to the customer which aggregated the majority of the product sales revenue. There were no specified minimum purchase commitments for the catheters.

The Company recognized revenue associated with the usage agreements and catheter supply arrangements in accordance with Topic 606 since (i) the contract primarily included variable payments, (ii) the catheters were priced at their standalone selling price, and (iii) the laser equipment was insignificant in the context of the contract. Revenue was recognized when the performance obligation was satisfied which was generally upon shipment of the catheter.

The Company had $85 thousand and $9 thousand in product sales during the three months ended March 31, 2023 and 2022, respectively.

Shipping and Handling Costs

Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statements of operations for each period.

Distinguishing Liabilities from Equity

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.

Advertising and Marketing

Advertising costs are expensed as incurred and included in sales and marketing expense. Advertising costs were $0.2 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively.

Patents

The Company expenses patent costs, including related legal costs, as incurred and records such costs as selling, general and administrative expenses in the accompanying statements of operations.

Share-based Compensation

The Company records stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with the authoritative guidance for stock-based compensation. The Company evaluates whether an award should be classified and accounted for as a liability award or equity award for all stock-based compensation awards granted. The cost of an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing valuation model (“Black-Scholes model”) which incorporates various assumptions including expected term, volatility and risk-free interest rate, and is recognized as expense on a straight-line basis over the requisite service period of the award, which is generally the vesting period of the respective award. Share-based compensation for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

As a result of the Merger, all unvested legacy Catheter stock options were subject to accelerated vesting and therefore became fully vested, as of the closing date of the business combination. Ra Medical recognized the fair value of the replacement options as included in consideration transferred to the extent they do not exceed the fair value of the equivalent Catheter options. Any incremental fair value was recognized in compensation expense in the post-combination period, with this recognized as a Day 1 expense due to the Catheter options becoming fully vested concurrent with the closing of the business combination.

Research and Development

Major components of research and development costs include personnel expenses, stock-based compensation, consulting, supplies and clinical trial expenses. Research and development expenses are charged to operations in the period incurred.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other expense, respectively.

Basic and Diluted Net Loss Per Share of Common Stock

The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents include warrants, stock options and non-vested restricted stock awards and restricted stock units using the treasury stock method, Series A Convertible Preferred Stock, Series X Convertible Preferred Stock, along with the effect, if any, from outstanding convertible securities. See Note 11, Net loss per share.

Net loss attributable to common stockholders consists of net income or loss, as adjusted for actual and deemed dividends declared. The Company recorded a deemed dividend for the modification of existing warrants and issuance of new warrants during the three months ended March 31, 2023 of $0.8 million. The deemed dividend is added to the net loss in determining the net loss available to common stockholders.

Recently Announced Accounting Pronouncements

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2022-03 on its unaudited condensed consolidated financial statements.

As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Schedule of activity in the accounts receivable

	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	$	—

Schedule of Allowance for Credit Losses

	March 31, 2023		December 31, 2022
Balance at beginning of period	$	152	$	131
Provision for credit losses		—		21
Balance at end of period	$	152	$	152

Schedule of Property and Equipment Estimated Useful Lives

Machinery and equipment	2-10 years
Computer hardware and software	2-5 years
VIVO DEMO/Clinical Systems	2 years
Furniture and fixtures	5 years

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Business Combination (Tables)

3 Months Ended

Mar. 31, 2023

Business Combination

summary the preliminary estimated fair value

Description	Fair Value as of January 9, 2023
Fair value of 14,649.591 Series X convertible preferred stock issued	$	79,840
Fair value of Catheter’s fully vested stock options		3,085
Total Purchase Price	$	82,925

summary Of preliminary purchase price allocations

Description	Fair Value
Assets acquired:
Cash and cash equivalents	$	15
Accounts receivable		71
Inventories		52
Prepaid expenses and other current assets		23
Property and equipment, net		26
Lease right-of-use assets		119
Other assets		8
Developed technology		35,080
Customer relationships		220
Trademarks		1,700
Goodwill		56,086
Total assets acquired	$	93,400
Liabilities assumed:
Accounts payable	$	922
Accrued expenses		1,389
Lease liability - current portion		37
Interest payable		198
Convertible promissory note		250
Lease liability - net of current portion		87
Royalties payable		7,592
Total liabilities assumed		10,475
Total purchase price	$	82,925

Schedule of acquisition date fair values and estimated useful lives

Intangible Assets	Estimated Fair Value		Estimated Useful Life
Developed technology- Vivo	$	8,020		8
Developed technology- LockeT		27,060		6
Customer relationships		220		5
Trademark- Vivo		1,480		9
Trademark- LockeT		220		8
	$	37,000

