We urge you to read carefully this prospectus, together with the information incorporated herein by reference as described under the heading “Where You Can Find Additional Information,” before buying any of the securities being offered.
You should rely only on the information contained or incorporated by reference in this prospectus. We and the selling stockholders have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus may only be used where it is legal to offer and sell shares of our common stock. If it is against the law in any jurisdiction to make an offer to sell these shares, or to solicit an offer from someone to buy these shares, then this prospectus does not apply to any person in that jurisdiction, and no offer or solicitation is made by this prospectus to any such person. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Our business, financial condition, results of operations and prospects may have changed since such date. Information contained on our website is not a part of this prospectus.
A prospectus supplement may add to, update or change the information contained in this prospectus. You should read both this prospectus and any applicable prospectus supplement together with additional information described below under the heading “Where You Can Find Additional Information.”
This prospectus contains references to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
PROSPECTUS SUMMARY
This summary highlights important features of this offering and the information contained elsewhere in or incorporated by reference into this prospectus. Because this is only a summary, it does not contain all of the information that you should consider before investing in our securities. You should carefully read this entire prospectus and any applicable prospectus supplement, including the information contained under the heading “Risk Factors,” and all other information included or incorporated by reference into this prospectus and any applicable prospectus supplement in their entirety before you invest in our securities.
Unless otherwise stated, all references in this prospectus to “we,” “us,” “our,” the “Company” and similar designations refer to Ra Medical Systems, Inc.
Company Overview
Ra Medical Systems, Inc. (the “Company”) is a medical device company that owns intellectual property related to an advanced excimer laser-based platform for use in the treatment of vascular immune-mediated inflammatory diseases. Its excimer laser and single-use catheter system, together referred to as the DABRA Excimer Laser System, or DABRA, is used as a tool in the treatment of peripheral artery disease. The Company was formed on September 4, 2002 in the state of California and reincorporated in Delaware on July 14, 2018.
DABRA is used as a tool in the treatment of peripheral artery disease, or PAD, which commonly occurs in the legs. DABRA is cleared by the U.S. Food and Drug Administration, or FDA, as a device for crossing chronic total occlusions in patients with symptomatic infrainguinal lower extremity vascular disease and with an intended use for ablating a channel in occlusive peripheral vascular disease. DABRA was also granted CE mark approval in Europe in September 2016 for the endovascular treatment of infrainguinal arteries via atherectomy and for crossing total occlusions.
Our business strategy has been focused on improving our catheter offering and exploring new markets, as well as conducting a clinical study to obtain an atherectomy “indication for use” in the United States.
Strategic Review
We previously disclosed that our board of directors was reviewing strategic alternatives with the goal of maximizing shareholder value. This review was triggered by the deteriorating macroeconomic environment and concerns regarding our ability to continue funding our clinical and engineering programs at levels consistent with the past few years. In conjunction with this review, on June 3, 2022, the board of directors approved a reduction in force, or RIF, under which approximately 65% of our full-time employees were terminated, effective June 6, 2022, and provided one-time severance payments of $0.6 million. Non-terminated employees were offered conditional retention arrangements for a period of approximately 60-120 days to allow for evaluation and monitoring of our near-term personnel needs based in part on our financial status and the board of directors’ review of strategic alternatives. The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to us during the board of directors’ review of strategic alternatives. Since June 3, 2022, additional employees have been terminated. As of September 13, 2022, nine full-time employees remained at the Company.
As a result of the RIF and the board of directors’ review of strategic alternatives, we have paused all engineering activities, including the development of a version of the DABRA catheter that is compatible with a standard interventional guidewire as well as 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, we 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. We currently have no plans to commercialize the DABRA 2.0 catheter.
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As stated, we are currently pursuing an atherectomy indication for use, which the FDA defines to include a prespecified improvement in luminal patency. We 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 January 2022, primarily due to subject fallout for follow-up visits due to COVID-19, we filed a protocol amendment with the FDA to add up to an additional 25 subjects to the study. The protocol amendment was approved by the FDA in February 2022, raising the enrollment limit from a maximum of 100 subjects to 125 subjects.
We enrolled the first subject in the atherectomy clinical study in February 2020. Throughout much of 2021 and 2020, the COVID-19 pandemic substantially impacted our ability to activate new sites and enroll additional subjects. Many sites or potential sites have been or are currently operating at a reduced capacity, and some have been closed from time to time.
On June 6, 2022, we made the decision to stop enrollment at 108 subjects in the atherectomy clinical study, and we believe we have enough subjects to eventually satisfy the FDA’s data requirements to support an atherectomy indication. Although the COVID-19 pandemic has had and will continue to have an unpredictable impact on subject follow-up in this study, we currently aim to complete the six-month follow-up in early 2023.
