# Stereotaxis, Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Stereotaxis, Inc.](/companies/stxs.md) (CIK 1289340)
- Form: 10-Q
- Filed: 2022-11-14
- Accepted by EDGAR: Nov 14, 2022, 11:03 ET
- Period: 2022-09-30
- Accession: 0001493152-22-031744
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1289340/000149315222031744/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1289340/000149315222031744/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $7.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $20.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $3.1m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $6.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $4.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $14.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $2.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $8.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$5.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$14.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$4.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$14.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.20 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.20 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 76,100,007 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 75,977,920 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$5.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $2.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2022-09-30 | $30.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $46.1m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $56.1m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $15.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $22.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $27.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,240 characters.

*The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Operating results are not necessarily indicative of results that may occur in future periods.*

*This report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Part II - Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2021. Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic conditions, financial condition, liquidity, capital resources, results of operations, and the impact of the recent coronavirus (“COVID-19”) pandemic and our response to it. Such statements include, but are not limited to, statements preceded by, followed by, or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “can”, “could”, “may”, “would”, or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they are made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.*

### Overview

Stereotaxis is a pioneer and global leader in surgical robotics for minimally invasive endovascular intervention. We design, manufacture and market robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology, Robotic Magnetic Navigation, fundamentally transforms endovascular interventions using precise computer-controlled magnetic fields to directly control the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional device, in contrast to all manual hand-held devices that are controlled from their handle, can improve the precision, stability, reach and safety of these devices during procedures.

Our primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional endovascular indications including coronary, neuro, and peripheral interventions.

There is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists at over one hundred hospitals globally have treated over 100,000 arrhythmia patients with our robotic technology. Clinical use of our technology has been documented in over 400 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency. We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging or unsuccessful and generates significant x-ray exposure.

Our primary products include the *Genesis RMN* System, the *Odyssey* Solution, and other related devices. We also offer to our customers the Stereotaxis Imaging Model S x-ray System and other accessory devices.

The *Genesis RMN* System is designed to enable physicians to complete more complex interventional procedures by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation, efficient procedures, and reduced x-ray exposure.

The *Odyssey* Solution consolidates lab information onto one large integrated display, enabling physicians to view and control all the key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote viewing and recording capability called *Odyssey Cinema*, which is an innovative solution that delivers synchronized content for optimized workflow, advanced care, and improved productivity. This tool includes an archiving capability that allows clinicians to store and replay entire procedures or segments of procedures. This information can be accessed from locations throughout the hospital local area network and over the global Odyssey Network providing physicians with a tool for clinical collaboration, remote consultation, and training.

We promote our full suite of products in a typical hospital implementation, subject to regulatory approvals or clearances. This implementation requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond the warranty period, and ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.

We have received regulatory clearances and registration approvals necessary for us to market the *Genesis RMN* System in the U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries. Our prior generation robotic magnetic navigation system, the *Niobe* System, and the *Odyssey* Solution, *Cardiodrive*, and various disposable interventional devices have received regulatory clearance in the U.S., Europe, Canada, China, Japan and various other countries. We have received the regulatory clearance, licensing and/or CE Mark approvals that allow us to market the *Vdrive* and *Vdrive Duo* Systems with the *V-CAS, V-Loop* and *V-Sono* devices in the U.S., Canada and Europe. Stereotaxis Imaging Model S x-ray System is CE marked and cleared by the FDA.

We have strategic relationships with technology leaders in the global interventional market. Through these strategic relationships we provide compatibility between our robotic magnetic navigation system and digital imaging and 3D catheter location sensing technology, as well as disposable interventional devices. The maintenance of these strategic relationships, or the establishment of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships will continue, and efforts are ongoing to ensure the availability of integrated systems and devices and/or equivalent alternatives. We cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive terms or at all.