Schedule of Basic and diluted net loss per share - on a pro forma basis

	Three Months Ended March 31,
	2023			2022
Revenues	$	88		$	95
Net loss		(66,570	)		(6,967	)
Net loss attributable to common stockholders		(67,370	)		(6,967	)
Basic and diluted net loss per share – on a pro forma basis (unaudited)	$	(13.56	)		(2.17	)

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Royalties Payable (Tables)

3 Months Ended

Mar. 31, 2023

Royalties Payable

summary of sales-based royalties

Royalty Percentage	Until Royalty Payment Reaches a Total of
4%	$	1,589,500
2%	$	3,179,000
1%		In perpetuity

summary Of roll forward of the royalty payable

Balance at beginning of period	$	—
AMIGO royalty payable recognized in connection with the Merger		160
LockeT royalty payable recognized in connection with the Merger		7,432
Accretion of LockeT royalty payable		513
Balance at end of period	$	8,105

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Inventories (Tables)

3 Months Ended

Mar. 31, 2023

Inventories

Schedule of Inventories

	March 31, 2023		December 31, 2022
Raw materials	$	38	$	—
Finished goods		32		—
Inventories	$	70	$	—

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2023

Property and Equipment

Schedule of Property and Equipment, Net

	March 31, 2023			December 31, 2022
Machinery and equipment	$	20		$	—
Computer hardware and software		14			—
VIVO DEMO/Clinical Systems		52			—
Property and equipment, gross		86			—
Accumulated depreciation		(30	)		—
Property and equipment, net	$	56		$	—

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Intangible Assets

Schedule of Intangible Assets

	Estimated Useful Life in Years		Gross Carrying Amount at January 9, 2023		Accumulated Amortization			Net Book Value at Net Book Value at March 31, 2023
Developed technology ‐ Vivo		8	$	8,020	$	(251	)	$	7,769
Developed technology ‐ Locket		6		27,060		(1,127	)		25,933
Customer relationships		5		220		(11	)		209
Trademarks/trade names ‐ Vivo		9		1,480		(41	)		1,439
Trademarks/trade names ‐ Locket		8		220		(7	)		213
			$	37,000	$	(1,437	)	$	35,563

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Goodwill (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill

Schedule of Goodwill

Beginning balance, January 1, 2023	$	-
Goodwill recognized in connection with the Merger (Note 3)		56,086
Impairment charge		(56,086	)
Ending balance, March 31, 2023	$	-

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Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2023

Accrued Expenses

Schedule of Accrued Expenses

	March 31, 2023		December 31, 2022
Legal expenses	$	177	$	5,195
Offering costs		1,356		1,356
Compensation and related benefits		63		369
Warranty expenses		192		192
Accrued severance (see Note 18)		1,750		—
Other accrued expenses		284		372
Accrued expenses	$	3,822	$	7,484

Schedule of Activity in the product warranty accrual is included in accrued expenses

	Three Months Ended March 31, 2023		Year Ended December 31, 2022
Balance at beginning of period	$	192	$	195
Claims satisfied		—		(3	)
Balance at end of period	$	192	$	192

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases

Schedule of weighted average discount rate

Weighted average remaining lease term (in years) – operating leases	2.51
Weighted average discount rate – operating leases	10.91	%

Schedule of Future lease payments for all lease

Period ending December 31:	Operating Lease
Remainder of 2023	$	62
2024		65
2025		49
Total minimum lease payments		176
Less effects of discounting		(53	)
Present value of future minimum lease payments	$	123

Schedule of Right of use lease assets and lease liabilities

	As of March 31, 2023		As of December 31, 2022
Assets
Lease right-of-use assets	$	129	$	—
Total lease assets		129		—
Liabilities
Current liabilities:
Lease liability - current portion		51		—
Non-current liabilities:
Lease liability, net of current portion		88		—
Total lease liability	$	139	$	—

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Equity Offerings (Tables)

3 Months Ended

Mar. 31, 2023

Equity Offerings

Schedule of Black-Scholes Model Based on Assumptions

	Series A			Series B
Risk-free interest rate		0.91	%		1.93	%
Volatility		131.07	%		85.38	%
Expected dividend yield		0.00	%		0.00	%
Expected life (in years)		1.0			7.0

	Series F	Series G
Risk-free interest rate	3.8 %	3.4 %
Volatility	80.0 %	74.0 %
Expected dividend yield	0.0 %	0.0 %
Expected life (in years)	2.0	6.0