As a result of discontinuing enrollment in the clinical study, the previously discussed employee terminations and the board of directors’ ongoing review of strategic alternatives, we have ceased manufacturing activities and are no longer supplying catheters to any sites.
Merger with Catheter Precision, Inc. (“Catheter”)
On September 9, 2022, we and Catheter, a privately-held Delaware corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Catheter, Rapid Merger Sub 1, Inc., a newly-created wholly-owned subsidiary of the Company (“First Merger Sub”), and Rapid Merger Sub 2, LLC, a newly-created wholly owned subsidiary of the Company (“Second Merger Sub” and together with First Merger Sub, the “Merger Subs”), pursuant to which, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, the First Merger Sub will merge with and into Catheter, with Catheter being the surviving corporation (the “First Merger Surviving Company”) and a wholly-owned subsidiary of the Company (the “First Effective Time”), and then, immediately following the First Effective Time, and as part of the same overall transaction, the First Merger Surviving Company will merge with and into the Second Merger Sub (the “Second Effective Time”), with the Second Merger Sub being the surviving limited liability company (the “Second Merger Surviving Company”) (such transactions collectively, the “Merger”, with the Company following the Merger being referred to herein as the “Post-Merger Combined Company”). The Boards of Directors of the Company and Catheter have both approved the Merger.
Catheter has three product areas that it intends to pursue. Its lead product, named VIVO™ (an acronym for View Into Ventricular Onset) is an FDA-cleared and CE Mark product that utilizes non-invasive inputs to locate the origin of ventricular arrhythmias, and, through its use, the physician can identify patients for invasive catheter ablation, and with those patients, reduce the amount of time in the invasive procedure. Ventricular arrhythmias include ventricular tachyarrhythmias and premature ventricular arrhythmias, diseases which affect millions of patients that are not well treated today. While much past growth in the electrophysiology market has been for atrial fibrillation, Catheter believes that ventricular arrhythmias represent a large growth area moving forward. It also intends to pursue a second generation of Amigo®, a robotic arm previously cleared by both FDA and CE, which serves as a catheter control device that can be remotely controlled outside of the procedure room. Catheter has demonstrated that patient outcomes could potentially be enhanced by utilization of this device. Catheter is working toward a third product release in the first half of 2023, which is a vessel closure device that would assist in the closure of the insertion site of the percutaneous catheter or other device used within the body. It is estimated that the worldwide market for this closure assist device is over one million procedures per year.
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Immediately upon the First Effective Time, each share of Catheter Common Stock issued and outstanding immediately prior to the First Effective Time (subject to certain exclusions set forth in the Merger Agreement) will be converted into and represent the right to receive, a number of shares of the Company’s Common Stock, par value $0.0001 per share (the “Company Common Stock”), equal to the Exchange Ratio (as defined in the Merger Agreement), following the conversion of certain Catheter indebtedness (consisting of certain convertible promissory notes (the “Catheter Notes”) representing an aggregate principal amount of $25,465,000) pursuant to the Debt Settlement Agreements (as defined in the Merger Agreement) into shares of Company Common Stock, at a conversion price equal to seventy five percent (75%) of the lower of the following: (x) the last closing sale price per share for the Company’s Common Stock prior to 4:00 p.m. (New York City time) on the last Trading Day (as defined in the Merger Agreement) prior to the Closing Date (as defined in the Merger Agreement), as reported by Bloomberg (as defined in the Merger Agreement); or (y) the average of the last closing sale price per share for the Company’s Common Stock prior to 4:00 p.m. (New York City time) on each of the five (5) consecutive full Trading Days ending on the last Trading Day immediately prior to such Closing Date, and the assumption of Catheter Options (as defined below). Because the conversion price of the Catheter Notes depends upon future stock prices for the Company’s common stock, and because the merger consideration will be used to pay down the Catheter Notes prior to any distribution to Catheter equityholders, the amount of merger consideration that will become payable to Catheter stockholders, if any, is not yet known. In exchange for the forgiveness of the interest accrued but remaining unpaid under the Catheter Notes, under the terms of the Debt Settlement Agreements the holders of Catheter Notes would also be entitled to receive certain royalty rights which would equal, in aggregate 12% per year on Net Sales, if any, of Catheter’s vessel closure device, which is currently under development by Catheter. For further information regarding the Debt Settlement Agreements, see Catheter’s Management’s Discussion and Analysis filed as Exhibit 99.3 to our Current Report on Form 8-K filed with the SEC on September 12, 2022. Entry into the Debt Settlement Agreements is a condition to the Merger.