### COVID-19 Pandemic

The impact of the COVID-19 pandemic has varied widely over time by individual geography. In 2021, resurgences of COVID-19 as well as hospital staffing shortages depressed procedure volumes at various times throughout the year. After such resurgences procedure volumes would generally stabilize or recover. Similarly, in 2022, procedure volumes continue to be challenged by periodic resurgences of COVID-19, ongoing hospital staffing issues and other factors.

We have experienced challenges and disruptions due to the pandemic such as worldwide supply chain disruptions, including shortages and inflationary pressures, and logistics delays which makes it difficult for us to source parts and ship our products. Our customers have also experienced similar supply chain issues as well as labor shortages, both of which have contributed to delayed hospital construction project timelines. To-date, we have been generally able to conduct normal business activities albeit in a more deliberate manner than prior to the pandemic, including taking action to increase inventory levels, but we cannot guarantee that they will not be impacted more severely in the future.

The ongoing impact that the pandemic will have on our business will likely continue to vary by individual geography based on the extent of the outbreak in each area, the timing of vaccine distribution, specific governmental restrictions and the availability of testing capabilities, personal protective equipment, and hospital facilities, as well as decisions by our vendors, suppliers, customers and, ultimately, patients in response to the pandemic, none of which we are able to currently and accurately predict. While we cannot reliably estimate the depth or length of the impact, we continue to anticipate significant, periodic disruptions to our procedures volumes, service activities and system placements in 2022. In addition, we would expect that capital system orders will continue to experience some delay.

Capital markets and worldwide economies continue to be significantly impacted by the COVID-19 pandemic, and the outlook for 2022 depends on future developments, including but not limited to: the length and severity of ongoing outbreaks (including further new variants beyond Delta and Omicron, which may be more contagious, more severe or less responsive to treatment or vaccines), the effectiveness of containment actions, and the timing of vaccinations and achievement of herd immunity. The impact on local and/or global economies is uncertain, including ongoing risk of recession. Such economic disruptions, including a recession, could have a material adverse effect on our long-term business as hospitals continue to monitor and adjust capital and overall spending or redirect such spending to treatments related directly to the pandemic. To date, our manufacturing operations and supply chains have been manageably impacted, but we cannot guarantee that such will not be impacted further in the future. If our manufacturing operations or supply chains are materially interrupted, it may not be possible for us to timely manufacture relevant products at required levels, or at all. A material reduction or interruption to any of our manufacturing processes could have a material adverse effect on our business, operating results, and financial condition. Further, the COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on our ability to travel and access our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, could also significantly impact our sales and our ability to ship our products and supply our customers. Any of these events could negatively impact the number of procedures performed and the number of system placements and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

### Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. We review our estimates and judgments on an on-going basis. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We believe the following accounting policies are critical to the judgments and estimates we use in preparing our financial statements. For a complete listing of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

### Revenue Recognition

We generate revenue from the initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices, from royalties paid to the Company on the sale by Biosense Webster of co-developed catheters, and from ongoing software enhancements and service contracts.

In accordance with Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers,” we account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that are remitted to government authorities.

For contracts containing multiple products and services the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

For arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market conditions. The Company regularly reviews standalone selling prices and updates these estimates as necessary.

#### Systems:

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from the implied obligation to deliver software enhancements if and when available is recognized ratably over the first year following installation of the system as the customer receives the right to software enhancements throughout the period and is included in Other Recurring Revenue. The Company’s system contracts do not provide a right of return. Systems are generally covered by a one-year assurance type warranty; warranty costs were $0.1 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

#### Disposables:

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance type warranty that provides for the return of defective products. Warranty costs were not material for the nine months ended September 30, 2022 and 2021.

#### Royalty:

The Company is entitled to royalty payments from Biosense Webster, payable quarterly based on net revenues from sales of the co-developed catheters.

#### Other Recurring Revenue:

Other recurring revenue includes revenue from product maintenance plans, other post warranty maintenance, and the implied obligation to provide software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue from services and software enhancements is deferred and amortized over the service or update period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed.

