Stereotaxis Inc (STXS) 2017 Q4 法說會逐字稿

Good morning. Thank you for joining us for the Stereotaxis fourth quarter 2017 earnings conference call. Certain statements during this conference call and question-and-answer period to follow may relate to future events, expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company in the future to be materially different from the statements that the company's executives may make today.

These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. (Operator Instructions) As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis. Please go ahead.

Thank you, operator. Good morning, everyone. I'm joined today by Marty Stammer, our Chief Financial Officer. I hope you all had an opportunity to review the 2 press releases we shared this morning, one describing our financial results and the other describing our raising $10 million in a nondilutive financing by inducing the early exercise of outstanding warrants.

I'll speak to the financing in my prepared remarks, but given that this is our annual call, I want to first use the occasion to provide a broader overview on Stereotaxis, our vision and goals, our accomplishments in 2017 and our focus in 2018. Following our prepared remarks, we look forward to opening the line to your questions.

Stereotaxis has developed and is commercializing a suite of robotic technologies that enable better treatment of cardiac arrhythmias. Cardiac arrhythmias are a common condition where the heart beats irregularly. Tens of millions of individuals in the developed world suffer from arrhythmias, prevalence is growing rapidly, and when left untreated, arrhythmias increase the risk of stroke, congestive heart failure and sudden death. The primary therapies prescribed to arrhythmias patients include pharmaceuticals, implantations of pacemakers, ICDs and cardiac ablation procedures.

Cardiac ablation refers to a minimally invasive procedure, where a catheter is introduced into the vein in the upper leg of a patient and then snaked up several feet into the heart chamber. The tip of the catheter delivers ablative energy to specific parts of the heart muscle to stop rogue electrical impulses that are causing the arrhythmia. Cardiac ablation has become a widely accepted therapy over the last 2 decades, with approximately 850,000 global cardiac ablation procedures performed annually, and over $4 billion in annual sales of medical devices. The clinical value of cardiac ablation was most dramatically demonstrated in a publication in The New England Journal of Medicine last month, in which patients randomized to cardiac ablation saw a 46% reduction in mortality at 3 years versus those placed on best pharmaceutical therapy.

While traditional, manually operated cardiac ablation procedures provide significant clinical value, they have inherent limitations. In order to move a manual catheter, physicians apply force with their fingers onto the base of the catheter in order to move its tip. To translate force from the base to the tip, manual catheters require internal pull wires and rigidity along the catheter shaft, which limits the catheter's precision, reach and stability, and can cause safety issues in sensitive anatomy. The reliance on x-ray for visualization exposes patients and physicians to radiation. And finally, these procedures are difficult and complicated and require significant skill to perform. The technique of navigating a manual catheter is akin to gardening delicate flowers by holding a hose from its base or writing in small fonts holding a pencil from the eraser.

Stereotaxis' robotic mechanism of action fundamentally transforms the experience of catheter navigation. Our products include a robotic magnetic navigation system composed of 2 magnets next to the operating table, on which the patient lies. During the procedure, a physician sits behind a large-screen computer control station, and using a mouse and intuitive interface, manipulates those magnets to adjust the magnetic field around the patient. This allows a physician to precisely direct and steer a cardiac ablation catheter that has a magnet at its tip.

By moving the catheter directly from the tip, a robotic magnetic catheter has unprecedented reach, precision and stability. Since we do not rely on pull wires or shaft rigidity, we can design catheters that are very gentle, like a piece of cooked spaghetti, and far safer when moving in delicate anatomies.

The benefits for patients and physicians are multiple fold. Unmatchable catheter precision, reach and stability enables the treatment of complex arrhythmias that can otherwise not be treated at all or cannot be treated well with manual catheters. Robotic precision helps ensure that therapy is delivered effectively to the right target tissue. The gentler magnetic catheter reduces the risk of perforations and other adverse events, improving patient safety. Radiation exposure per patient is reduced as a physician's reliance on x-ray for navigation decreases.