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StockBased Compensation (Tables)

3 Months Ended

Mar. 31, 2023

StockBased Compensation

Schedule of Options Activity

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		990		$	11,405
Options assumed in Catheter Merger		753,699		$	1		—		—
Options exercised		(301,746	)	$	1		—		—
Canceled/forfeited		(35	)	$	1,525		—		—
Outstanding at March 31, 2023		452,908		$	26		3.40	$	—
Vested and expected to vest at March 31, 2023		452,908		$	26		3.40	$	—
Exercisable at March 31, 2023		452,824		$	26		3.40	$	—

Schedule of Restricted Stock Units Activity

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		61		$	450.46
Vested		(26	)	$	333.00
Forfeited		(9	)	$	1,129.10
Outstanding at March 31, 2023		26		$	1,912.56

Schedule of Restricted Stock Awards Activity

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		948		$	248.48
Vested		—		$	—
Forfeited		(392	)	$	177.90
Outstanding at March 31, 2023		556		$	298.23

Schedule of Stock-based Compensation Expense Recorded in Operating Expenses

	Three Months Ended March 31,
	2023		2022
Selling, general and administrative	$	1,394	$	113
Research and development		—		49
Stock-based compensation in operating expenses	$	1,394	$	162

Schedule of Unrecognized Estimated Stock Based Compensation Expense by Award Type

	Unrecognized Expense (in thousands)		Remaining Weighted Average Recognition Period (in years)
Stock options	$	62		—
Restricted stock awards	$	96		0.6
Restricted stock units	$	7		0.8

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2023

Income Taxes

Reconciliation of Differences between United States Statutory Federal Income Tax Rate and Effective Tax Rate

	Three Months Ended March 31,			Year Ended December 31,
	2023			2022
Reported income tax expense rate		0	%	(0.1	%)

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Organization and Nature of Operations Additional Information (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Sep. 20, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Oct. 03, 2022
Accumulated deficit		$ (271,537)		$ (205,137)
Net cash used in operating activities		(12,053)	$ (8,569)
Cash flows used in operating activities		12,100
Cash and cash equivalents		12,200
Accued settlement costs		$ 5,000
Common stock, shares outstanding	68,200,000	5,267,092		2,160,950	1,400,000
Reverse stock split ratio, description	On September 20, 2022, the Company’s board of directors approved a reverse stock split ratio of 1-for-50 (the “Reverse Stock Split”).
Private Placement
Gross proceeds		$ 8,000
Warrant Repricing
Gross proceeds		1,300
Going Concern [Member]
Accumulated deficit		271,500
Net cash used in operating activities		$ (12,100)

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Summary of Significant Accounting Policies
Accounts receivable acquired in business combination	$ 80	$ 0
Change in provision for credit losses	$ 0	$ (21)

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Summary of Significant Accounting Policies (Details 1) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Summary of Significant Accounting Policies
Balance at end of year	$ 152	$ 152
Provision for credit losses	0	21
Balance at beginning of year	$ 152	$ 131

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Summary of Significant Accounting Policies (Details 2)	3 Months Ended
	Mar. 31, 2023
Furniture And Fixtures [Member]
Estimated useful lives	5 years
VIVO DEMO/Clinical Systems[Member]
Estimated useful lives	2 years
Machinery And Equipment [Member] | Minimum [Member]
Estimated useful lives	2 years
Machinery And Equipment [Member] | Maximum [Member]
Estimated useful lives	10 years
Computer Hardware And Software [Member] | Minimum [Member]
Estimated useful lives	2 years
Computer Hardware And Software [Member] | Maximum [Member]
Estimated useful lives	5 years

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Product sales	$ 85,000	$ 9,000
Impairment charges of goodwill	56,100,000
Issuance of new warrants amount	800,000
FDIC credit limit	250,000
Cash	11,500,000
Cash equivalents	11,700,000		$ 1,700,000
Mutual fund	11,400,000
Money market fund	300,000		1,400,000
Certificate of deposit	$ 20,000		$ 300,000
Royalty liability description	The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of its Surgical Vessel Closing Pressure Device, commencing upon the first commercial sale, through December 31, 2035
Royalty liability fair value	$ 7,900,000
Advertising and marketing	200,000	100,000
Hardware sales [Member]
Product sales	$ 85,000	$ 9,000

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Business Combination (Details)	Jan. 09, 2023 USD ($)
Total Purchase Price	$ 82,925
Catheter's [Member]
Fair value	3,085
Series X convertible preferred stock [Member]
Fair value	$ 79,840

