PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's Q3 2020 financial statements reflect significant revenue decline, continued net losses, and increased cash from financing, with substantial doubt about its going concern status [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) As of September 30, 2020, cash significantly increased to **$33.6 million** due to financing, while total assets slightly decreased and accumulated deficit grew to **$142.8 million** Condensed Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $33,646 | $14,584 | | Total current assets | $37,179 | $36,000 | | TOTAL ASSETS | $43,454 | $44,081 | | **Liabilities & Equity** | | | | Total current liabilities | $8,039 | $6,814 | | Total liabilities | $12,916 | $10,931 | | Accumulated deficit | ($142,758) | ($117,157) | | Total stockholders' equity | $30,538 | $33,150 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $43,454 | $44,081 | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) Q3 2020 net revenue decreased **52%** to **$0.9 million** due to lower product sales, resulting in a **$7.8 million** net loss despite reduced operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $914 | $1,908 | $3,188 | $5,809 | | Gross loss | ($504) | ($517) | ($981) | ($1,291) | | Selling, general and administrative | $4,933 | $15,889 | $19,114 | $42,907 | | Research and development | $2,332 | $1,182 | $5,580 | $3,692 | | Operating loss | ($7,769) | ($17,588) | ($25,675) | ($47,890) | | Net loss | ($7,779) | ($17,418) | ($25,601) | ($47,214) | | Basic and diluted net loss per share | ($0.13) | ($1.30) | ($0.79) | ($3.63) | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, net cash used in operations improved, while **$22.0 million** from financing activities led to a **$19.1 million** net increase in cash Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,890) | ($23,601) | | Net cash provided by (used in) investing activities | $15,928 | ($25,984) | | Net cash provided by (used in) financing activities | $22,024 | ($218) | | **Net change in cash and cash equivalents** | **$19,062** | **($49,803)** | [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes highlight substantial doubt about going concern, COVID-19 impact, **$19.1 million** raised from public offerings, and ongoing SEC/DOJ investigations with a **$2.7 million** accrual - The company's ability to continue as a going concern is in **substantial doubt** due to recurring net losses, negative cash flows, and ongoing COVID-19 uncertainty[25](index=25&type=chunk)[29](index=29&type=chunk) - The COVID-19 pandemic is expected to continue adversely impacting revenue and delaying enrollment in the company's atherectomy clinical trial[23](index=23&type=chunk)[27](index=27&type=chunk) - The company is subject to active investigations by the **SEC** and **DOJ** regarding potential violations, with a **$2.7 million** accrual for the DOJ False Claims Act investigation[84](index=84&type=chunk)[85](index=85&type=chunk) - In May and August 2020, the company completed public offerings, raising aggregate net proceeds of approximately **$19.1 million**[69](index=69&type=chunk)[72](index=72&type=chunk) - In May 2020, the company received a **$2.0 million** loan under the Paycheck Protection Program (PPP), potentially forgivable if used for eligible purposes[59](index=59&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses DABRA catheter improvements, COVID-19 clinical trial delays, Q3 2020 revenue decline, reduced operating expenses, bolstered liquidity, and ongoing going concern doubts [Overview and Recent Developments](index=20&type=section&id=Overview%20and%20Recent%20Developments) Ra Medical focuses on improving DABRA catheter and advancing its atherectomy clinical trial, which faces COVID-19 delays, while commercial shipments are paused until Q1 2021 - The company's vascular strategy focuses on engineering efforts to improve the **DABRA catheter's shelf life, robustness, and guidewire compatibility**[106](index=106&type=chunk)[112](index=112&type=chunk) - The company is conducting a pivotal IDE clinical study for an atherectomy indication, but enrollment is substantially delayed by the **COVID-19 pandemic**[107](index=107&type=chunk)[108](index=108&type=chunk) - Commercial shipments of DABRA catheters are paused due to shelf-life stability issues, with resolution and FDA approval expected in **Q1 2021**[109](index=109&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q3 2020 net revenue decreased **52%** to **$0.9 million** across both segments, while SG&A expenses significantly declined, and R&D expenses increased, leading to improved Adjusted EBITDA Net Revenue by Segment (in thousands) | Segment | Q3 2020 | Q3 2019 | Change $ | | :--- | :--- | :--- | :--- | | Vascular | $68 | $226 | ($158) | | Dermatology | $846 | $1,682 | ($836) | | **Total net revenue** | **$914** | **$1,908** | **($994)** | - SG&A expenses for Q3 2020 decreased by **$11.0 million** year-over-year, primarily due to lower stock-based compensation, legal expenses, and personnel costs[139](index=139&type=chunk) - R&D expenses for Q3 2020 increased by **$1.1 million** year-over-year, driven by higher personnel, consulting, and supply costs for catheter improvement initiatives[141](index=141&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net loss | ($7,779) | ($17,418) | | Depreciation and amortization | 631 | 460 | | Interest income | (4) | (245) | | Interest expense | 14 | 72 | | Income tax expense | — | 3 | | Stock-based compensation | 964 | 7,277 | | **Adjusted EBITDA** | **($6,174)** | **($9,851)** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, the company had **$33.6 million** in cash, bolstered by **$19.1 million** from offerings and a **$2.0 million** PPP loan, but substantial doubt about going concern persists - As of September 30, 2020, the company had cash and cash equivalents of **$33.6 million** and an accumulated deficit of **$142.8 million**[150](index=150&type=chunk) - The company raised net proceeds of **$19.1 million** from public offerings in 2020 and received a **$2.0 million** PPP loan[150](index=150&type=chunk)[151](index=151&type=chunk) - Cost-saving initiatives included reducing the DABRA sales force from **34 employees** to **five clinical specialists**[152](index=152&type=chunk) - Management concluded that **substantial doubt** exists about the company's ability to continue as a going concern within 12 months from the financial statements' issuance[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports minimal material exposure to market risks, including interest rate and foreign currency exchange risks, due to its short-term cash and U.S. dollar denominated revenues - The company believes it has no material exposure to changes in fair value from interest rate changes due to the **short-term nature of its cash and cash equivalents**[170](index=170&type=chunk) - Foreign currency exchange risk is not considered material as revenues are denominated in **U.S. dollars** and international operations are limited[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes in internal control over financial reporting - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were **effective** at the reasonable assurance level[175](index=175&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2020[176](index=176&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company faces significant legal challenges, including a securities class action lawsuit and multiple ongoing government investigations by the SEC and DOJ, with a **$2.7 million** accrual - The company is defending against a **securities class action lawsuit** alleging material misstatements in its IPO registration statement and disclosures[179](index=179&type=chunk) - The company is subject to an **SEC investigation** and separate **civil and criminal investigations by the DOJ**[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - The DOJ's civil investigation concerns potential **False Claims Act violations**, with a **$2.7 million** accrual for this matter[184](index=184&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company faces high risks including substantial doubt about going concern, DABRA product issues, intense competition, regulatory compliance, ongoing government investigations, and potential NYSE delisting - There is **substantial doubt** about the company's ability to continue as a going concern, requiring additional financing[196](index=196&type=chunk) - The company's success is highly dependent on the **DABRA catheter**, which faces unresolved performance, shelf life, and calibration issues leading to paused commercial sales[198](index=198&type=chunk)[199](index=199&type=chunk) - The company is subject to active and ongoing **government investigations (DOJ, SEC)** and litigation that may adversely affect its business[219](index=219&type=chunk)[220](index=220&type=chunk) - The company must comply with **NYSE's continued listing requirements**, including minimum share price and market capitalization, to avoid delisting[407](index=407&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred; remaining IPO proceeds will fund the atherectomy clinical trial, DABRA catheter improvements, and general corporate purposes - There were **no unregistered sales of equity securities** in the reported period[440](index=440&type=chunk) - The company intends to use remaining IPO proceeds for its **atherectomy clinical trial**, DABRA catheter improvements, and general corporate purposes[443](index=443&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) Jeffrey Kraws, the company's President, provided notice of his resignation effective January 15, 2021 - Jeffrey Kraws, the Company's President, announced his resignation effective **January 15, 2021**[447](index=447&type=chunk)