Physicians perform a robotic procedure, seated, unscrubbed, protected from radiation, with all the procedure information on the large screen in front of them and all the controls over the procedure at their fingertips. This allows them to focus on the design and delivery of therapy rather than the mechanical manipulation of a catheter. They do so from an ergonomic, comfortable position with reduced dependency on staff and with improved personal safety and career longevity.

The long-term safety risk for physicians performing nonrobotic manual interventional procedures is significant, with studies showing 49% suffering orthopedic injury as a direct result of their work and 85% of brain tumors in interventional physicians being found in the left side of the brain as opposed to the right side, as a physician usually stands with their left side closer to the x-ray source.

These benefits of robotic cardiac ablation are not theoretical. They have been demonstrated extensively in the real-world experience of hundreds of physicians at over a hundred leading hospitals, treating over 100,000 patients with our technology to date. As part of our recent 100,000 procedure milestone, we have been showcasing and celebrating the physicians and hospitals that helped us reach that milestone. I encourage you to visit our website and social media pages to browse the several dozen physician profiles showcased to date. It's an efficient and effective way to corroborate the varied benefits robotics provide to their patients and practices.

The benefits of robotic ablation have also been demonstrated with scientific rigor in hundreds of peer-reviewed publications. Last year was particularly successful in increasing our clinical validation, both measured by quantity and quality. A few data points. 37 clinical publications showcased the value of our technology in 2017, up from 22 in 2016 and 19 in 2015. An independent meta-analysis published in the September issue of the Journal of Interventional Cardiac Electrophysiology compared 779 ventricular tachycardia patients treated with Stereotaxis' robotic technology to manual catheters. The results showed clinically meaningful and statistically significant benefits for robotics across the trifecta of efficacy, safety and efficiency, including a 39% lower risk of VT recurrence, a 65% reduction in complications and shorter procedure times.

The European Heart Rhythm Association recently published a consensus document on the occupational risk of radiation for electrophysiologists and identified our technology in its recommendation as allowing near 0 exposure to operators. A press release we shared on February 1 provides significantly more information on the topic. In a recently completed clinical evaluation report, an internal systematic review of all peer-reviewed publications prepared for regulatory purposes, Stereotaxis' robotic technology reduced major complication rates by 62%, minor complications by 43% and patient radiation duration by 31%.

We are working on ways to ensure this dramatic data is more readily available to patients, physicians and the broader community. We are also progressing on a randomized, well-designed, prospective MAGNETIC-VT trial to corroborate our superiority in VT. We entered 2017 with only 14 patients enrolled, but just randomized our 100th patient and have seen a significant increase in enrollment in recent months.

When I joined Stereotaxis a year ago, I recognized these fundamental core strengths: a highly sophisticated and differentiated robotic technology that has been extensively validated, and that provides clinical benefits to patients and physicians in a very large, growing market. That setup is a solid foundation for our vision of Stereotaxis revolutionizing electrophysiology and being the preeminent robotic company across endovascular surgery.

I also recognize that Stereotaxis was a company with significant challenges: initial missteps with an aggressive premature commercialization, poor allocation of financial and human resources, limited engagement with partners and potential partners in the industry and the lack of a clear innovation and commercial strategy put Stereotaxis in need of a turnaround. Our 3 key areas of focus last year were: financial discipline, improved commercial execution, and reinvigorating Stereotaxis' commitment to innovation and collaboration. I'm proud of our substantial progress along all 3 of these.

In the 3 quarters of 2017 since joining Stereotaxis, our operating expenses were, on average, 19% lower year-over-year, an annualized saving of approximately $5.9 million. The reduction in operating expenses continues to reflect the year-over-year impact of lower executive compensation and more efficient management of expenses across the organization, but does not represent any material changes in the organization's personnel, infrastructure or capabilities. I'm confident that the reduction in expenses did not cut Stereotaxis' muscle.

On the contrary, we reduced expenses while being much more active, nimble and effective in a broad range of commercial and innovation initiatives. I expect operating expenses to grow modestly as we advance our innovation initiatives in 2018, and I'm comfortable that with continued vigilance, we'll maintain a relatively low burn rate. And with our strengthened balance sheet, we can advance our initiatives and reach profitability without the need for additional financing.