As a result of the Merger, (i) Catheter would merge into Second Merger Sub and become a wholly-owned subsidiary of the Company; (ii) upon Closing of the Merger, (A) stakeholders in Catheter immediately prior to the Merger, including Catheter stockholders, the Noteholders and Option holders, would, immediately following Closing, own approximately 79.37% of the economic value of the Post-Merger Combined Company, subject to downwards adjustment as provided in the Merger Agreement to the extent that, and by the amount in which, the Company delivers Net Cash (as defined in the Merger Agreement) greater than $8,000,000; and (B) the Company’s stockholders (together with the holders of any convertible instruments including options and warrants that may be in the money at the time of Closing) immediately prior to the Merger would own approximately 20.63% of the Post-Merger Combined Company as of such time, subject to upwards adjustment as provided in the Merger Agreement to the extent that, and by the amount in which, the Company delivers Net Cash (as defined in the Merger Agreement) greater than $8,000,000; and (iii) the Second Merger Sub, to be renamed Catheter Precision, LLC and which will be wholly-owned by the Post-Merger Combined Company will assume all of Catheter’s assets and liabilities and be the operating entity focused on the current business of Catheter going forward. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. The Merger will be treated by the Company as a reverse merger under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States. For accounting purposes, Catheter is considered to be acquiring the Company in this transaction, and its historical financial statements will be those of the Post-Merger Combined Company following the Merger.
In connection with the Merger, the Company would assume all outstanding options to purchase Catheter Common Stock (“Catheter Options”) whereby immediately prior to the First Effective Time, Catheter Options would cease to represent a right to acquire shares of Catheter Common Stock and would be assumed and converted, at the First Effective Time, into an option to purchase shares of Company Common Stock (such options once assumed and converted, the “Assumed Options”). Certain indebtedness of Catheter that is not converted into shares of Company Common Stock as a result of the Merger will instead be assumed by the Company in connection with the Merger (the “Additional Debt”), as described in Catheter’s Management’s Discussion and Analysis filed as Exhibit 99.3 to our Current Report on Form 8-K filed with the SEC on September 12, 2022.
The Merger Agreement provides that the Board of Directors of the Post-Merger Combined Company will consist of David Jenkins and four other directors. Immediately following, and contingent upon the Merger, David Jenkins will
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join the Company as Executive Chairman and Chief Executive Officer. Messrs. Jonathan Will McGuire, the current CEO, and Brian Conn, the current interim CFO, have agreed to remain with the Company through the closing of the Merger. It is a closing condition that Mr. Jenkins will become Executive Chair and receive a compensation package to be negotiated, which will include a base salary of $300,000. Mr. Jenkins’ appointment to the Board of Directors and his role as Executive Chairman and Chief Executive Officer, together with his compensation package, are subject to approval by the Compensation Committee of the Board of Directors and the Nominating and Corporate Governance Committee of the Board of Directors.
The closing of the Merger is subject to satisfaction or waiver of certain conditions including, among others, (a) Catheter shall have delivered the PPM/Joint Information Statement (as defined in the Merger Agreement) to any Catheter securityholders anticipated to receive shares of Company Common Stock pursuant to the Merger or who are entitled to receive notice that the Catheter stockholders have acted by written consent in lieu of a meeting to approve the Merger and the transactions contemplated by the Merger Agreement, if and when such approval is obtained, and informing all Catheter stockholders that any stockholder who has not approved the Merger is entitled to appraisal rights pursuant to Section 262(d)(2) of the Delaware General Corporate Law, (b) no law or order preventing the closing of the Merger and the related transactions, (c) the HHS Confirmation (as defined in the Merger Agreement) shall continue to be in effect and certain requirements regarding outstanding litigation shall be satisfied, (d) the Company furnishing Net Cash greater than $8,000,000, (e) the entry into the Executive Chairman Agreement (as defined in the Merger Agreement) pursuant to which David Jenkins shall be appointed to the Board of Directors of the Company and shall be paid an annual salary of $300,000, (f) the last closing sale price of the Company’s Common Stock prior to 4:00 p.m. (New York City time) on the last Trading Day (as defined in the Merger Agreement) prior to the Closing is equal to or greater than $0.09, and the average of the last closing sale price of the Company’s Common Stock prior to 4:00 p.m. (New York City time) on each of the five (5) consecutive full Trading Days prior to the Closing is equal to or greater than $0.09, in each case as adjusted for the Reverse Stock Split (as defined in the Merger Agreement), (g) other than the letter dated August 31, 2022 from the NYSE American LLC, the Company shall not have received correspondence from the NYSE American or the staff thereof relating to the delisting, or maintenance of listing, of the Company’s Common Stock on the NYSE American, and Catheter shall have received assurance in form and substance satisfactory to Catheter that the transactions contemplated by the Merger Agreement will not cause the Company to be delisted from the NYSE American, (h) Catheter shall have entered into a Debt Settlement Agreement with each of the holders of Catheter Notes, (i) lock-up agreements have been entered into by and among the Company, Catheter, and certain persons who are directors, officers and/or significant stockholders of either Parent or the Company, (j) the Company shall have sublet or terminated the lease with respect to its corporate headquarters and manufacturing facility, (k) Catheter and the Company shall have received the approval from their respective stockholders necessary to approve the Merger and the transactions contemplated by the Merger Agreement, (l) that the Company has entered into release agreements with certain of its officers and employees relating to existing change of control and severance agreements, and (m) each of the representations and warranties of the Company and Catheter set forth in the Merger Agreement shall have been true as of the date of the Merger Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date), in each case, except where the failure to be true and correct, individually or in the aggregate, has not had, and is not reasonably likely to have a Parent Material Adverse Effect (as defined in the Merger Agreement) with respect to Parent, or a Material Adverse Effect (as defined in the Merger Agreement) with respect to Catheter.