Financial Data and Key Metrics Changes - Net revenue for Q3 2020 was $0.9 million, down from $1.9 million in Q3 2019, with product sales decreasing from $1.1 million to $0.2 million and service revenue slightly decreasing from $0.8 million to $0.7 million [22] - Gross loss decreased to $504,000 in Q3 2020 from $517,000 in Q3 2019 [23] - GAAP net loss for Q3 2020 was $7.8 million or $0.13 per share, compared to a net loss of $17.4 million or $1.30 per share in the prior year [25] - Adjusted EBITDA improved to negative $6.2 million in Q3 2020 from negative $9.9 million in Q3 2019 [26] Business Line Data and Key Metrics Changes - Revenue from the vascular segment was $0.1 million in Q3 2020, down from $0.2 million in the prior year [22] - Dermatology segment revenue was $0.8 million in Q3 2020, down from $1.7 million in the prior year, but showed a 20% growth in product revenue compared to Q2 2020 [20][23] Market Data and Key Metrics Changes - The dermatology business has seen a recovery with many offices reopening, achieving 70% to 90% of pre-COVID procedure volumes [48] - The company has experienced increased activity in clinical sites, enrolling an additional 12 subjects for a total of 13 subjects in the atherectomy indication clinical trial [18] Company Strategy and Development Direction - The company is focused on quality improvements and has completed 115 out of 116 items in its quality improvement plan [9] - Engineering efforts are aimed at extending the shelf life of future catheters and developing next-generation products, including a guidewire-compatible catheter [12][15] - The company is navigating the challenges posed by COVID-19 while continuing to invest in strategic initiatives and reducing spending where necessary [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made in engineering and clinical trials despite the challenges posed by the COVID-19 pandemic [29] - The company is committed to its mission of saving lives and limbs while operating in large and growing markets [29] Other Important Information - The company has reduced its DABRA sales force significantly from 34 employees to 5 due to the pandemic's impact [21] - The manufacturing facility has remained operational throughout the pandemic, with minor delays in receiving parts but no material impact on key engineering efforts [27] Q&A Session Summary Question: Shelf life issue with the catheter - Management is focused on two identified issues affecting shelf life and believes they have made significant progress in addressing them [32] Question: Next-generation catheter technology - No additional clinical data is needed for the braided over jacket catheter, and regulatory filings will be made without it [35] Question: Timeline for IDE trial and enrollment - The company is hopeful to activate two additional sites within the next 90 days, pending IRB approvals [46] Question: Dermatology business recovery - The dermatology offices are reopening, and the company has seen a 20% increase in product revenue from Q2 to Q3, predominantly in the U.S. [49] Question: Reverse split approval - The board is expected to approve the range for the reverse split shortly [50]

Product & Technology - DABRA is an excimer laser system with disposable catheters for treating peripheral artery disease (PAD) by crossing total chronic occlusions (CTOs) and ablating a channel[7] - DABRA utilizes photoablation to disintegrate plaque in the artery and is designed to track the patient's true lumen[8,19] - PHAROS, using the same laser platform as DABRA, has US FDA 510(k) clearance and Europe CE Mark for treating psoriasis, vitiligo, atopic dermatitis, and leukoderma[8] Clinical & Market - In a pivotal study, DABRA demonstrated 94% effectiveness in successful crossing of target lesions based on angiographic analysis[26] - The company targets a $1.1 billion global annual total addressable market (TAM) with over 17 million PAD sufferers in the US[9,28] - Only 20% to 30% of peripheral artery disease patients are actively being treated[12,28] Financials - For the six months ended June 30, 2020, total net revenue was $2.274 million, including $191 thousand from vascular and $2.083 million from dermatology[53] - For the year ended December 31, 2019, total net revenue was $7.199 million, including $1.275 million from vascular and $5.924 million from dermatology[53] - As of June 30, 2020, the company had $29.380 million in cash and cash equivalents and short-term investments[55]

Financial Data and Key Metrics Changes - Net revenue for Q2 2020 was $0.9 million, down from $2.2 million in Q2 2019, with product sales decreasing from $1.3 million to $0.2 million and service revenue from $0.9 million to $0.7 million [20] - Gross profit margin for Q2 2020 was negative 30%, compared to negative 27% in Q2 2019 [21] - GAAP net loss for Q2 2020 was $10.1 million or $0.43 per share, an improvement from a net loss of $15.1 million or $1.16 per share in the prior year [24] - Adjusted EBITDA for Q2 2020 was negative $8.4 million, compared to negative $7.8 million in the prior year [24] Business Line Data and Key Metrics Changes - Revenue from the vascular segment in Q2 2020 was $0.1 million, down from $0.4 million in the prior year [21] - Revenue from the dermatology segment was $0.8 million in Q2 2020, compared to $1.8 million in the prior year [21] - SG&A expenses for Q2 2020 were $7.9 million, down from $13.8 million in the prior year, including an increase of $2.0 million in accrued costs related to government investigations [22] Market Data and Key Metrics Changes - The COVID-19 pandemic has significantly impacted the ability to activate new clinical trial sites and enroll subjects, with many sites operating at reduced capacity [14][15] - The dermatology business has seen delays in capital equipment purchases, but recurring revenue from service and lease agreements has mitigated some impacts [17] Company Strategy and Development Direction - The company is focused on engineering improvements for the DABRA catheter to enhance its market penetration in the atherectomy market, including extending shelf life and increasing robustness [10][11] - The company is exploring the development of larger diameter catheters for atherectomy procedures in larger vessels [13] - A strategy for the dermatology business is under evaluation, with potential for revenue growth both domestically and internationally [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate the challenges posed by COVID-19 and highlighted successful capital raises during the pandemic [9] - The company is optimistic about the return of procedural volumes in clinical settings and is actively working to support trial sites for the atherectomy study [42] Other Important Information - The company secured a $2 million loan under the Paycheck Protection Program, which may be forgiven if used for specified purposes [19] - Cash and cash equivalents as of June 30, 2020, were reported at $29.4 million, with an additional $10.6 million raised from a public offering shortly thereafter [19] Q&A Session Summary Question: Can you provide more detail on the progress regarding the catheter shelf life issue? - Management identified issues related to the catheter's fluid core and coating, expressing confidence in resolving these by year-end [28][29] Question: What are the components of the increased SG&A expenses? - SG&A expenses included litigation costs and increased spending in quality and R&D, with a cash burn of $12.8 million for the first half of 2020 [30][31] Question: How is the company addressing the atherectomy trial enrollment process during COVID-19? - The company is actively adding sites and has amended the protocol to include more severe patients, while also supporting trial sites with clinical specialists [41][42] Question: What is the timeline for completing enrollment in the atherectomy trial? - Management could not provide a definitive timeline due to the unpredictable impact of COVID-19 but indicated that updates would be available in future calls [45] Question: What is the strategy for the dermatology business as offices reopen? - The company sees opportunities for growth in the dermatology business and is evaluating strategies to capitalize on the rebound in procedures [46][47]

Ra Medical Systems, Inc. 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 June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission file number: 001-38677 (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or orga ...