From a commercial perspective, our overarching goal is to ensure over physician customers have successful, growing robotic ablation practices. Having successful robotic practices that attract patients, capture market share in their region and showcase the clinical and commercial benefits of adopting robotics creates an environment for significant adoption of our technology. We have a well-defined, multipronged strategy here, categorized into 6 fields: effective physician training, good procedure support, tools to drive physician practice growth, tools to generate patient demand, building physician relationships, and supporting impactful clinical literature.

Highlights of this past year include support for the successful establishment of a global physician Society for Cardiac Robotic Navigation, creatively enhancing our clinical support capabilities, recruiting the first participants in what we expect to be a robust robotic ablation fellowship program, reinvigorating our social media presence through the celebration of our 100,000 procedure milestone and a marked increase in the quality and quantity of peer-reviewed publications detailing the clinical benefits of our technology. The early impact of these commercial efforts are evident in the accelerated procedure growth shown in the quarter and in the annual procedural growth, which represents a positive reversal of a multiyear trend. We are just in the first innings of these commercial efforts and have an extensive list of projects being worked on as we speak.

From an innovation perspective, Stereotaxis cannot, on the one hand, rightfully count robotics as the cutting edge of medicine, while on the other hand avoid meaningful innovation. Our technology also works in an ecosystem with others and thus, collaboration is crucial. I believe we are doing well in reinvigorating Stereotaxis' commitment to innovation and collaboration.

We have identified and are advancing a strategic innovation plan that addresses each of the 5 core technologies utilized in a robotic cardiac ablation procedure: our robotic magnetic system, the magnetic ablation catheter, software that allows for intuitive navigation, the cardiac mapping system, and the fluoroscopy system. The 3 guiding goals of our innovation plan are improving patient care, physician choice, and technology availability. The right innovation plan can provide these benefits to patients, physicians and hospitals, while also improving Stereotaxis' opportunity. And I believe we have a plan that is elegant and both medically and commercially sound.

Importantly, it also reflects the realities of what can be achieved internally with our resources, and what we believe potential collaborators are open to working with us towards. While realization of the various aspects of the plan will play out over the coming years, we do expect it to meaningfully contribute to revenue in 2019 and beyond. The details of the innovation plan will become clearer over time as it becomes appropriate to provide additional disclosures.

I'll now pass the call over to Marty, who will discuss the fourth quarter financial results in more detail.

Thanks, David, and good morning, everyone. Revenue for the fourth quarter of 2017 totaled $7.6 million, up from $7.3 million in the prior-year quarter. Recurring revenue was $6.9 million in the quarter, up 7% from $6.5 million in the prior-year quarter. Recurring revenue benefited from a 7% year-over-year growth in global procedures, with all major geographies contributing to the acceleration in procedure growth. Recurring revenue for the full year 2017 of $26.9 million represents a 2% increase above the $26.4 million recorded for the same period in 2016.

Procedures for the full year 2017 grew 3% over the full year 2016, the first year of annual procedure growth since 2012. System revenue in the fourth quarter was $600,000, down from $800,000 in the prior year quarter. System revenue of $4.3 million for the full year 2017 was down from $5.8 million in 2016, primarily reflecting the expiration of an Odyssey distribution agreement and the timing of Niobe system installations in 2016.

In the fourth quarter of 2017, Stereotaxis recorded a noncash inventory-related charge of $3.8 million to systems cost of goods sold. Including this charge, gross margin in the quarter was $2.2 million or 29% of revenue versus $5.3 million or 73% of revenue in the fourth quarter of 2016. Excluding the noncash inventory-related charge, gross margin for the fourth quarter of 2017 would have been 80%.

Operating expenses in the fourth quarter were $5.9 million, down 20% from $7.4 million in the prior-year quarter, and down 2% sequentially from $6.1 million in the third quarter. Operating loss in the fourth quarter was $3.7 million compared to $2.1 million in the prior-year fourth quarter. Excluding the noncash inventory-related charge, the company would've shown an operating profit of $100,000.