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Business Combination (Details 1) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Total purchase price	$ 82,925,000
Accounts payable	580,000	$ 92,000
Accrued expenses	3,822,000	7,484,000
Lease liability - current portion	88,000	0
Lease liability - net of current portion	51,000	0
Total liabilities assumed	12,646,000	7,576,000
Cash and cash equivalents	12,218,000	15,859,000
Accounts receivable	80,000	21,000
Inventories	70,000	0
Prepaid expenses and other current assets	388,000	977,000
Property and equipment, net	56,000	0
Lease right of use assets	129,000	0
Goodwill	0	$ 0
Assets Acquired [Member]
Cash and cash equivalents	15,000
Accounts receivable	71
Inventories	52,000
Prepaid expenses and other current assets	23,000
Property and equipment, net	26,000
Lease right of use assets	119
Other assets	8
Developed technology	35,080
Customer relationships	220
Trademarks	1,700
Goodwill	56,086
Total assets acquired	93,400
Liabilities assumed [Member]
Accounts payable	922,000
Accrued expenses	1,389,000
Lease liability - current portion	37
Interest payable	198
Convertible promissory note	250
Lease liability - net of current portion	87
Royalties payable	7,592
Total liabilities assumed	$ 10,475

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Business Combination (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Intangible assets acquired	$ 37,000
Intangible assets acquired	86	$ 0
Customer relationships [Member]
Intangible assets acquired	$ 220
Estimated Useful Life	5 years
Developed technology ? Vivo [Member]
Intangible assets acquired	$ 8,020
Estimated Useful Life	8 years
Developed technology- LockeT [Member]
Intangible assets acquired	$ 27,060
Estimated Useful Life	6 years
Trademark- Vivo [Member]
Intangible assets acquired	$ 1,480
Estimated Useful Life	9 years
Trademark- LockeT [Member]
Intangible assets acquired	$ 220
Estimated Useful Life	8 years

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Business Combination (Details 3) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net loss	$ (66,400,000)	$ (5,495,000)
Pro Forma Financial Information [Member]
Revenues	88	95
Net loss	(66,570)	(6,967)
Net loss attributable to common stockholders	$ (67,370)	$ (6,967)
Basic and diluted net loss per share - on a pro forma basis (unaudited)	$ (13.56)	$ (2.17)

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Business Combination (Details Narrative) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) shares
Transaction costs	$ 1.7
Merger Agreement [Member]
Aggregate principal Amount	$ 25.2
Right to receive the convertible shares | shares	14,649
Converted into options to purchase of common shares | shares	753,699
Total purchase consideration	$ 82.9
Estimated fair value of the Convertible Preferred Stock issued | shares	14,649
Estimated fair value	$ 3.1

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Royalties Payable (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Royalty Two [Member]
Royalty Percentage	2.00%
Royalty Payment	$ 317,900.0
Royalty One [Member]
Royalty Percentage	4.00%
Royalty Payment	$ 158,950.0
Royalty Three [Member]
Royalty Percentage	1.00%
Royalty Payment	In perpetuity

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Royalties Payable (Details 1) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Royalties Payable
Balance at beginning of period	$ 0.0
AMIGO royalty payable recognized in connection with the Merger	16.0
LockeT royalty payable recognized in connection with the Merger	743.2
Accretion of LockeT royalty payable	51.3
Balance at end of period	$ 810.5

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Royalties Payable (Details Narrative) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
LockeT Royalty [Member]
Royalty payable	12.00%
Fair value of royalty payable	$ 7.4
AMIGO System Royalty [Member]
Investment amount received	$ 1.6

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Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventories
Raw materials	$ 38
Finished goods	32
Inventories	$ 70	$ 0

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Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property and equipment, net	$ 56	$ 0
Property and equipment, gross	86	0
Accumulated depreciation	(30)	0
VIVO DEMO/Clinical Systems[Member]
Property and equipment, gross	52	0
Machinery And Equipment [Member]
Property and equipment, gross	20	0
Computer Hardware And Software [Member]
Property and equipment, gross	$ 14	$ 0

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Property and Equipment (Details narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Property and Equipment
Depreciation expense	$ 7	$ 115