The Merger Agreement contains certain customary termination rights, including, (a) the right of the parties to terminate the Merger Agreement by mutual written consent, (b) the right of either party to terminate the Merger Agreement if the Merger has not occurred by December 31, 2022, (c) the right of either party to terminate the Merger Agreement due to a material breach by the other party of any of its representations, warranties or covenants which would result in the closing conditions not being satisfied, subject to certain conditions, (d) the right of Catheter to terminate the Merger Agreement if any of the closing conditions are not capable of being satisfied, and (e) the right of either party to terminate the Merger Agreement if a court of competent jurisdiction or other governmental body issues a final and non-appealable order, decree or ruling, or has taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger and related transactions.
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Pursuant to the terms of the Merger Agreement, the Company is obligated to take any and all additional action necessary under applicable law to call, give notice of and hold a meeting of its stockholders, using commercially reasonable efforts to hold such stockholder meeting within sixty (60) days of the date of the Merger Agreement, to consider and vote to approve, among other matters, (a) the Merger, and (b) the issuance of the shares of Company Common Stock pursuant to the terms of the Merger Agreement (collectively, the “Parent Stockholder Matters”). In connection with the Merger, the Company intends to file a proxy statement with the Securities and Exchange Commission (“SEC”), with respect to the Parent Stockholder Matters (the “Proxy Statement”).
The Company is also obligated to use commercially reasonable efforts to file a registration statement covering the resale of the shares of the Company Common Stock issuable pursuant to the Merger Agreements no later than sixty (60) days following the Closing Date and cause the registration statement to become effective no later than ninety (90) days after the filing of such registration statement. Furthermore, the Company is obligated to file a registration statement on Form S-8 (or any successor form, or if Form S-8 is not available, other appropriate forms) with respect to the shares of the Company’s Common Stock subject to the Assumed Options and shall use its reasonable best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as the Assumed Options remain outstanding and are required to be registered. The Company is also obligated to use reasonable efforts to raise sufficient funds to enable it to satisfy the requirement that it provide Net Cash greater than $8,000,000 at Closing.
The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to our Current Report on Form 8‑K filed with the SEC on September 12, 2022.
Warrant Repricing
On July 22, 2022, we reduced the exercise price of all outstanding warrants, consisting of Series A and Series B warrants that were issued in the February 2022 public offering, from $0.50 per share to $0.28 per share, or the Warrant Repricing. Following the Warrant Repricing, we entered into warrant inducement offer letters, or the Inducement Letters, with certain investors to immediately exercise all of the Series A and Series B warrants held by such investors. In response to the Inducement Letters, investors exercised approximately 22.2 million Series A warrants and no Series B warrants. Investors who exercised their Series A warrants received Series C warrants to purchase 100% of the shares exercised pursuant to the Series A warrants with an exercise price of $0.28 per share and a term of five years. We received net proceeds of approximately $5.5 million, after issuance costs of $0.7 million, from the exercises of the Series A warrants. The Series C warrants and the shares underlying the Series C warrants are unregistered and were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act.
The Warrant Repricing resulted in an immediate and incremental increase of approximately $2.3 million in the estimated fair value of the Series A warrants and Series B warrants. Based on the Black-Scholes valuation model, we estimated the fair value of the Series C warrants issued to be approximately $2.3 million.
For more detailed information regarding the warrant repricing and associated costs and fees, see our Form 10-Q filed on August 15, 2022.
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Company Information
Our principal executive offices are located at 2070 Las Palmas Drive, Carlsbad, California 92011 and our telephone number is (760) 804-1648 or (877) 635-1800 toll-free. Our corporate website address is www.ramed.com. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and is not considered part of, this filing. You should not rely on any such information in making your decision whether to purchase our common stock. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.