Net loss for the fourth quarter of $2.6 million includes $1.2 million of mark-to-market warrant revaluation income. Excluding the mark-to-market warrant revaluation income and the inventory-related charge, the company would have reported net income of less than $100,000 for the quarter.

Cash burn for the fourth quarter was $800,000. Cash burn for the full year 2017 was $4.8 million, of which $2.7 million was from the first quarter of 2017, and the remaining quarters of the year averaged a cash usage of under $700,000 per quarter. This cash usage for the 2017 full year does not include the receipt of any cash from Niobe system sales and compares to a cash burn of $7 million in 2016. At December 31, we had cash and cash equivalents of $3.7 million and no debt.

We announced this morning that we raised $10 million by inducing the early exercise of already outstanding warrants. On a pro forma basis, including the capital from the exercise of these warrants, Stereotaxis would have had $13.7 million in cash and cash equivalents and no debt as of the end of 2017.

I'll now hand the call back to David.

Thank you, Marty. Before opening the call to Q&A, I want to make a few comments on the financing announced this morning. First, I'm grateful for the continued support and enthusiasm of our shareholders and board members. The additional capital from these warrant exercises, in combination with our already debt-free balance sheet and more prudent management of operating expenses, places Stereotaxis in the most stable financial position it has enjoyed in many years. Stereotaxis is now in a strong financial position that allows us to deliver on our commercial and innovation initiatives over the coming years and reach profitability without the need for additional financings.

From a structural perspective, I believe we found an elegant solution to raising capital by inducing the exercise of warrants over 3.5 years prior to when they would normally be exercised. This structure allowed us to avoid dilutive financing and to bring in sufficient capital now when it is highly useful, without any incremental dilution to our fully diluted capital structure. The warrant exercise and amendments also represent a necessary first step on our path towards relisting on NASDAQ by removing the warrant liability from our balance sheet. The long-term 18-month lock-up agreement entered into by the warrant holders reflects their commitment to the long-term success of Stereotaxis and belief in our long-term promise.

That concludes our prepared remarks. Operator, can you please open the line to questions?

(Operator Instructions) (technical difficulty) today is from Paul Nouri from Noble Equity.

On the reusable revenue line, you had a pretty good step-up from prior quarters. I'm just wondering if you can build upon that in 2018. Or if there were any one-time items in the fourth quarter?

So in the fourth quarter, there were definitely no one-time items. I think I even looked into are there any other explanations for the growth. There was 1 extra selling day in the fourth quarter of this year versus the fourth quarter of last year, but that's about 1% or 1.5%, I think, of delta. Outside of that, there was no other items that could explain this growth in procedures or recurring revenue. So it was, overall, an exciting quarter for us to see that type of growth after, obviously, many years of not having any growth at all. I -- as we go into 2018, I think we have definitely tailwinds in terms of the progress of these commercial initiatives as they become more fully out there, and as we implement more of them.

I know we probably also have some headwinds. There's a few sites that are high users of us that will be moving their systems over the course of the year. I think in past calls, I mentioned that, typically, there's a replacement cycle for EP Labs. And during those periods, our sites get moved and our system is usually down for a couple of months or a few months. So I know we have a few of these that are taking place over the course of this year that are a little bit of a headwind, but otherwise, there was nothing abnormal in the fourth quarter results. And there's nothing else that kind of I see as a real headwind from a procedure perspective.

Okay. And I think as part of your strategy going forward, you talked about greater doctor training. Was that already in place in the fourth quarter? Or are these steps that you're going to take in 2018?

These are all gradual, incremental improvements. And so I would say that most of what you see in the fourth quarter is really kind of the initial steps of us being more active, engaging more with our customer partners, and not yet the impact of structural improvements that are kind of reflected across the organization. As an example, we actually just had, about 1 month ago, in Las Vegas, a training event for ventricular tachycardia. We had about 18, I believe, participants who flew in to Las Vegas to do that the event. It was very successful, and we've seen the impact of it even after that. And so overall, I don't think that you saw some of the improvements in training in the fourth quarter. I think those are things that will be implemented over time.