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Intangible Assets (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Gross Carrying Amount at January 9, 2023	$ 37,000
Accumulated Amortization	(1,437)
Net Book Value	$ 35,563
Customer relationships [Member]
Estimated Useful Life in Years	5 years
Gross Carrying Amount at January 9, 2023	$ 220
Accumulated Amortization	(11)
Net Book Value	$ 209
Trademarks/trade names ? Vivo [Member]
Estimated Useful Life in Years	9 years
Gross Carrying Amount at January 9, 2023	$ 1,480
Accumulated Amortization	(41)
Net Book Value	$ 1,439
Trademarks/trade names [Member]
Estimated Useful Life in Years	8 years
Gross Carrying Amount at January 9, 2023	$ 220
Accumulated Amortization	(7)
Net Book Value	$ 213
Developed technology ? Vivo [Member]
Estimated Useful Life in Years	8 years
Gross Carrying Amount at January 9, 2023	$ 8,020
Accumulated Amortization	(251)
Net Book Value	$ 7,769
Developed technology- LockeT [Member]
Estimated Useful Life in Years	6 years
Gross Carrying Amount at January 9, 2023	$ 27,060
Accumulated Amortization	(1,127)
Net Book Value	$ 25,933

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Intangible Assets (Details narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Intangible Assets
Amortization expense	$ 1,400,000	$ 0

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Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill
Balance at beginning of period	$ 0
Goodwill recognized in connection with the Merger	56,086
Impairment charge	(56,086)
Balance at end of period	$ 0

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Goodwill (Details Narrative) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill
Goodwill	$ 56.1
Impairment charges of goodwill	56.1
Cumulative goodwill impairment charges	56.1
Loss on impairment of goodwill	$ 56.1

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Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Accrued Expenses
Legal expenses	$ 177	$ 5,195
Offering costs	1,356	1,356
Compensation and related benefits	63	369
Other accrued expenses	284	372
Warranty expenses (Note 8)	192	192	$ 192	$ 195
Accrued severance (see Note 18)	1,750	0
Accrued expenses	$ 3,822	$ 7,484

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Accrued Expenses (Details 1) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2021
Accrued Expenses
Balance at beginning of period, Accrued warranty	$ 192	$ 195
Claims satisfied	0	(3)
Balance at end of period, Accrued warranty	$ 192	$ 192

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Accrued Expenses (Details narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Accrued Expenses
Accrued severance	$ 1,750
Payment of severance	$ 1,750

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Leases (Details)	3 Months Ended
	Mar. 31, 2023
Leases
Weighted average discount rate - operating leases	10.91%
Weighted average remaining lease term (in years) - operating leases	2 years 6 months 3 days

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Leases (Details 1)	Mar. 31, 2023 USD ($)
Leases
Remainder of 2023	$ 62
2024	65
2025	49
Total minimum lease payments	176
Less effects of discounting	(53)
Present value of future minimum lease payments	$ 123

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Leases (Details 2) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases
Lease right-of-use assets	$ 129	$ 0
Total lease assets	129	0
Lease liability - current portion	51	0
Lease liability, net of current portion	88	0
Total lease liability	$ 139	$ 0

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Leases (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	Oct. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Operating lease expenses		$ 15,000	$ 16,000
cash paid		$ 108,000	$ 110,000
Estimated incremental borrowing rate		10.00%	11.09%
California Operating Lease [Member]
Lease expiry and term		expires in 2027. At March 31, 2022, the remaining lease term was 5.75 years.
Lease security deposit		$ 36,000
Termination fee to landloard		300,000
Wrote-off its right-of-use asset, right-of-use liability and security deposit		$ 100,000
Lease termination fee	$ 300,000
South Carolina Office Lease Agreement [Member]
Estimated incremental borrowing rate		11.09%
Lease expiry and term		term of the lease is 38 months which began on October 1, 2022
Total rent per month		$ 3,773
New Jersey Office Lease Agreement [Member]
Lease expiry and term		term of the lease is 24 months which began on January 1, 2023
Total rent per month		$ 1,207

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Net Loss per Share (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Deemed dividend amount	$ 800,000
Loss allocated to participating securities	$ 0
Warrants Member
Anti-dilutive common share equivalents excluded from computation of diluted net loss per share	11,148,858	1,126,599
Stock Options [Member]
Anti-dilutive common share equivalents excluded from computation of diluted net loss per share	452,908	2,128
Restricted Stock Awards
Anti-dilutive common share equivalents excluded from computation of diluted net loss per share	556	3,298
Restricted Stock Units (RSUs) [Member]
Anti-dilutive common share equivalents excluded from computation of diluted net loss per share	26	993
Employee Stock Purchase Plan [Member]
Anti-dilutive common share equivalents excluded from computation of diluted net loss per share		333
Series X convertible preferred stock [Member]
Convertible preferred stock	14,649
Convertible preferred stock	12,675,000,000
Series A convertible preferred stock [Member]
Convertible preferred stock	7,203,000,000