#### Sublease Revenue:

A portion of our former principal executive office was subleased to a third party through 2021. In accordance with Accounting Standards Update (ASU) 2016-02, “Leases” (Topic 842), the Company recorded sublease income as revenue.

The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Customer deposits primarily relate to future system sales but can also include deposits on disposable sales. Deferred revenue is primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance obligations are satisfied. See Note 2 for additional detail on deferred revenue. The Company did not have any impairment losses on its contract assets for the periods presented.

### Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The costs capitalized as contract acquisition costs included in prepaid expenses and other assets in the Company’s balance sheets were $0.2 million as of September 30, 2022 and December 31, 2021. The Company did not incur any impairment losses during any of the periods presented.

### Leases

The Company accounts for leases in accordance with ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company determines if a contract contains a lease at inception. For contracts where the Company is the lessee, operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liability on the Company’s balance sheet. The Company currently does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s operating leases. Additionally, the Company applies the short-term lease measurement and recognition exemption in which right of use assets and lease liabilities are not recognized for leases less than twelve months.

As disclosed in Note 6, on March 1, 2021, the Company entered into an office lease agreement (the “Lease”) with Globe Building Company (the “Landlord”), under which the Company is leasing executive office space and manufacturing facilities of approximately 43,100 square feet of rentable space located at 710 N. Tucker Boulevard, St. Louis, Missouri (the “Premises”) that serves as the Company’s new principal executive and administrative offices and manufacturing facility. Lease payments commenced on January 1, 2022 and the lease has a term of ten years, with two renewal options of five years each. The minimum annual rent under the terms of the Lease ranges from approximately $0.8 million in 2022 to $1.0 million in 2031.

The Company gained access to the Premises in the third quarter 2021 to begin constructing leasehold improvements. In accordance with ASC 842, the Company recorded a ROU asset and lease liability. The initial recognition of the ROU asset and lease liability was $5.9 million. In the fourth quarter of 2021, the Company received an occupancy permit and relocated its operations to the new leased space.

### Cost of Contracts

Costs of systems revenue include direct product costs, installation labor and other costs, estimated warranty costs, and initial training and product maintenance costs. These costs are recognized at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recognized at the time of sale. Cost of revenue from services and license fees are recognized when incurred. Cost of sublease revenue was recognized on a straight-line basis.

### Share-Based Compensation

The Company accounts for its grants of stock options, stock appreciation rights, restricted shares, restricted stock units and for its employee stock purchase plan in accordance with the provisions of general accounting principles for share-based payments. These accounting principles require the determination of the fair value of the share-based compensation at the grant date and the recognition of the related expense over the period in which the share-based compensation vests.

For time-based awards, the Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights at the date of grant. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Restricted shares and units granted to employees are valued at the fair market value at the date of grant. The Company amortizes the fair market value to expense over the service period. If the shares are subject to performance objectives, the resulting compensation expense is amortized over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.

For market-based awards, stock-based compensation expense is recognized over the minimum service period regardless of whether or not the market target is probable of being achieved. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

Shares purchased by employees under the 2009 and 2022 Employee Stock Purchase Plans are considered to be non-compensatory.

### Results of Operations

#### Comparison of the Three Months Ended September 30, 2022 and 2021

*Revenue*. Revenue decreased from $9.1 million for the three months ended September 30, 2021, to $7.7 million for the three months ended September 30, 2022, a decrease of 16%. Revenue from the sales of systems decreased to $2.4 million for the three months ended September 30, 2022, from $3.5 million for the three months ended September 30, 2021, due to changes in product mix in the current year period. Revenue from sales of disposable interventional devices, service, and accessories was approximately $5.3 million for the three months ended September 30, 2022 and 2021. The Company recognized $0.2 million of sublease revenue for the three-month period ended September 30, 2021. The sublease ended December 31, 2021.