Okay. And then, what should we think about the diluted share count approximately? I mean, I know there's some things to take into account, like options. But I guess it should be a bit simpler now with the warrants being exercised. Is it around 90 million or 95 million or am I off?

I can take that one, Paul. That's very close, but probably a little low. So we have about 23 million common shares outstanding as of 12/31. With the warrants exercised, that would provide another 36 million outstanding, which gets us fairly close to 60 million. Then the majority of what would be remaining would be the potential conversion of the preferred shares, which would be about another 40 million. So I would look at it about 100 million fully diluted.

Each of those were conservative, a little bit overstated, so I think it's about 97 million or 96 million on a fully diluted, including all options, warrants, common shares, preferred shares.

And moving on, our next question comes from [Andrew Jay] from [ACME Health Investors].

We're talking a lot about ventricular tachycardia. Can you -- and the data from your 779-patient meta-analysis showing that using Niobe ablation gives superior results that are clinically superior. Can you just remind us of the size of the opportunity? And how you're progressing -- how you see yourself -- I imagine, part of the growth strategy is converting some of those patients from medical management to use of ablation. Kind of, can you just talk a little bit about that opportunity? And how -- what are you doing to effect that?

Sure. You're right, there's a -- that's a good question. Data, even sometimes simple data, is not always the easiest to find. But let me take a shot at that. There seems to be about 85,000 or so VT kind of ventricular cardiac ablation procedures performed annually, of which, obviously, the vast majority of those are performed manually. The larger opportunity is exactly as you defined, which is there's a wide, wide group of patients out there that have ventricular arrhythmias that are not being treated at all because the difficulty of performing those procedures is high. And so most physicians do not perform the procedures and most referring physicians might not even know that cardiac ablation is a suitable option for those patients.

In, for example, PVCs, premature ventricular contractions, there should be millions of those patients out there. A cardiac ablation procedure to treat the condition is fairly easy procedure, if you know -- if you are able to reach the right spots in the ventricle. And so it's one where we've seen a few sites grow very successful practices by focusing on that, but most physicians just don't perform the procedures because it's technically difficult to move a catheter into those areas of the ventricle and to hold the catheter stable on the papillary muscles. If you look at kind of something like the VT training event that happened a month ago, that I just touched upon in the last question, a large reason why many of the attendees attended that training event was because they wanted to learn how to do ventricular procedures, and how to grow their practices on the ventricular side.

Most of those attendees had very robust practices focused on atrial fibrillation, but they did want to learn how to become more, both technically savvy in catheter navigation using magnetic robotics and also savvy in how to treat arrhythmias in the ventricle. And so events like that help grow the overall market for cardiac ablation in the ventricle. And through kind of that gradual grinding away and physician-by-physician effort, we think we can grow it. And that's also where some of the other commercial initiatives come into play, like materials that help physicians speak to their referral physicians, help speak directly to patients, that becomes kind of a holistic strategy on how to grow the therapy.

One other question on a slightly different topic -- thank you for that answer. In the release on the warrant exercise, you mentioned a potential relisting on the NASDAQ. Do you have a timeline for that? And what's your thoughts on moving that forward?

Sure. So let me give you kind of some thoughts on the topic. We definitely do want Stereotaxis to become a part, again, of the broader public company community. I think that's important. I think it's good for shareholders. I think it's good for the company, and we're exciting enough of a company from a technology perspective and from a business perspective that we should be a part of the normal community of medical device companies. One of the big barriers to uplisting was the fact that we had a very significant -- it's really an accounting topic. It's not a liability, in my mind, from any fundamental perspective, but from an accounting perspective, it was counted as liability from the warrants that were outstanding. And part of the reason why we settled on this type of transaction was to remove the warrant liability entirely. That allows us to have an owner's equity, which is about enough to allow us to uplist to NASDAQ.