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Equity Offerings (Details) - Offering [Member].	3 Months Ended
	Mar. 31, 2023
Series A warrants.
Risk-free interest rate	0.91%
Volatility	131.07%
Expected dividend yield	0.00%
Expected life (in years)	1 year
Series B warrants.
Risk-free interest rate	1.93%
Volatility	85.38%
Expected dividend yield	0.00%
Expected life (in years)	7 years
Series F warrants.
Risk-free interest rate	3.80%
Volatility	80.00%
Expected dividend yield	0.00%
Expected life (in years)	2 years
Series G warrants.
Risk-free interest rate	3.40%
Volatility	74.00%
Expected dividend yield	0.00%
Expected life (in years)	6 years

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Equity Offerings (Details Narrative) - USD ($)			1 Months Ended		3 Months Ended
	Jan. 09, 2023	Feb. 08, 2022	Jul. 31, 2022	Mar. 31, 2022	Mar. 31, 2023	Dec. 31, 2022
Common stock, weighted average exercise price	$ 3.00
Series F warrants exercisable	4,999,093
Series G warrants exercisable	4,999,093
Repriced warrants					$ 300,000
Fair value of Series E warrant					$ 1,900,000
Common stock reserve for issuance					11,148,858
Weighted average exercise price					$ 5.39
Deemed dividend amount					$ 800,000
Maximum [Member] | Existing warrants. | Warrant inducement offer.
Warrants issued price per share	$ 526.50
Minimum [Member] | Existing warrants. | Warrant inducement offer.
Warrants issued price per share	$ 14.00
Offering [Member].
Expected term (In Years)					5 years
Expected dividend yield					0.00%
Risk-free interest rate					1.81%
Expected Volatility					93.25%
Valuation of warrants					$ 400,000
Number of warrants to issue for purchase of common stock						33,000
Fee withheld					1,100,000
Stock issued during period, warrants exercised			800	1,000
Warrants issued price per share						$ 31.25
Offering expenses paid or payable					1,800,000
Proceeds from issuance of common stock					11,500,000
Common stock issued (in shares)		190,700
Offering [Member]. | Accrued Expenses [Member]
Cash fee for placement agent					$ 900,000	$ 900,000.0
Overallotment Option [Member]
Overallotment option period		45 days
Common stock issued (in shares)		24,902
Overallotment Option [Member] | Maximum [Member]
Common stock issued (in shares)		72,000
Series A warrants.
Number of warrants to issue for purchase of common stock	8,000,000.0
Percentage of shares exercised	9.99%
Stock issued during period, warrants exercised	49,790,800,000
Par value	$ 0.0001
Warrants issued price per share	$ 3.00
Offering expenses paid or payable	$ 100,000,000
Proceeds from issuance of common stock	$ 90,000
Series A warrants. | Offering [Member].
Equity offering description		warrants to purchase one share of common stock
Stock issued during period, warrants exercised			800
Warrants issued price per share		$ 25.00
Common stock issued (in shares)		480,052
Series A warrants. | Overallotment Option [Member]
Common stock issued (in shares)		72,000
Series A warrants. | Overallotment Option [Member] | Maximum [Member]
Common stock issued (in shares)		72,000
Series B warrants.
Stock issued during period, warrants exercised	7,203
Warrants issued price per share	$ 3.00
Offering expenses paid or payable	$ 100,000,000
Proceeds from issuance of common stock	$ 710,000
Series B warrants. | Offering [Member].
Equity offering description		warrants to purchase one share of common stock
Warrants issued price per share		$ 25.00
Common stock issued (in shares)		480,052
Series B warrants. | Overallotment Option [Member]
Common stock issued (in shares)		72,000
Series B warrants. | Overallotment Option [Member] | Maximum [Member]
Common stock issued (in shares)		72,000
Common Stocks | At The Market Offerings.
Warrants issued price per share	$ 4.00
Common stock issued (in shares)	331,608
Net proceeds	$ 1,100,000
Pre-funded Warrants. | Offering [Member].
Equity offering description		warrants to purchase one share of common stock
Stock issued during period, warrants exercised				289,352
Warrants issued price per share		$ 0.005
Common stock issued (in shares)		289,352
Series A and Series B Warrants. | Offering [Member].
Valuation of warrants		$ 11,600,000
Series A warrants and Series B warrants. | Offering [Member].
Stock issued during period, warrants exercised				500
Series F and Series G Warrants. | Private Placement [Member].
Valuation of warrants	5,500,000
Warrant Repricing
Expected term (In Years)					4 years 7 months 6 days
Risk-free interest rate					2.87%
Expected Volatility					98.90%
Valuation of warrants					$ 400,000
Fee withheld	$ 200,000
Stock issued during period, warrants exercised	33,160,800,000
Warrants issued price per share	$ 4.00
Proceeds from issuance of common stock	$ 1,300,000

