10-K/A: Catheter Precision Amends 10-K to Include Related Party Transaction Details

Catheter Precision files an amendment to its 2024 annual report to include previously omitted information regarding related party transactions.

Summary

• Catheter Precision, Inc. filed an amendment to its Form 10-K for the year ended December 31, 2024, to include information about certain relationships and related party transactions that were initially omitted.
• The amendment addresses Part III, Item 13 of the original filing, focusing on transactions involving executive officers, directors, promoters, and beneficial owners of more than 5% of the company's common stock.
• The company engaged in several transactions with related parties, including employment agreements, merger-related transactions, warrant inducement offers, private placements, public offerings, and related party loans.
• David Jenkins, the CEO and Chairman, and his affiliates were involved in multiple transactions, including the conversion of convertible promissory notes, royalty agreements, and related party loans.
• Armistice Capital Master Fund Ltd., a significant shareholder, participated in warrant repricing, inducement offers, and private placements.
• The company is pursuing the acquisition of assets from Cardionomic, Inc. through its subsidiary Cardionomix, Inc., involving the issuance of common stock and a promissory note.
• The board of directors has determined that certain directors are independent under NYSE American rules, following a review of their relationships and affiliations.
• The document contains forward-looking statements regarding the acquisition of Cardionomic's assets and the company's ability to finance and develop them, which are subject to various risks and uncertainties.

Sentiment

Score: 4

Explanation: The document highlights both positive strategic moves (acquisition, capital raising) and concerning issues (related party transactions, internal control weaknesses, reliance on debt). The overall sentiment is cautiously negative due to the financial risks and governance concerns.

Positives

• The company is actively pursuing strategic transactions, such as the acquisition of Cardionomic assets, to expand its business.
• The company has successfully raised capital through public offerings and warrant inducement offers.
• The board of directors has taken steps to ensure the independence of its members, complying with NYSE American rules.

Negatives

• The company has engaged in numerous related party transactions, which could raise concerns about potential conflicts of interest.
• The company relies on related party loans, indicating potential financial strain.
• The company's internal controls and disclosure controls were not effective as of March 31, 2024, June 30, 2024, September 30, 2024, and December 31, 2024.

Risks

• The acquisition of Cardionomic's assets is subject to closing conditions and may not be completed.
• The company may not be able to obtain sufficient financing for Cardionomix to develop the acquired assets.
• The company faces competition in the medical device industry, and its products may not be accepted by hospitals, physicians, or patients.
• The company's future operating results depend on its ability to obtain components in sufficient quantities on commercially reasonable terms.
• The company's revenues may depend on customers' receipt of adequate reimbursement from private insurers and government-sponsored healthcare programs.
• The company's forward-looking statements are subject to various risks and uncertainties, including the COVID-19 pandemic and ongoing volatility in the stock markets.

Future Outlook

The company expects to acquire assets of Cardionomic, Inc. and anticipates concluding financing for its new subsidiary, Cardionomix, to fund the development of these assets independently of Catheter Precision's balance sheet; however, these expectations are subject to various risks and uncertainties.

Industry Context

The medical device industry is highly competitive, with many companies having greater resources than Catheter Precision; the company faces competition from other neuromodulation therapies and potential new drug therapies for heart failure.

Comparison to Industry Standards

• The document does not contain enough information to make a detailed comparison to industry standards.
• However, the related party transactions are high and would be considered outside of industry norms.
• The company's reliance on warrant inducement offers and private placements to raise capital is not uncommon for small, developing companies in the medical device sector, but it can be dilutive to existing shareholders.

Related Party Transactions

• In January 2023, the company entered into an oral employment agreement with Missiaen Huck, Mr. David Jenkins adult daughter, who serves as the non-executive chief operating officer of Catheter and receives annual compensation of $165,000.
• Mr. Jenkins and his affiliates held approximately $25.1 million of Old Catheters Convertible Promissory Notes that were converted in the Merger into 7,856.251 shares of Series X Preferred Stock.
• In consideration for forgiving the interest accrued but remaining unpaid under the Notes in an aggregate amount of approximately $13.9 million, Mr. Jenkins and his affiliates also received royalties equal to 11.77% of the net sales, if any, of the LockeT device, commencing upon the first commercial sale and through December 31, 2035.
• Additional, noninterest-bearing demand loans totaling $1,075,000 from David Jenkins to Old Catheter were repaid by the Company at or shortly after the closing of the merger.
• On May 30, 2024, David A. Jenkins, Executive Chair and Chief Executive Officer, loaned $500,000 to the Company in exchange for a promissory note.
• On June 25, 2024, FatBoy Capital, L.P. (FatBoy), an entity controlled by David A. Jenkins, loaned $150,000 to the Company in exchange for a promissory note.
• On July 1, 2024, FatBoy loaned an additional $250,000 to the Company in exchange for a promissory note.
• On July 18, 2024, FatBoy loaned an additional $100,000 to the Company in exchange for a promissory note.
• On July 25, 2024, the Jenkins Family Charitable Institute loaned $500,000 to the Company in exchange for a promissory note.
• In February 2025, we formed our subsidiary Cardionomix, Inc., a Nevada Corporation (Cardionomix), in order to pursue the possible acquisition of certain assets of Cardionomic, Inc., a Delaware corporation, which has ceased operations.
• We issued 82% of the common stock of Cardionomix to us, 5% to David Jenkins, 7% to FatBoy and 6% to certain business associates of Mr. Jenkins.

Stakeholder Impact

• Shareholders may be concerned about the related party transactions and the potential dilution from warrant exercises and stock issuances.
• Employees may be affected by the company's financial performance and its ability to secure funding for future operations.
• Customers and suppliers may be impacted by the company's ability to develop and commercialize its products.
• Creditors may be concerned about the company's reliance on debt and its ability to repay its obligations.

Next Steps

• Closing the proposed acquisition of assets from Cardionomic, Inc.
• Securing financing for Cardionomix to develop the acquired assets.
• Addressing the identified material weaknesses in internal controls.
• Monitoring the performance of the LockeT device and related royalty payments.

Key Dates

Keywords

related party transactions, warrant inducement, public offering, private placement, convertible notes, Cardionomic acquisition, David Jenkins, Armistice Capital, LockeT, financing