And the other big barrier is, obviously, the stock price. I'd like to avoid reverse splits, and so my preference is not to do a reverse split. We might seek at least board authorization in order to do a reverse split at the next shareholder meeting. And so you might see that in the shareholder materials. But again, that's something that -- if we seek it, it would be as kind of a broader authorization to do it at some point in the future. That's not something that we necessarily want to pull the trigger on right away. And we'll think about when is the best point to uplist on NASDAQ. Overall, again, I prefer to be on NASDAQ. I prefer to work towards that. As you see, we're trying to make sure we do the right steps such that we can do so, but I also don't want to rush it artificially. I want to make sure it's done from a position of strength.

We'll go next to John Morganelli, a private investor.

First of all, I want to compliment David for the work he's done over the last year. I think it's certainly moving in the right direction from where we were. Obviously, as an investor, I'm very concerned about sales of systems because it seems to me that, that's the future of revenue that's going to grow this company. And I understand the strategy that's been outlined, not only today but the last call. But I'm concerned about the stock price and also this reverse split. Shareholders like myself, long term, have gotten killed because of these ongoings that have occurred under previous leadership, and I'm glad to hear David say that. My question is, what -- is there a strategy moving forward about how do we go about selling this great product, which we all agree is great, as you described it? And in the short term, is there anything being done about getting more investors that would raise the price for this stock because of people investing in the company?

Yes. Those are 2 very good questions, and thank you for the comments, John. So let me focus first on the system side, and then maybe on the stock side. On the system side, it is a good question. Again, it was asked, I think, on the last call and the call before that as well, why are we not selling more systems. It is definitely not because of a lack of opportunity. I -- there are several hundred EP Labs being renovated each year, each represents an opportunity for adoption of our technology. And given the robust sales of other robots in urology and gynecology and general surgery by Intuitive Surgical and Stryker and the overall attractive clinical value that we provide and the revenue that EPs generate to hospitals versus some of those other specialties, I don't believe that the opportunity is our problem.

So the challenges are a few fold. Some of it is that we're just small, and we have very small market share and we have a very small sales force. And overall, we're trying to orient the sales force towards focusing on procedures and focusing on the initiatives that I described earlier, which are really trying to make sure we have successful practices, because that's the nice way to grow over the long term rather than trying to focus on system sales, and then not having those capabilities and processes in place and running into the same issues Stereotaxis faced many years ago when it had great growth in sales, many system sales, but ultimately, that was a liability rather than a benefit, if those systems ultimately were not used. The other thing kind of to note, and I mentioned it also, I think, on one of the last calls is that, right now, we're lacking a replacement cycle of sales. Every capital equipment company I know has a replacement cycle. Given our active installed base, you would think we should have about and a useful life typically of about 10 years for every lab. You would think that we should be selling 10 plus systems a year just from a replacement cycle. The fact that, that doesn't exist is obviously not right, but I think we haven't put in place the right framework for that type of replacement cycle to take place. That's not something that's being ignored. But again, there's a little bit of work on our side to do in order to make sure the environment's right for that.

And a final set of points, and I think these are really kind of the fundamental that we're -- issues that we're trying to address is that we have many physicians who are excited about adopting robotics. And I see it regularly, so I'm very confident that we have physicians at various hospitals that would very much like to have our system. But there are concerns that also physicians, and more often hospital administrators raise, and those have to do with things like the fact that we have overall -- we had, prior to this financing, a relatively low balance sheet, cash levels, the fact that we are a penny stock, that we're not listed on NASDAQ. And I think, most importantly, the fact that they haven't seen true innovation from Stereotaxis on a lot of the core technologies for many years. And before purchasing a system for $1.5 million-plus, they want to see that there's a clear innovation plan, and that there is kind of a guarantee that we're going to be around, and are going to be committed to innovation for the long term.