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Preferred Stock (Details Narrative) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Jan. 09, 2023	Mar. 31, 2023	Mar. 21, 2023	Dec. 31, 2022
Common stock share issued		5,267,092		2,160,950
Series X convertible preferred stock [Member]
Convertible promissory notes, representing an aggregate principal		$ 25.2
Converted preferred stock		14,649
Common stock share issued			1,974,905
Conversion of preferred stock			1,974
Common stock share outstanding description		The remaining 12,674.687 shares of Series X Preferred Stock are expected to remain outstanding until at least July 9, 2024, and will convert thereafter up to 12,674,687 shares of common stock
Series A convertible preferred stock [Member]
Converted preferred stock		7,203,000,000
Share aggregate purchase price	$ 8.0
convertible preferred stock par value	$ 0.0001
Description of private investment in public equity	PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion
Series A convertible preferred stock [Member] | Securities Purchase AgreeMent [Member] | Private Placement [Member].
Proceeds from issuance of private placement	$ 0.9
Stock Issued During Period Shares New Issues	497,908,000,000
Series A convertible preferred stock [Member] | Securities Purchase AgreeMent Class B [Member] | Private Placement [Member].
Proceeds from issuance of private placement	$ 7.1
Stock Issued During Period Shares New Issues	4,501,060,000,000

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Stock-Based Compensation (Details)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Beginning balance | $ / shares	$ 11,405
Ending balance | $ / shares	$ 26
Beginning balance | shares	990
Ending balance | shares	452,908
Stock Options [Member]
Options assumed in Catheter Merger | shares	753,699
Stock options exercised | shares	301,746
Stock options canceled/forfeited | shares	(35)
Stock option vested and expected to vest at the end of the period | shares	452,908
Stock option exercisable at the end of the period | shares	452,824
Weighted Average Exercise Price vested and expected to vest at the end of the period | $ / shares	$ 26
Weighted Average Exercise Price exercisable at the end of the period | $ / shares	$ 26
Exercisable at the end of the period	3 years 4 months 24 days
Vested and expected to vest at the end of the period	3 years 4 months 24 days
Weighted Average Remaining Life (in years), ending balance	3 years 4 months 24 days
WeightedAverageExercisePrice [Member]
Options assumed in Catheter Merger per share | $ / shares	$ 1
Options exercised per share | $ / shares	1
Canceled forfeited number of share | $ / shares	$ 1,525

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Stock-Based Compensation (Details 1)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
StockBased Compensation
Beginning balance | shares	61
Canceled/forfeited | shares	(9)
Vested RSU | shares	(26)
Ending balance | shares	26
Beginning balance | $ / shares	$ 450.46
Vested | $ / shares	333.00
Canceled/forfeited RSU | $ / shares	1,129.10
Ending balance | $ / shares	$ 1,912.56

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Stock-Based Compensation (Details 2)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Vested RSU | shares	26
Ending balance | shares	26
Beginning balance | $ / shares	$ 450.46
Beginning balance | shares	61
Canceled/forfeited | $ / shares	$ 1,129.10
Vested | $ / shares	333.00
Ending balance | $ / shares	$ 1,912.56
Restricted Stock Awards
Vested RSU | shares	0
Canceled/forfeited RSU | shares	(392)
Ending balance | shares	556
Beginning balance | $ / shares	$ 248.48
Beginning balance | shares	948
Canceled/forfeited | $ / shares	$ 177.90
Ending balance | $ / shares	$ 298.23

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Stock-Based Compensation (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based compensation in operating expenses	$ 1,394	$ 162
Selling, General And Administrative [Member]
Stock-based compensation in operating expenses	1,394	113
Research And Development [Member]
Stock-based compensation in operating expenses	$ 0	$ 49

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Stock-Based Compensation (Details 4) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Stock Options [Member]
Unrecognized Expense	$ 62
Restricted Stock Awards
Remaining Weighted Average Recognition Period	7 months 6 days
Unrecognized Expense	$ 96
Restricted Stock Units (RSUs) [Member]
Remaining Weighted Average Recognition Period	9 months 18 days
Unrecognized Expense	$ 7