Financial Data and Key Metrics Changes - Net revenue for Q1 2020 was $1.4 million, down from $1.7 million in Q1 2019, with product sales decreasing from $0.9 million to $0.6 million and service revenue remaining stable at $0.8 million [31] - Gross profit margin for Q1 2020 was negative 15%, compared to a negative margin in Q1 2019 [32] - GAAP net loss for Q1 2020 was $7.7 million or $0.56 per share, an improvement from a net loss of $14.7 million or $1.16 per share in the prior year [34] - Cash, cash equivalents, and short-term investments as of March 31, 2020, were $23.4 million, with a cash burn of $7.0 million for Q1 2020 [35] Business Line Data and Key Metrics Changes - Revenue from the vascular segment for Q1 2020 was $0.1 million, down from $0.5 million in the prior year [31] - Revenue from the dermatology segment remained stable at $1.3 million for both Q1 2020 and Q1 2019 [31] Market Data and Key Metrics Changes - The vascular business has seen a reduction in cases starting in March 2020 due to COVID-19, with a focus on severe cases to prevent amputations [20] - The dermatology business has been significantly impacted by COVID-19, leading to a reduction in laser replacements and sales [21] Company Strategy and Development Direction - The company is focusing on extending the shelf life of DABRA catheters and enhancing product features to penetrate the vascular market [42][70] - A comprehensive quality improvement plan has been initiated to address weaknesses in processes and procedures [23] - The company plans to evaluate the dermatology business opportunity and develop a capital-efficient strategy for growth in the U.S. and select markets [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the significant uncertainty due to COVID-19 and its impact on operations and financial results [5] - The company is optimistic about resuming elective surgeries and believes it will help with patient enrollment in clinical studies [63] - Future revenue and gross margin are expected to be negatively impacted in the short term due to reduced sales force and procedural use of products [36] Other Important Information - The company received a $2 million loan under the Paycheck Protection Program, which may be forgiven if used for eligible expenses [37] - Legal fees have increased significantly due to ongoing investigations, impacting overall expenses [26] Q&A Session Summary Question: What is the focus for the company moving forward? - The primary focus is on the vascular side, particularly on extending the shelf life of catheters and supporting the atherectomy study [42][44] Question: What is the timeline for pushing the vascular business? - Engineering work is expected to be completed and FDA clearance obtained in 2021, with enrollment in the atherectomy study anticipated in the first half of 2021 [48] Question: What are the plans for capital and burn rate? - Cash burn has decreased significantly, and the company plans to raise capital, although the exact timing is uncertain [50] Question: Are there any key positions that need to be filled? - Currently, there are no key positions needed, but there is a focus on improving project management processes [52] Question: How is the company addressing the shelf life issue? - The company is approaching the shelf life issue methodically, with a focus on understanding the root causes and implementing solutions [56][57] Question: What is the strategy for the dermatology business? - The company is evaluating both domestic and international opportunities for growth in the dermatology space [60] Question: What is the status of the atherectomy trial? - The company is optimistic about qualifying additional sites for the trial and has received FDA approval to enroll a broader range of patients [62][64]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Ra Medical Systems reported a reduced net loss of **$7.7 million** in Q1 2020, but faces going concern doubts and legal challenges [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $18,437 | $14,584 | | Short-term investments | $5,003 | $15,993 | | Total current assets | $28,689 | $36,000 | | **Total Assets** | **$36,300** | **$44,081** | | **Liabilities & Equity** | | | | Total current liabilities | $6,022 | $6,814 | | **Total Liabilities** | **$9,826** | **$10,931** | | Accumulated deficit | $(124,858) | $(117,157) | | **Total Stockholders' Equity** | **$26,474** | **$33,150** | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) Condensed Statement of Operations (in thousands, except per share data) | Account | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Total net revenue | $1,374 | $1,748 | | Gross loss | $(210) | $(194) | | Selling, general and administrative | $6,285 | $13,229 | | Research and development | $1,295 | $1,531 | | **Operating loss** | **$(7,790)** | **$(14,954)** | | **Net loss** | **$(7,701)** | **$(14,674)** | | Basic and diluted net loss per share | $(0.56) | $(1.16) | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statement of Cash Flows (in thousands) | Activity | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,043) | $(8,944) | | Net cash provided by (used in) investing activities | $10,972 | $(165) | | Net cash used in financing activities | $(76) | $(77) | | **Net change in cash and cash equivalents** | **$3,853** | **$(9,186)** | | **Cash and cash equivalents, end of period** | **$18,437** | **$55,129** | [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) - The company expects COVID-19 to adversely impact revenue and delay its atherectomy clinical trial enrollment as patients postpone voluntary treatments[27](index=27&type=chunk) - Management has substantial doubt about the company's ability to continue as a going concern for the next 12 months due to recurring net losses, negative cash flows, and a significant accumulated deficit of **$124.9 million** as of March 31, 2020 The company's continuation is dependent on raising additional funding[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The company is subject to a securities class action lawsuit, a shareholder derivative complaint, and investigations by the SEC and the Department of Justice (DOJ) The DOJ investigation includes a Civil Investigative Demand related to the False Claims Act and a separate criminal investigation[71](index=71&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) Segment Performance (in thousands) | Segment | Net Revenue Q1 2020 | Net Revenue Q1 2019 | Gross (Loss)/Profit Q1 2020 | Gross (Loss)/Profit Q1 2019 | | :--- | :--- | :--- | :--- | :--- | | Vascular | $113 | $461 | $(548) | $(706) | | Dermatology | $1,261 | $1,287 | $338 | $512 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **21%** revenue decrease to vascular product issues and reduced operating expenses, while addressing going concern doubts and COVID-19 impacts [Overview and Recent Developments](index=18&type=section&id=Overview%20and%20Recent%20Developments) - The company's vascular business strategy is focused on servicing core U.S. accounts while working on key initiatives to relaunch its DABRA product These initiatives include achieving a longer shelf life, developing a braided overjacket to reduce kinking, creating a rapid exchange version, and obtaining an atherectomy indication[91](index=91&type=chunk)[99](index=99&type=chunk) - The COVID-19 pandemic is expected to adversely impact revenue and slow enrollment in the atherectomy clinical trial To mitigate financial pressures, the company entered into a **$2.0 million** Paycheck Protection Program (PPP) loan in May 2020[96](index=96&type=chunk)[97](index=97&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Results of Operations Comparison (in thousands) | Account | Q1 2020 | Q1 2019 | Change $ | | :--- | :--- | :--- | :--- | | Total net revenue | $1,374 | $1,748 | $(374) | | Gross loss | $(210) | $(194) | $(16) | | Selling, general and administrative | $6,285 | $13,229 | $(6,944) | | Research and development | $1,295 | $1,531 | $(236) | | **Operating loss** | **$(7,790)** | **$(14,954)** | **$7,164** | - Vascular net revenue decreased by **$0.4 million** year-over-year due to lower catheter unit sales, a result of the company's reduced sales force and focus on fixing catheter performance issues[109](index=109&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **$6.9 million**, primarily due to a **$5.5 million** reduction in stock-based compensation and a **$1.8 million** decrease in personnel-related costs from sales force reductions This was partially offset by a **$1.4 million** increase in legal expenses[119](index=119&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2020, the company had **$23.4 million** in cash, cash equivalents, and short-term investments, with an accumulated deficit of **$124.9 million**[127](index=127&type=chunk) - Management expects operating losses and negative cash flows to continue due to its reduced commercial footprint, costs for its atherectomy clinical trial, product development efforts, and ongoing litigation[129](index=129&type=chunk) - Management has concluded there is substantial doubt about the company's ability to continue as a going concern and plans to raise additional capital through equity or debt financings to fund operations for at least the next 12 months[132](index=132&type=chunk)[133](index=133&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material exposure to market risks from interest rate changes, foreign currency