Stereotaxis Inc. Reports Operating Results (10-Q)
Stereotaxis Inc. has a market cap of $196.2 million; its shares were traded at around $3.9 with and P/S ratio of 3.9.
Highlight of Business Operations: Revenue. Revenue decreased from $11.1 million for the three months ended March 31, 2009 to $10.6 million for the three months ended March 31, 2010, a decrease of approximately 5%. Revenue from the sale of systems decreased from $6.9 million to $5.2 million, a decrease of approximately 24%, primarily due to a decrease in the number of NIOBE systems sold. We recognized revenue on four NIOBE systems and a total of $0.8 million for ODYSSEY and CINEMA systems during the 2010 period, versus five NIOBE systems and a total of $0.9 million for ODYSSEY and CINEMA systems during the 2009 period. Revenue from sales of disposable interventional devices, service and accessories increased to $5.4 million for the three months ended March 31, 2010 from $4.3 million for the three months ended March 31, 2009, an increase of approximately 26%. The increase was attributable to the increased base of installed systems, the resulting disposable sales and service contracts, as well as favorable pricing on a next generation proprietary disposable.
Cost of Revenue. Cost of revenue decreased from $3.5 million for the three months ended March 31, 2009 to $2.9 million for the three months ended March 31, 2010, a decrease of approximately 16%. Cost of revenue for systems sold decreased from $2.6 million for the three months ended March 31, 2009 to $2.1 million for the three months ended March 31, 2010, a decrease of approximately 19%, primarily due to the decrease in the number of NIOBE systems sold in the most recent quarter. Cost of revenue for disposables, service and accessories decreased to $0.8 million during the 2010 period from $0.9 million during the 2009 period. As a percentage of our total revenue, overall gross margin improved to 72% for the three months ended March 31, 2010 compared to 69% during the same three month period of the prior year, primarily due to a shift in revenue from system revenue to recurring revenue. Gross margin for disposables, service and accessories was 84% for the current quarter compared to 79% for the three months ended March 31, 2009.
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. At March 31, 2010 we had $24.5 million of cash and equivalents. We had working capital of approximately $4.1 million and $22.9 million as of March 31, 2010 and December 31, 2009, respectively. The decrease in working capital is due principally to the reclassification of $11 million of debt from long-term to current during the period as well as the $6.1 million use of cash from operating activities.
In December 2009, the Company amended its agreement with its primary lender to extend the maturity of the current working capital line of credit from March 31, 2010 to March 31, 2011 and to increase the total availability under the line from $25 million to $30 million, retaining the $10 million sublimit for borrowings supported by guarantees from stockholders who are affiliates of two members of its board of directors (Lenders) and considered to be related parties. Under the revised facility the Company is required to maintain a minimum tangible net worth as defined in the agreement. Interest on the facility accrues at the rate of prime plus 0.5% subject to a floor of 6% for the amount under guarantee and prime plus 1.75% subject to a floor of 7% for the remaining amounts.
As of March 31, 2010, the Company had $10 million outstanding under the revolving line of credit and a current borrowing capacity of $15.2 million based on the Companys collateralized assets, including amounts already drawn. As such, the Company had the ability to borrow an additional $5.2 million under the revolving line of credit at March 31, 2010. As of March 31, 2010, the Company was in compliance with all covenants of the bank loan agreement and had no remaining availability on its Lender loan and guarantee.
In July 2008, the Company and Biosense Webster entered into an amendment to their existing agreements relating to the development and sale of catheters. Pursuant to the amendment, Biosense Webster agreed to pay to the Company $10.0 million as an advance on royalty amounts that were owed at the time the amendment was executed or would be owed in the future by Biosense Webster to the Company pursuant to the royalty provisions of one of the existing agreements. The Company and Biosense Webster also agreed that an aggregate of up to $8.0 million of certain agreed upon research and development expenses that were owed at the time the amendment was executed or may be owed in the future by the Company to Biosense Webster pursuant to the existing agreement would be deferred and will be due, together with any unrecouped portion of the $10.0 million royalty advance, on the Final Payment Date (as defined below). Interest on the outstanding and unrecouped amounts of the royalty advance and deferred research and development expenses will accrue at an interest rate of the prime rate plus 0.75%. Outstanding royalty advances and deferred research and development expenses and accrued interest thereon will be recouped by Biosense Webster by deductions from royalty amounts otherwise owed to the Company from Biosense Webster pursuant to the existing agreement. The Company has the right to prepay any amounts due pursuant to the Amendment at any time without penalty. As of March 31, 2010, approximately $18.0 million had been advanced by Biosense Webster to the Company pursuant to the amendment. As of March 31, 2010, $6.9 million of royalty payments owed by Biosense had been used to reduce the advances and the remaining approximately $12.5 million of amounts owed to Biosense Webster has been classified as debt in the accompanying balance sheet including $4.0 million as short-term debt and $8.5 million as long-term debt. The Company recorded research and development expenses of $0.2 million and disposables, service and accessories revenue of $1.0 million for the three months ended March 31, 2010, related to this agreement.
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