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StockBased Compensation (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		52 Months Ended
	Sep. 30, 2018	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Mar. 31, 2020
Stock-based compensation		$ 1,394,000	$ 165,000
Common stock reserve for issuance		11,148,858
Stock Options Assumed in Merger [Member]
Estimated fair value		$ 3,085,000
Stock-based compensation		1,374,000
Common stock outstanding		$ 25,215,000
Convertible promissory notes		14,649
Options to purchase		753,699
Two thousand eighteen equity stock purchase plan.
Cash received from the exercise of purchase rights		$ 0	100,000
Shares issued under employee stock purchase plan				950
Percentage of fair market value of share of common stock to purchase	85.00%
Eligible employees withhold percentage of earnings to purchase shares of common stock	15.00%
Maximum annual increase of outstanding stock reserved for future issuance, Percentage	1.25%
Common stock reserve for issuance	237
2018 Stock Compensation Plan.
Number of shares available for grant under the plan		1,305
Maximum annual increase of outstanding stock reserved for future issuance, Percentage		5.00%
Common stock reserve for issuance		9,041		8,552
Two thousand twenty stock option plan.
Stock-based compensation		$ 0	$ 3,000
Common stock reserve for issuance		181			640

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Taxes
Reported income tax expense rate	0.00%	(0.10%)

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Income Taxes (Details narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Description of research and development amounts amortized	research and development in the U.S., the amounts will be amortized over 5 years, and expenses that are incurred for research and experimentation outside the U.S. will be amortized over 15 years.
Domestic Country [Member]
Operating Loss Carryforwards		$ 47,800,000
State And Local Jurisdiction [Member]
Operating Loss Carryforwards		54,500,000
Internal revenue code.
Operating Loss Carryforwards		47,800,000
Internal revenue code. | Domestic Country [Member]
Operating Loss Carryforwards		54,500,000
Operating Loss Carryforwards Valuation Allowance		0
Internal revenue code. | State And Local Jurisdiction [Member]
Operating Loss Carryforwards		40,800,000
Operating Loss Carryforwards Valuation Allowance		$ 6,900,000

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Commitments and Contingencies (Details Narrative) - USD ($)		1 Months Ended
	Dec. 28, 2020	Feb. 28, 2023	Mar. 31, 2023	Dec. 31, 2022
Accrued legal fees			$ 177,000	$ 5,195,000
Securities class action.
Litigation settlement amount	$ 60,000
Settlement provided for a payment to plaintiff class	1,000,000.0
Settlement agreement.
Accrued legal fees				$ 5,000,000.0
Settlement claim	56,000,000
Business acquisition change In control payments	28,000,000
Business acquisition, transaction costs	$ 100,000,000
Business acquisition additional settlement percentage	4.00%
Business acquisition, settlement amount	$ 5,000,000.0
Settlement year four	2024
Settlement amount , year 2024	$ 1,250,000
Settlement year three	2023
Settlement amount , year 2023	$ 1,000,000
Settlement year two	2022
Settlement amount , year 2022	$ 750,000
Settlement year one	2021
Settlement amount , year 2021	$ 500,000
Settlement agreement. | Department Of Justice.
Litigation settlement amount		$ 4,700,000
Settlement agreement. | Participating states.
Litigation settlement amount		$ 300,000
Settlement agreement. | Maximum [Member]
Revenue	$ 10,000,000

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Employee Benefit Plan (Details Narrative) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Defined benefit contribution plan expense	$ 0.0	$ 0.2
Defined contribution plan, description	all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100% of each employee’s contribution up to 3% and 50% of contributions between 3% and 5%, with the match-eligible contribution limited to 4% of the employee’s eligible compensation
First Contribution [Member]
Maximum contribution per employee (percentage)	3.00%
Employer matching contribution, maximum (percentage)	100.00%
Second Contribution [Member]
Employer matching contribution, maximum (percentage)	50.00%
Second Contribution [Member] | Minimum [Member]
Maximum contribution per employee (percentage)	3.00%
Second Contribution [Member] | Maximum [Member]
Maximum contribution per employee (percentage)	5.00%
Third Contribution [Member]
Maximum contribution per employee (percentage)	4.00%

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Subsequent Events (Details narrative) - USD ($)	1 Months Ended	3 Months Ended
	Mar. 19, 2023	Mar. 31, 2023
Accrued severance		$ 1,750,000
Payment of severance		$ 1,750,000
Lease Agreement [Member]
Lease term	36 years
Rent expense	$ 3,203