fluctuations, or inflation due to its short-term investments - The company believes it does not have material exposure to changes in fair value from interest rate fluctuations due to the short-term nature of its cash and cash equivalents[146](index=146&type=chunk) - As revenue is denominated in U.S. dollars and expenses are primarily in the U.S., the effect of a **10%** adverse change in foreign currency exchange rates would not have been material for the periods presented[147](index=147&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2020, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[150](index=150&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[151](index=151&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company faces significant legal challenges, including a securities class action and ongoing SEC and DOJ investigations into marketing practices and 510(k) clearance - A putative securities class action lawsuit alleges material misstatements in the company's IPO registration statement and subsequent public statements A motion to dismiss was filed by the defendants in March 2020[153](index=153&type=chunk) - The company is cooperating with an active SEC investigation that began in November 2019 following the company's voluntary disclosure of an internal Audit Committee investigation[156](index=156&type=chunk) - The Department of Justice (DOJ) is conducting a False Claims Act investigation and a separate criminal investigation The civil probe concerns whether the company fraudulently obtained 510(k) clearance, promoted its DABRA device for unapproved uses, and made improper payments to physicians[158](index=158&type=chunk)[159](index=159&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company faces critical risks including going concern doubts, DABRA product performance issues, significant legal and regulatory investigations, and potential NYSE delisting [Financial and Operational Risks](index=30&type=section&id=Financial%20and%20Operational%20Risks) - The company has determined there is substantial doubt about its ability to continue as a going concern and is dependent on raising additional external financing to fund operations[166](index=166&type=chunk)[167](index=167&type=chunk) - The company's future success depends substantially on its DABRA product It may be unable to successfully remedy performance, shelf life, and calibration issues, which have previously led to customer dissatisfaction and a voluntary recall[169](index=169&type=chunk)[170](index=170&type=chunk) - The company has a history of significant net losses, with an accumulated deficit of **$124.9 million** as of March 31, 2020, and may be unable to achieve profitability in the future[188](index=188&type=chunk) [Legal and Regulatory Risks](index=36&type=section&id=Legal%20and%20Regulatory%20Risks) - The company faces significant risk from active and ongoing government investigations (SEC, DOJ) and litigation related to findings from its Audit Committee investigation, which could result in civil or criminal penalties, fines, and exclusion from governmental healthcare programs[189](index=189&type=chunk)[190](index=190&type=chunk) - The company is subject to enforcement actions if it is found to have engaged in off-label promotion of its products The DOJ is investigating whether the company marketed its DABRA device for unapproved uses[216](index=216&type=chunk)[218](index=218&type=chunk) - The company is subject to numerous healthcare fraud and abuse laws, such as the Anti-Kickback Statute The DOJ is investigating whether the company paid improper remuneration to physicians[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) [Stock and Corporate Risks](index=70&type=section&id=Stock%20and%20Corporate%20Risks) - The company is not in compliance with NYSE continued listing requirements for minimum market capitalization and faces the risk of delisting, which could negatively impact stock liquidity and price[375](index=375&type=chunk)[376](index=376&type=chunk) - The company's stock price may be highly volatile due to factors such as operating results, regulatory developments, and limited trading volume[378](index=378&type=chunk) - As of March 31, 2020, executive officers, directors, and **10%** stockholders owned approximately **38%** of the company's common stock, allowing them to exert significant control over matters subject to stockholder approval[389](index=389&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=77&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales and shifted IPO proceeds from sales force expansion to remedying DABRA issues and general corporate purposes - The company received net proceeds of approximately **$67.3 million** from its IPO in October 2018[411](index=411&type=chunk) - The intended use of IPO proceeds has shifted from sales force expansion to focusing on remedying DABRA catheter performance issues and other general corporate purposes, including clinical studies[413](index=413&type=chunk) [Other Items (Defaults, Mine Safety, Other Info, Exhibits)](index=78&type=section&id=Other%20Items) The company reports no defaults on senior securities, no mine safety disclosures, and no other material information for the period - The company reports no defaults on senior securities, no mine safety disclosures, and no other material information for the period[414](index=414&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) Ra Medical Systems develops excimer laser treatments for vascular and dermatological diseases, currently resolving DABRA catheter issues for a future relaunch [Overview](index=4&type=section&id=Overview) The company develops excimer laser platforms, with DABRA facing performance issues leading to recall, sales force reduction, and a strategic relaunch focus - The company's DABRA laser system is cleared by the FDA for crossing chronic total occlusions (CTOs) in patients with symptomatic infrainguinal lower extremity vascular disease[15](index=15&type=chunk) - In 2019, the company experienced inconsistencies in DABRA catheter performance, finding that catheters more than two months post-sterilization had a significantly higher rate of non-calibration, leading to a voluntary recall to replace 12-month shelf-life catheters with 2-month ones[16](index=16&type=chunk) - As part of cost-saving initiatives in Q3 2019, the company reduced its DABRA sales force from **34** employees to **five** clinical specialists to align resources with its product strategy and manage cash flows[17](index=17&type=chunk) - The company's strategy for relaunching DABRA is focused on four key initiatives: achieving a longer shelf life, developing a braided overjacket to reduce kinking, creating a rapid exchange mechanism for easier use with guidewires, and obtaining an atherectomy indication for use[18](index=18&type=chunk)[19](index=19&type=chunk) [Our Products](index=5&type=section&id=Our%20Products) The company's product portfolio includes DABRA for vascular diseases and Pharos for dermatological conditions, both utilizing excimer laser technology - The DABRA (Destruction of Arteriosclerotic Blockages by laser Radiation Ablation) system is a minimally-invasive excimer laser and single-use catheter used to treat vascular blockages in the lower extremities by dissolving plaque without generating harmful particulates[21](index=21&type=chunk) - The Pharos excimer laser is FDA-cleared for treating psoriasis, vitiligo, atopic dermatitis, and leukoderma, delivering concentrated 308nm ultraviolet light to treat skin disorders, offering a targeted approach that spares healthy tissue[26](index=26&type=chunk)[58](index=58&type=chunk) - The company is conducting a pivotal study to support an atherectomy indication for DABRA in the U.S., with the IDE for the study approved in January 2020 and the first patient enrolled in February 2020[15](index=15&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Markets and Competition](index=6&type=section&id=Markets%20and%20Competition) The company operates in vascular and dermatological markets, facing intense competition from established medical device and pharmaceutical companies - Peripheral Artery Disease (PAD) affects an estimated **17.6 million** people in the U.S., but only **20-30%** are actively treated, with the global atherectomy market estimated at **$1.1 billion** in 2018[32](index=32&type=chunk)[33](index=33&type=chunk) - Major competitors for the DABRA vascular solution include Medtronic plc, Cardiovascular Systems Inc., Boston Scientific Corp., and Abbott Laboratories[70](index=70&type=chunk) - Psoriasis affects over **8 million** people in the U.S., while atopic dermatitis affects over **18 million** adults in the U.S.; major competitors for the Pharos dermatological solution include The Daavlin Company, STRATA Skin Sciences, and large pharmaceutical companies[63](index=63&type=chunk)[72](index=72&type=chunk) [Operations and Strategy](index=15&type=section&id=Operations%20and%20Strategy) The company manufactures products in California, uses a direct sales force, focuses R&D on product enhancement, and protects technology via patents - The company manufactures its products in an approximately **32,000 square foot**, ISO 13485 certified facility in Carlsbad, California[68](index=68&type=chunk) - As of March 6, 2020, the company owns six U.S. issued patents and is pursuing protection in five different patent families, with U.S. patents expiring between **2035** and **2037**[78](index=78&type=chunk) Research and Development Expenses | Year | R&D Expense (in millions) | | :--- | :--- | | 2019 | $4.5 | | 2018 | $2.8 | [Government Regulation](index=17&type=section&id=Government%20Regulation) Products are Class II medical devices subject to extensive FDA regulation, including QSR and healthcare fraud laws, with past FDA 483 observations - Both DABRA and Pharos are classified as Class II medical devices in the U.S. and are subject to extensive FDA regulation, including Quality System Regulation (QSR) for manufacturing[82](index=82&type=chunk) - The company received a Form 483 from the FDA in May 2018 for failure to properly evaluate complaints for potential Medical Device Reporting (MDR), and an internal Audit Committee later found failures to identify reportable events and file timely reports[103](index=103&type=chunk) - In December 2019, the FDA issued another Form 483 with observations that equipment maintenance schedules were not adequately established, a device master record was not current, and document control procedures were not fully established[103](index=103&type=chunk) - The company is subject to various healthcare fraud and abuse laws, including the U.S. federal Anti-Kickback Statute and the False Claims Act, which regulate relationships with healthcare professionals and customers[113](index=113&type=chunk)[114](index=114&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including going concern doubt, DABRA catheter issues, multiple government investigations, legal actions, and intense competition - There is substantial doubt about the company's ability to continue as a going concern, as it does not generate sufficient revenue to fund operations and is dependent on external financing[140](index=140&type=chunk)[141](index=141&type=chunk) - The company's success is highly dependent on its ability to remedy the performance and calibration issues with its DABRA catheters, which have led to a voluntary recall and a shift to a two-month shelf life[143](index=143&type=chunk)[147](index=147&type=chunk) - The company is subject to multiple government investigations, including a DOJ Civil Investigative Demand regarding potential False Claims Act and Anti-Kickback Statute violations, a DOJ criminal investigation, and an SEC investigation following an internal Audit Committee review[167](index=167&type=chunk)[202](index=202&type=chunk)[208](index=208&type=chunk) - The company faces substantial competition from larger, more established medical device companies with greater financial and marketing resources, who may offer bundled products or have stronger customer relationships[187](index=187&type=chunk)[190](index=190&type=chunk) [Unresolved Staff Comments](index=76&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[396](index=396&type=chunk) [Properties](index=76&type=section&id=Item%202.%20Properties) Headquarters and manufacturing are in a 32,000 sq ft Carlsbad facility, with sufficient capacity for expected demand - The company's headquarters and manufacturing are in a **32,000 sq. ft.** facility in Carlsbad, CA, leased until **December 2027**[397](index=397&type=chunk) - Current manufacturing capacity is estimated at **400 lasers** and **140,000 catheters** per year, which is considered sufficient for the foreseeable future[398](index=398&type=chunk) [Legal Proceedings](index=76&type=section&id=Item%203.%20Legal%20Proceedings) Involved in significant legal and governmental proceedings, including securities class actions and DOJ/SEC investigations following internal findings - A securities class action lawsuit alleges violations of the Securities Act and Exchange Act due to material misstatements or omissions regarding the company's business and products between **September 2018** and **November 2019**[399](index=399&type=chunk) - The company is under investigation by the SEC and the Department of Justice (DOJ), with the DOJ's civil investigation concerning potential False Claims Act violations related to marketing clearance, off-label promotion, and improper payments to physicians, and a separate DOJ criminal investigation also open[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk) - The governmental investigations were preceded by an internal Audit Committee investigation which found issues including inconsistent DABRA catheter performance, failure to file timely Medical Device Reports (MDRs), undocumented product recalls, and improper marketing characterizations of DABRA as an atherectomy device[401](index=401&type=chunk)[402](index=402&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=79&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on NYSE, no dividends paid, and IPO proceeds were allocated to sales, clinical studies, and general corporate purposes - The company has never declared or paid cash dividends and intends to retain all future earnings to fund business operations[416](index=416&type=chunk) - The company's October 2018 IPO raised approximately **$67.3 million** in net proceeds, with intended use for sales force expansion (**~$21 million**), clinical studies (**~$14 million**), and general corporate purposes[418](index=418&type=chunk)[422](index=422&type=chunk) [Selected Financial Data](index=79&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable as per the report - Not applicable[420](index=420&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=80&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net loss widened significantly in 2019 due to increased costs and operating expenses, leading to going concern doubt and need for financing Results of Operations (in thousands) | | 2019 | 2018 | | :--- | :--- | :--- | | **Total net revenue** | $7,199 | $6,257 | | **Gross (loss) profit** | $(1,651) | $2,051 | | **Total operating expenses** | $56,079 | $33,211 | | **Operating loss** | $(57,730) | $(31,160) | | **Net loss** | $(56,957) | $(30,832) | - The company incurred a net loss of **$57.0 million** in 2019, a significant increase from the **$30.8 million** loss in 2018, with an accumulated deficit of **$117.2 million** as of December 31, 2019[432](index=432&type=chunk) - Management has substantial doubt about the company's ability to continue as a going concern due to recurring losses, negative cash flows, and the need to raise additional capital to fund operations for the next 12 months[466](index=466&type=chunk)[467](index=467&type=chunk) Net Revenue by Segment (in thousands) | Segment | 2019 | 2018 | | :--- | :--- | :--- | | Vascular | $1,275 | $1,552 | | Dermatology | $5,924 | $4,705 | | **Total** | **$7,199** | **$6,257** | [Quantitative and Qualitative Disclosures About Market Risk](index=94&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks are immaterial interest rate sensitivity and minimal foreign currency exchange risk, which may increase with international expansion - The company's cash, cash equivalents, and short-term investments totaled **$30.6 million** as of December 31, 2019, with immaterial exposure to interest rate changes due to the short-term nature of these investments[513](index=513&type=chunk) - Foreign currency exchange risk is currently minimal as most revenue is in U.S. dollars, but this risk could increase with international growth[514](index=514&type=chunk) [Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements show decreased assets and increased net loss in 2019, with the auditor expressing substantial doubt about going concern - The independent auditor's report expresses substantial doubt about the Company's ability to continue as a going concern due to recurring losses, negative cash flows, and a significant accumulated deficit[667](index=667&type=chunk) Balance Sheet Highlights (in thousands) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,584 | $64,315 | | Total Assets | $44,081 | $74,035 | | Total Liabilities | $10,931 | $7,330 | | Total Stockholders' Equity | $33,150 | $66,705 | | Accumulated Deficit | $(117,157) | $(60,221) | Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Total net revenue | $7,199 | $6,257 | | Gross (loss) profit | $(1,651) | $2,051 | | Operating loss | $(57,730) | $(31,160) | | Net loss | $(56,957) | $(30,832) | | Basic and diluted net loss per share | $(4.33) | $(3.34) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=94&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[517](index=517&type=chunk) [Controls and Procedures](index=94&type=section&id=Item%209A.%20Controls%20and%20Procedures) Material weaknesses in internal control were identified and remediated in 2019, stemming from former management's 'tone at the top' and regulatory failures - Material weaknesses were identified in the control environment, stemming from an inappropriate 'tone at the top' set by certain members of senior management and a lack of sufficient competent resources[522](index=522&type=chunk) - The control deficiencies resulted in multiple issues, including failure to timely file Medical Device Reports (MDRs), undocumented product recalls, and salespeople being instructed to characterize DABRA as performing atherectomy for reimbursement purposes[525](index=525&type=chunk) - Remediation actions included the separation of certain former executives, hiring a new VP of Quality, Regulatory and Clinical, implementing enhanced policies and training, and strengthening quality and regulatory systems[527](index=527&type=chunk) - Management concluded that as of **December 31, 2019**, the previously disclosed material weaknesses have been remediated and disclosure controls and procedures were effective[521](index=521&type=chunk)[528](index=528&type=chunk) [Other Information](index=97&type=section&id=Item%209B.