And so I think that, from my vantage point, ensure that we progress sufficiently far on the innovation projects, such that it becomes publicly evident to everyone how that plan looks like, and so that there's comfort for physicians and hospitals that, that plan is clinically sound and clinically elegant and financially sound. That is really kind of my primary focus this year. And I think we can advance that plan without really increasing the burn rate in a meaningful way. As I mentioned, the burn rate over the last few quarters was not -- did not reflect any cash from system sales. I think we are managing the company in a relatively disciplined fashion. And we have the ability to do significant innovation with -- it will require some incremental capital, but not kind of amounts that are outside of our capabilities. And so I think we can advance that. And I think that, that's really, in my mind, the primary gating factor to more system sales. If I kind of (technical difficulty) if I -- sure. Do you want me to pivot to the second part of your question?

Yes, thank you.

Sure. So on the stock side, I -- whenever the opportunity presents itself to speak with investors, I look forward to doing that. I was grateful that in the fourth quarter, we were able to speak at the Piper Jaffray Healthcare Conference. The LD Micro, actually, conference -- I was just invited to give a webcast actually tomorrow afternoon. So they have a virtual LD Micro conference, I'll be speaking there. Given the last-minute nature, I didn't have the opportunity to put it out in a press release. I apologize. And so when the opportunity presents itself, I look forward to speaking with potential investors and I look forward to creating the environment where it's more easy to invest in Stereotaxis. But again, that's a gradual process, and I don't have any quick-fix solutions. All I can say is that by day in, day out, trying to make the right decisions, trying to be available, trying to be responsive and trying to make sure, most importantly, that the fundamental business improves the way it should, I expect that we will see incremental demand in interest over time.

One last comment. David, I hope you stay with us for a while.

Thank you. I'm committed. That I can guarantee you.

(Operator Instructions) We'll go next to Andrew Ghezzi from Investwerx.

Just a quick question, probably 2 parts here. One is that there was an event that you posted at on Twitter regarding a remote procedure, where a professor, an EP, I think, Professor over in Dubai, performed surgery remotely on a patient in Finland. Could you give us some more color on the purpose of that? I know there's a lot of marketing behind it. It looks like it was a great effort, really well attended. But is that something you see down the road where physicians are going to access into the system remotely?

So, that is -- I'm glad you brought that up. That was a very fun event. And so I'll try to share some of my thoughts here. First of all, you're right about the event. A Finnish physician was attending an electrophysiology conference in Dubai. While seated in Dubai and working off of a laptop, he was able to treat a patient who was at his hospital in Finland. And he was able to navigate the catheter remotely. That is obviously -- it's kind of magic when you step back and actually think about it. It's magic and it is exciting kind of to see that take place. Now, to be honest, Stereotaxis has had that capability for many years. I believe it's Professor Pappone from Milan, even 10 years ago or so, did several of these cases across the Atlantic Ocean. And so the capability exists.

We are -- we're experimenting with the capability. I know that there are several physicians who are excited about it and have brought it up as something that would be exciting for them to do. Outside of the kind of showmanship of it, though, there are probably a few practical applications that we're actually seriously kind of thinking about. So it's nice to do these things for fun, but you want to also know what could be real valuable usage of a capability like this on a regular basis over the coming years. And kind of the 2 that I would say right now, kind of are on my mind, one is -- as you know, we actually have the ability to provide remote clinical support. So we have a few individuals in St. Louis who are able to remotely view and provide guidance to physicians, both technical guidance and clinical guidance, as they do their case. And again, this is possible because all of the procedure information in a robotic procedure is consolidated and presented onto one screen. And so we can see exactly everything that the physician is seeing during the procedure.

There are many cases where physicians at different hospitals are collaborating with each other. And electrophysiology is a very cognitive kind of surgery, for better word. It's a very cognitive procedure, where you're trying to consolidate a lot of information, and you're trying to actually determine how do you treat the patient, where should you ablate in order to stop the arrhythmia. So we've had kind of cases of physicians who, while they might not on a regular basis ever want to take -- and perhaps regulatory or liability purposes, they won't want to ever have control over a catheter remotely, but they would like to be able to share their screen and share their procedure in real time with other physicians and get that type of mentorship and ability to ask questions and to perform a procedure kind of with the guidance of maybe a physician that they respect and trust. And so I could see that by implementing a more robust IT structure for that, we can make that a reality. And that, that would be useful, and there are several physicians that I know would find use from that. And then the other is I've heard, let's say, in geographies like China, there are oftentimes -- the leading electrophysiologists in the large cities oftentimes travel over the weekends to smaller cities, and by smaller cities they usually still have many millions of people in China, but they will travel to smaller cities over the weekends to do many procedures. And it's a fairly taxing lifestyle, and yet that's kind of what they're expected to do.