*Cost of Revenue.* Cost of revenue decreased from $4.4 million for the three months ended September 30, 2021, to $3.1 million for the three months ended September 30, 2022, a decrease of approximately 29%. As a percentage of our total revenue, overall gross margin increased to 60% for the three months ended September 30, 2022, from 52% for the three months ended September 30, 2021. Cost of revenue for systems sold decreased to $2.0 million for the three months ended September 30, 2022, from $3.4 million for the three months ended September 30, 2021, driven by changes in product mix in the current year period. Gross margin for systems was $0.4 million for the three months ended September 30, 2022, compared to $0.2 million for the three months ended September 30, 2021. Cost of revenue for disposables, service, and accessories increased to $1.1 million for the three months ended September 30, 2022, from $0.8 million for the three months ended September 30, 2021, driven by increased costs incurred under service contracts and changes in excess and obsolescence reserves. Gross margin for disposables, service, and accessories was 80% for the three months ended September 30,2022 compared to 86% for the three months ended September 30, 2021. Cost of sublease revenue was $0.2 million for the three months ended September 30, 2021. The sublease ended December 31, 2021.

*Research and Development Expenses*. Research and development expenses increased from $2.5 million for the three months ended September 30, 2021, to $2.8 million for the three months ended September 30, 2022, an increase of approximately 13%. This increase was primarily driven by project timing and measured hiring in the current year period.

*Sales and Marketing Expenses*. Sales and marketing expenses increased from $2.9 million for the three months ended September 30, 2021, to $3.1 million for the three months ended September 30, 2022, an increase of approximately 7% primarily due to higher headcount costs.

*General and Administrative Expenses.* General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses decreased from $3.9 million for the three months ended September 30, 2021, to $3.7 million for the three months ended September 30, 2022, a decrease of approximately 6%. This decrease was primarily driven by reduced professional service fees in the current year period.

*Interest Income (Expense)*. Net interest income was approximately $0.1 million for the three months ended September 30, 2022, compared to less than $0.1 million for the three months ended September 30, 2021.

#### Comparison of the Nine Months Ended September 30, 2022 and 2021

*Revenue*. Revenue decreased from $26.8 million for the nine months ended September 30, 2021, to $20.8 million for the nine months ended September 30, 2022, a decrease of approximately 22%. Revenue from the sales of systems decreased to $4.6 million for the nine months ended September 30, 2022, from $8.8 million for the nine months ended September 30, 2021, due to decreased system sales volumes and changes in product mix in the current year period. Revenue from sales of disposable interventional devices, service, and accessories decreased to $16.2 million for the nine months ended September 30, 2022, from $17.2 million for the nine months ended September 30, 2021, a decrease of approximately 6%, primarily driven by timing of service contract revenue, lower procedure volumes, and the strengthening of the US dollar during the current year period. Sublease revenue was $0.7 million for the nine-month period ended September 30, 2021. The sublease ended December 31, 2021.

*Cost of Revenue.* Cost of revenue decreased from $9.5 million for the nine months ended September 30, 2021, to $6.7 million for the nine months ended September 30, 2022, a decrease of approximately 30%. As a percentage of our total revenue, overall gross margin increased to 68% for the nine months ended September 30, 2022, from 65% for the nine months ended September 30, 2021, primarily due to changes in product mix. Cost of revenue for systems sold decreased from $6.2 million for the nine months ended September 30, 2021, to $3.8 million for the nine months ended September 30, 2022, driven by decreased system sales volumes and changes in product mix in the current year period. Gross margin for systems decreased from $2.6 million for the nine months ended September 30, 2021, to $0.8 million for the nine months ended September 30, 2022. Cost of revenue for disposables, service, and accessories increased to $2.9 million for the nine months ended September 30, 2022, from $2.6 million for the nine months ended September 30, 2021, driven by higher expenses incurred under service contracts. Gross margin for disposables, service and accessories was 82% for the nine months ended September 30, 2022, compared to 85% for the nine months ended September 30, 2021. Cost of sublease revenue was $0.7 million for the nine months ended September 30, 2021. The sublease ended December 31, 2021.