%20Other%20Information) Discloses 2019 cash bonuses and March 2020 base salary increases for named executive officers - On **February 3, 2020**, the compensation committee approved 2019 cash bonuses for named executive officers: Andrew Jackson (**$150,000**), Jeffrey Kraws (**$65,000**), and Daniel Horwood (**$78,000**)[534](index=534&type=chunk) - On **March 9, 2020**, annual base salaries for named executive officers were increased, effective **March 1, 2020**[535](index=535&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=98&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Board consists of five independent directors with three committees, and executive officers include Interim CEO/CFO, Co-President, and General Counsel - The Board of Directors consists of five members, all determined to be independent under NYSE listing standards, with Martin Colombatto serving as Chairman[538](index=538&type=chunk)[556](index=556&type=chunk) - The company's executive officers include Andrew Jackson as Interim CEO and CFO, Jeffrey Kraws as Co-President, and Daniel Horwood as General Counsel[547](index=547&type=chunk) - The board has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, all composed of independent directors[565](index=565&type=chunk) [Executive Compensation](index=106&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation includes salary, bonuses, and equity awards, with severance agreements, while directors receive cash retainers and equity 2019 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Andrew Jackson | 2019 | 348,808 | 194,805 | 91,385 | 651,573 | | Jeffrey R. Kraws | 2019 | 345,425 | 65,000 | 93,832 | 517,522 | | Daniel Horwood | 2019 | 298,275 | 104,226 | 91,385 | 507,639 | | Dean S. Irwin (Former CEO) | 2019 | 311,983 | — | — | 311,983 | - The company has change in control and severance agreements providing benefits such as lump-sum salary payments and accelerated equity vesting upon a qualifying termination[604](index=604&type=chunk)[606](index=606&type=chunk)[607](index=607&type=chunk) - Non-employee directors receive an annual cash retainer of **$40,000**, plus additional retainers for committee and chair service, and also receive initial and annual restricted stock unit awards[616](index=616&type=chunk)[617](index=617&type=chunk)[621](index=621&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Directors and executive officers collectively own 6.1% of common stock, with former CEO Dean Irwin and his wife as largest beneficial owners - As of **March 6, 2020**, all directors and executive officers as a group beneficially owned approximately **877,444 shares**, representing **6.1%** of the outstanding common stock[628](index=628&type=chunk) - Former CEO Dean Irwin and his wife Melissa Burstein are the largest beneficial owners, each with control over **3,207,761 shares**, or **22.9%** of the company[628](index=628&type=chunk) - Former director Martin Burstein beneficially owns **1,956,203 shares**, representing **14.2%** of the company[628](index=628&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=116&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Details related party transactions, including compensation for former CEO's wife and legal fees to a firm connected to a director - Melissa Burstein, wife of former CEO Dean Irwin, served as Executive Vice President, and in 2019, she received a salary of **$237,561** and a severance payment of **$230,000**[637](index=637&type=chunk) - In 2019, the company paid **$403,827** for legal services to Cooley LLP, where the brother-in-law of director Mark Saad is a partner[639](index=639&type=chunk) - The company has a formal policy requiring the Audit Committee to review and approve or ratify any related person transaction exceeding **$120,000**[641](index=641&type=chunk)[642](index=642&type=chunk) [Principal Accounting Fees and Services](index=117&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Deloitte & Touche LLP provided audit and other services, with fees totaling $0.9 million in 2019 and $1.6 million in 2018 Fees Paid to Independent Registered Public Accounting Firm | | Fiscal Year 2019 | Fiscal Year 2018 | | :--- | :--- | :--- | | Audit Fees | $925,105 | $1,604,415 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | | **Total Fees** | **$925,105** | **$1,604,415** | - The Audit Committee's policy is to pre-approve all audit and permissible non-audit services provided by the independent accountants[646](index=646&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=118&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section indexes all financial statements, schedules, and exhibits filed with the annual report - This section provides an index of all financial statements, schedules, and exhibits filed with the annual report, as required by Item 601 of Regulation S-K[651](index=651&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for Q3 2019 show significant declines in cash and equity, widening net loss, and negative operating cash flow [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) The balance sheet as of September 30, 2019, reflects a significant decrease in cash and equity, offset by short-term investments Condensed Balance Sheet Data (in thousands) | Account | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $14,512 | $64,315 | | Short-term investments | $25,964 | $0 | | Total current assets | $45,452 | $69,233 | | TOTAL ASSETS | $54,002 | $74,035 | | **Liabilities & Equity** | | | | Total current liabilities | $7,982 | $5,950 | | Total liabilities | $12,261 | $7,330 | | Accumulated deficit | $(107,414) | $(60,221) | | Total stockholders' equity | $41,741 | $66,705 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $54,002 | $74,035 | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) The statements of operations show a significantly widened net loss for Q3 and nine months 2019, driven by surging operating expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $1,908 | $2,064 | $5,809 | $4,269 | | Gross (loss) profit | $(517) | $784 | $(1,291) | $1,263 | | Selling, general and administrative | $15,889 | $5,366 | $42,907 | $15,621 | | Research and development | $1,182 | $224 | $3,692 | $1,532 | | Operating loss | $(17,588) | $(4,806) | $(47,890) | $(15,890) | | Net loss | $(17,418) | $(4,807) | $(47,214) | $(15,895) | | Basic and diluted net loss per share | $(1.30) | $(0.59) | $(3.63) | $(1.97) | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Cash flow statements indicate a substantial increase in cash used in operations and investing activities for the nine months ended September 30, 2019 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(23,601) | $(10,109) | | Net cash used in investing activities | $(25,984) | $(424) | | Net cash (used in) provided by financing activities | $(218) | $7,211 | | **NET CHANGE IN CASH AND CASH EQUIVALENTS** | **$(49,803)** | **$(3,322)** | | CASH AND CASH EQUIVALENTS, end of period | $14,512 | $4,915 | [Notes to Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes detail accounting policies, significant commitments, and ongoing legal and governmental investigations, highlighting segment performance - The company believes its cash, cash equivalents, and short-term investments will be sufficient to fund operations for at least the next 12 months[26](index=26&type=chunk) - In September 2019, the company initiated a voluntary recall of its DABRA laser system single-use catheters to change product labeling due to performance issues[53](index=53&type=chunk) - The company is subject to a securities class action lawsuit filed in June 2019, alleging material misstatements in its IPO registration statement[93](index=93&type=chunk) - The company is under investigation by the Department of Justice (DOJ) for potential False Claims Act violations related to marketing clearance, unapproved uses, and improper payments to physicians. It is also under investigation by the SEC and the Criminal Division of the DOJ[97](index=97&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Segment Net Revenue (in thousands) | Segment | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Vascular | $226 | $789 | $1,121 | $973 | | Dermatology | $1,682 | $1,275 | $4,688 | $3,296 | | **Total Net Revenue** | **$1,908** | **$2,064** | **$5,809** | **$4,269** | Segment Gross (Loss) Profit (in thousands) | Segment | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Vascular | $(694) | $210 | $(2,389) | $(77) | | Dermatology | $177 | $574 | $1,098 | $1,340 | | **Total Gross (Loss) Profit** | **$(517)** | **$784** | **$(1,291)** | **$1,263** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights delayed filing due to an Audit Committee investigation, ongoing government probes, product recall, and significant financial losses - The filing was delayed due to an Audit Committee investigation into a former employee's complaint, revealing frequent DABRA catheter failures, potentially confusing sales explanations, and failure to make timely Medical Device Reports (MDRs) to the FDA[113](index=113&type=chunk)[114](index=114&type=chunk) - The company is facing investigations from the SEC's Enforcement Division, a DOJ Civil Investigative Demand regarding the False Claims Act, and a DOJ criminal investigation[118](index=118&type=chunk)[119](index=119&type=chunk) - Due to inconsistent DABRA catheter performance, the company initiated a recall in September 2019 to relabel the product shelf life from 12 months to two months[127](index=127&type=chunk) - The company implemented cost-saving initiatives, including reducing its DABRA sales force from **34 employees** as of June 30, 2019, to **6 employees** as of November 11, 2019[128](index=128&type=chunk) Comparison of Results of Operations (in thousands) | Metric | Q3 2019 | Q3 2018 | Change $ | | :--- | :--- | :--- | :--- | | Total net revenue | $1,908 | $2,064 | $(156) | | Gross (loss) profit | $(517) | $784 | $(1,301) | | Selling, general and administrative | $15,889 | $5,366 | $10,523 | | Operating loss | $(17,588) | $(4,806) | $(12,782) | | Net loss | $(17,418) | $(4,807) | $(12,611) | - The increase in SG&A expenses for Q3 2019 was primarily due to a **$5.2 million** increase in stock-based compensation and a **$3.3 million** increase in legal expenses related to the Audit Committee investigation[155](index=155&type=chunk) - As of September 30, 2019, the company had cash, cash equivalents, and short-term investments of **$40.5 million** and believes this is sufficient to fund operations for at least the next 12 months[164](index=164&type=chunk)[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company assesses its exposure to interest rate, foreign currency, and inflation risks as not material due to its investment policy and operational focus - The company does not believe it has any material exposure to changes in the fair value of its assets from interest rate changes due to the short-term nature of its cash and cash equivalents[179](index=179&type=chunk) - As revenue is denominated in U.S. dollars and expenses are primarily in the United States, the effect of a **10% adverse change** in foreign currency exchange rates would not have been material[180](index=180&type=chunk) - The company does not believe that inflation has had a material effect on its business, results of operations, or financial condition[181](index=181&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, with remediation underway - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[183](index=183&type=chunk) - A material weakness was identified in the control environment, stemming from an inappropriate "tone at the top" set by certain former senior management, leading to behavior inconsistent with the Code of Ethics, failure to make timely FDA reports, and undocumented product recalls[185](index=185&type=chunk)[191](index=191&type=chunk) - A material weakness was also identified in information and communication, as complaints implicating executive officers were not brought to the attention of the board or Audit Committee[187](index=187&type=chunk) - Remediation activities have commenced, including separation from certain former executives, hiring a new VP of Quality, implementing enhanced policies and training, and strengthening regulatory systems[188](index=188&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in significant legal and regulatory matters, including securities class actions, shareholder derivative suits, and multiple governmental investigations by the DOJ and SEC - A securities class action lawsuit was filed in June 2019 against the company, certain officers, and IPO underwriters, alleging material misstatements or omissions in the registration statement[193](index=193&type=chunk) - A shareholder derivative complaint was filed in October 2019 against certain officers and directors for breaches of fiduciary duty and other violations[194](index=194&type=chunk) - The company is under a DOJ Civil Investigative Demand regarding a False Claims Act investigation and is also aware of an open criminal investigation by the DOJ's Fraud Section[196](index=196&type=chunk)[198](index=198&type=chunk) - The SEC notified the company on November 13, 2019, that it is conducting an investigation[198](index=198&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces high risks from unresolved product performance issues, ongoing government investigations, a history of losses, internal control weaknesses, and intense competition - The company may be unable to successfully remedy the performance and calibration issues with its DABRA catheters, which has led to a product recall and could prevent market acceptance and revenue growth[203](index=203&type=chunk)[204](index=204&type=chunk) - The business is exposed to significant risk from matters arising from the Audit Committee investigation, including regulatory proceedings and government enforcement actions by the SEC and DOJ, which may adversely affect business and results[225](index=225&type=chunk) - The company has a history of net losses (**$47.2 million** for the nine months ended Sep 30, 2019) and may be unable to achieve profitability. It may require additional capital, which may not be available on acceptable terms[224](index=224&type=chunk)[219](index=219&type=chunk) - Material weaknesses have been identified in internal control over financial reporting, which could prevent accurate financial reporting and cause investors to lose confidence[273](index=273&type=chunk) - The company faces substantial competition from larger, better-resourced companies in the medical device industry, such as Medtronic, Boston Scientific, and Abbott Laboratories[236](index=236&type=chunk)[241](index=241&type=chunk) - The company is subject to numerous healthcare laws, including anti-kickback and false claims statutes, and is currently under a DOJ investigation for potential violations[259](index=259&type=chunk)[261](index=261&type=chunk) - The company received a deficiency notice from the NYSE for failure to timely file its Form 10-Q and must maintain compliance with listing standards, including minimum market capitalization, to avoid delisting[397](index=397&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered equity sales and is re-prioritizing IPO proceeds to address DABRA catheter performance issues - The company raised approximately **$67.3 million** in net proceeds from its IPO, which closed on October 1, 2018[431](index=431&type=chunk) - The company is re-prioritizing the use of its IPO proceeds to focus on remedying the inconsistencies in its DABRA catheter performance, in addition to supporting clinical studies and general corporate purposes[432](index=432&type=chunk) [Defaults Upon Senior Securities](index=79&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - None[433](index=433&type=chunk) [Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[434](index=434&type=chunk) [Other Information](index=79&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[435](index=435&type=chunk) [Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications - Exhibits include corporate governance documents, CEO/CFO certifications (Sections 302 and 906 of Sarbanes-Oxley), and XBRL financial data[436](index=436&type=chunk)

PART I. FINANCIAL INFORMATION [Explanatory Note](index=3&type=section&id=Explanatory%20Note) The company states the filing of its Form 10-Q was delayed due to internal and external investigations - The delay in filing the Form 10-Q was caused by an internal Audit Committee investigation and an external Department of Justice investigation[9](index=9&type=chunk) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements show a significant cash decrease, revenue growth, and a substantially increased net loss driven by higher operating expenses [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Total assets decreased due to a significant reduction in cash, while total liabilities increased mainly from operating lease liabilities Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $11,787 | $64,315 | | Short-term investments | $36,601 | $0 | | Total current assets | $53,488 | $69,233 | | Total Assets | $62,474 | $74,035 | | **Liabilities & Equity** | | | | Total current liabilities | $6,295 | $5,950 | | Total liabilities | $10,579 | $7,330 | | Total stockholders' equity | $51,895 | $66,705 | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) Net revenue increased year-over-year, but net losses widened significantly due to a substantial rise in SG&A expenses Statement of Operations Summary (in thousands) | Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $2,153 | $1,236 | $3,901 | $2,205 | | Gross (loss) profit | $(580) | $246 | $(774) | $479 | | Selling, general and administrative | $13,789 | $7,615 | $27,018 | $10,254 | | Operating loss | $(15,348) | $(8,391) | $(30,302) | $(11,083) | | Net loss | $(15,122) | $(8,395) | $(29,796) | $(11,088) | | Basic and diluted net loss per share | $(1.16) | $(1.03) | $(2.32) | $(1.38) | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operations and investing activities increased significantly, leading to a $52.5 million decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,747) | $(5,966) | | Net cash used in investing activities | $(36,657) | $(251) | | Net cash (used in) provided by financing activities | $(124) | $7,749 | | **Net Change in Cash and Cash Equivalents** | **$(52,528)** | **$1,532** | [Notes to Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail the adoption of new accounting standards and outline significant legal challenges, including DOJ and SEC investigations - The company adopted new accounting standards for Revenue (ASC 606) and Leases (ASC 842) on