*Research and Development Expenses*. Research and development expenses increased from $7.6 million for the nine months ended September 30, 2021, to $8.2 million for the nine months ended September 30, 2022, an increase of approximately 8%. This increase was primarily due to higher project spending and measured hiring in the current year period.

*Sales and Marketing Expenses*. Sales and marketing expenses increased from $8.9 million for the nine months ended September 30, 2021, to $9.3 million for the nine months ended September 30, 2022, an increase of approximately 5%. This increase was primarily due to higher travel and compensation expenses in the current year period.

*General and Administrative Expenses.* General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses increased to $11.0 million for the nine months ended September 30, 2022, from $10.3 million for the nine months ended September 30, 2021, an increase of approximately 6%. This increase was primarily driven by higher stock-based compensation expense for the previously announced CEO Performance Award partially offset by lower professional service fees in the current year period.

*Interest Income (Expense)*. Net interest income was approximately $0.2 million for the nine months ended September 30, 2022, and net interest expense was less than $0.1 million for the nine months ended September 30, 2021.

### Liquidity and Capital Resources

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations. These liquid financial assets consist of cash and cash equivalents. We are continuously and critically reviewing our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 pandemic, the increasing recession risk, and macroeconomic headwinds.

At September 30, 2022 we had $32.4 million of cash and cash equivalents, inclusive of restricted cash. We had working capital of $30.5 million as of September 30, 2022, compared to $38.1 million as of December 31, 2021.

The following table summarizes our cash flow by operating, investing and financing activities for the nine months ended September 30, 2022 and 2021 (in thousands):

|  | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Cash flow used in operating activities | $(5,863) | $(1,727) |
| Cash flow used in investing activities | (2,009) | (201) |
| Cash flow provided by financing activities | 159 | 536 |

*Net cash used in operating activities*. We used approximately $5.9 million and $1.7 million of cash for operating activities during the nine months ended September 30, 2022 and 2021, respectively. The increase in cash used in operating activities was driven by the increase in operating loss.

*Net cash used in investing activities*. We used approximately $2.0 million of cash during the nine months ended September 30, 2022, for the purchase of equipment, construction and design costs associated with our new facility. We used approximately $0.2 million of cash during the nine months ended September 30, 2021 for the purchase of equipment and design costs associated with our new facility.

*Net cash provided by financing activities*. We generated approximately $0.2 million and $0.5 million of cash from financing activities during the nine months ended September 30, 2022 and 2021, respectively. The cash generated in both periods was driven by the proceeds from issuance of stock, net of issuance costs.

#### Capital Resources

As of September 30, 2022, the Company did not have any debt.

#### Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program that provides for Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. In general, the loan could be forgiven as long as the funds were used for payroll related expenses as well as rent and utilities paid during the twenty-four-week period from the date of the loan and as long as certain headcount and salary/wage levels were maintained. On April 10, 2020, the Company was informed by its lender, Midwest BankCentre (the “Bank”), that the Bank received approval from the SBA to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”). Per the terms of the PPP Loan, the Company received total proceeds of approximately $2.2 million from the Bank on April 20, 2020. In accordance with the loan forgiveness requirements of the CARES Act, the Company used the full proceeds from the PPP Loan primarily for payroll costs, rent and utilities. In March 2021, the Company applied for loan forgiveness and in June 2021, full loan forgiveness was granted by the SBA. The Company recognized a net gain from debt extinguishment of approximately $2.2 million upon forgiveness.

### Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market, or credit risk that could have arisen if we had engaged in these relationships.

## Controls and procedures

As filed, 1,499 characters.

*Disclosure Controls and Procedures:* The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

*Changes In Internal Control Over Financial Reporting:* The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.

Filed Nov 14, 2022.
Source: SEC EDGAR, the filing index for accession 0001493152-22-031744. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.