January 1, 2019[37](index=37&type=chunk)[50](index=50&type=chunk)[62](index=62&type=chunk) - The company is facing multiple legal and regulatory challenges, including a securities class action lawsuit, a shareholder derivative complaint, and investigations by the SEC and DOJ concerning potential violations of the **False Claims Act** and **Anti-Kickback Statute**[89](index=89&type=chunk)[90](index=90&type=chunk)[93](index=93&type=chunk) Segment Net Revenue and Gross (Loss) Profit (in thousands) | Segment | H1 2019 Net Revenue | H1 2018 Net Revenue | H1 2019 Gross (Loss) Profit | H1 2018 Gross Profit | | :--- | :--- | :--- | :--- | :--- | | Vascular | $895 | $184 | $(1,695) | $(287) | | Dermatology | $3,006 | $2,021 | $921 | $766 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the filing delay, investigation findings, operational results showing revenue growth but a larger net loss, and cash sufficiency - An internal Audit Committee investigation found significant issues, including inconsistent DABRA catheter performance, misleading sales explanations, failure to file Medical Device Reports (MDRs), undocumented product recalls, and questionable payments to physicians[108](index=108&type=chunk) - The company is under investigation by the SEC and the Department of Justice (both civil and criminal divisions) regarding potential violations of the **False Claims Act** and **Anti-Kickback Statute**, among other issues[112](index=112&type=chunk)[113](index=113&type=chunk) - In response to operational challenges and to conserve cash, the company initiated cost-saving measures, including reducing its DABRA sales force from **34 employees** as of June 30, 2019, to **6 as of November 11, 2019**[122](index=122&type=chunk)[162](index=162&type=chunk) Results of Operations Comparison - Six Months Ended June 30 (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Total net revenue | $3,901 | $2,205 | | Gross (loss) profit | $(774) | $479 | | Selling, general and administrative | $27,018 | $10,254 | | Operating loss | $(30,302) | $(11,083) | | Net loss | $(29,796) | $(11,088) | [Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate sensitivity and foreign currency exchange, both currently considered not material - The company's primary market risks are **interest rate sensitivity** on its cash and investments and **foreign currency exchange risk**[176](index=176&type=chunk) - Management believes there is **no material exposure** to interest rate changes due to the short-term nature of its cash and investments[177](index=177&type=chunk) - Foreign currency risk is currently minimal as most transactions are in U.S. dollars, but this could change with international growth[178](index=178&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective due to material weaknesses in the control environment and communication channels - Management concluded that **disclosure controls and procedures were not effective** as of June 30, 2019[181](index=181&type=chunk) - A material weakness was identified in the control environment, stemming from an inappropriate **"tone at the top"** set by certain former senior management, leading to behavior inconsistent with the Code of Ethics, misleading sales explanations, and failure to properly document recalls and payments[184](index=184&type=chunk)[188](index=188&type=chunk) - A material weakness was also identified in information and communication, as complaints implicating executive officers were not brought to the attention of the board or Audit Committee[186](index=186&type=chunk) - Remediation efforts are underway, including the separation of certain former executives, hiring of new qualified personnel, and implementing enhanced policies and controls[187](index=187&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a securities class action lawsuit and multiple governmental investigations by the DOJ and SEC - A securities class action lawsuit was filed against the company, certain officers, and IPO underwriters, alleging **material misstatements** in the registration statement[191](index=191&type=chunk) - The company is under investigation by the Department of Justice (DOJ) for potential **False Claims Act violations** related to marketing clearance, unapproved uses of its DABRA device, and improper payments to physicians[194](index=194&type=chunk) - The company has been notified of investigations by both the **SEC's Division of Enforcement** and the **Criminal Division of the DOJ**[195](index=195&type=chunk)[196](index=196&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to its products, ongoing government investigations, regulatory compliance, and stock ownership [Risks Related to Business and Products](index=37&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Products) Success is highly dependent on fixing DABRA catheter issues, managing net losses, and navigating outcomes of investigations and litigation - A primary risk is the inability to successfully remedy performance and calibration issues with DABRA catheters, which has led to customer dissatisfaction and a voluntary recall to relabel the shelf life from **12 to two months**[201](index=201&type=chunk)[204](index=204&type=chunk)[209](index=209&type=chunk) - The company has a history of net losses, incurring **$29.8 million in the first six months of 2019**, and may be unable to achieve profitability[219](index=219&type=chunk) - The company faces significant risks from its recently completed Audit Committee investigation, ongoing regulatory investigations (DOJ, SEC), and related securities litigation, which could result in penalties, fines, and business disruption[220](index=220&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) [Risks Related to Regulatory Approval and Industry](index=53&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20our%20Industry) The company faces extensive FDA oversight, risks from off-label promotion allegations, and potential impacts from healthcare reform - The company's operations are subject to pervasive **FDA regulatory requirements**, and failure to comply can result in sanctions, recalls, or production suspension[281](index=281&type=chunk)[283](index=283&type=chunk) - The company faces risks of enforcement action for **off-label promotion**, particularly concerning the marketing of DABRA for atherectomy, which is a subject of a DOJ investigation[247](index=247&type=chunk)[249](index=249&type=chunk) - The business is subject to healthcare fraud and abuse laws, such as the **Anti-Kickback Statute**, and the DOJ is investigating improper remuneration to physicians[253](index=253&type=chunk)[254](index=254&type=chunk) [Risks Related to Intellectual Property](index=62&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) Competitive position depends on the uncertain process of obtaining and defending patents and protecting critical trade secrets - The company's ability to compete depends on successfully obtaining and maintaining **patent protection** for its products, which is an uncertain and complex process[334](index=334&type=chunk)[335](index=335&type=chunk) - The company may become involved in expensive and time-consuming **intellectual property litigation** to defend against infringement claims or to enforce its own patents[361](index=361&type=chunk)[372](index=372&type=chunk) - In addition to patents, the company relies on **trade secrets**, which are difficult to protect and could be lost through misappropriation or independent development by competitors[356](index=356&type=chunk) [Risks Related to Ownership of Common Stock](index=72&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Stock ownership risks include high price volatility, potential NYSE delisting, and significant control by principal stockholders - The company received a deficiency notice from the NYSE for failing to timely file its Form 10-Q and faces the **risk of delisting** if it does not maintain compliance with all listing requirements[386](index=386&type=chunk) - The stock price is likely to be **highly volatile** due to factors such as operating results, regulatory developments, and market conditions[388](index=388&type=chunk)[389](index=389&type=chunk) - As of June 30, 2019, executive officers, directors, and 10% stockholders owned approximately **38% of the outstanding common stock**, giving them significant influence over corporate matters[401](index=401&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales and has updated the use of its IPO proceeds to prioritize fixing DABRA catheter issues - The company's IPO in October 2018 raised approximately **$67.3 million in net proceeds**[420](index=420&type=chunk) - The intended use of IPO proceeds has been updated to prioritize remedying the inconsistencies in **DABRA catheter performance**, alongside clinical studies and general corporate purposes[421](index=421&type=chunk) [Defaults Upon Senior Securities](index=78&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[422](index=422&type=chunk) [Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[423](index=423&type=chunk) [Other Information](index=78&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[424](index=424&type=chunk) [Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including corporate governance documents and required Sarbanes-Oxley certifications - Key exhibits include corporate governance documents and required **CEO/CFO certifications** under Sarbanes-Oxley[425](index=425&type=chunk)