And so perhaps, there's an opportunity where -- and this is probably something that won't be pushed forward first in the States. It's probably more likely to be pushed forward in other geographies, but where you actually make remote surgery a normal part of a practice and perhaps even a hospital purchases a system primarily for that type of capability. But again, I think we're kind of in the early stages of that. We're both having fun, trying to show physicians what's possible and what's kind of -- what's very much we're able to do, what the technology does enable them to do. And trying to think through how to build a more robust IT structure, so that maybe this can become something that's not a one-off event, but can be a real part of the value that we provide.

And then the second part of the question, regarding your cash position right now is looking as stable as it has been in a very long time. As you look at the product innovation plan, how does the $10 million play into that? Are you looking at specific small acquisitions, maybe on the mapping side? Or do you see the proceeds being more used internally for programs that are already in place and just further building them out?

So our product innovation plan doesn't have any acquisitions in it. I think there are probably attractive ways to partner with other companies to gain access to other technologies in our space without that. But again, I'll always be open to ideas. Just because we have a robust balance sheet doesn't mean that we're going to change the way we run our operations suddenly. I view this, like we put in the press release, this is a balance sheet that enables us to get to profitability and to execute on all of our innovation plans. And so I think you'll see that we'll continue to manage our expenses in a careful, thoughtful way. There will be some increases in spending, I know, from these innovation initiatives, but kind of we -- it's not shooting a shotgun with [pebbles]. There's kind of very specific things we want to invest in. I think we're able to measure the ROI of these types of investments and what that should change, both financially for the company, but also, importantly, for patients and for physicians and for hospitals. And so we will advance on those, and you'll see the gradual creep in R&D expense growing. But again, we don't view this as suddenly a windfall of cash that we're looking to spend suddenly. This should carry us for years and should allow us to, again, to execute on those initiatives. With executing on those initiatives, I expect good sales growth. And we have an organization that is a robust, built-out organization in many ways. So I don't expect that -- but again, as we grow sales, I expect that we'd become a profitable company.

Great. And one follow-up, quick question here. You had mentioned in the past, initiatives to automate the process of guiding these catheters using algorithms or whatnot. So coming through the veins and getting into the heart area and then just having a physician kind of nav between 2 points, then having this system itself ablate in certain areas. Can you just give some color on the progress towards that? Or anything else regarding automation of the system?

Sure. So a little bit of a correction. You're right entirely about automation being one of the more exciting things we're working on, on the R&D side. And when I mentioned the 5 core technologies that are used in robotic cardiac ablation procedure, one of them was navigation software. And the most exciting thing taking place there is the path towards automation. The one correction versus your statement is that our system would never actually provide ablations. Our system would allow autonomous navigation of the catheter along a predefined path that the physician places. The physician would still be doing the ablation. It's just that they would not have to worry anymore about the movement of the catheter along the path, they could define exactly which path they want the catheter to move, and it would do so.

And we do actually have, in our system right now, automation software. And it actually works. So I can show cases where in live patients at independent hospitals, they've used the automation software, and it works. What it is not, though, is it's not yet reliable, reproducible and rapid automation. And so it's not being used on a regular basis by our physicians because it's not reliable yet. And I think that the primary challenge of making it more reliable is increasing the amount of data we get in the procedure case. What I liken to is, I believe that we are like the Tesla of the industry. But if you have a Tesla that has automation software in it, and that automation software can turn the steering wheel and press the gas pedal and press the brake pedal, and it uses the GPS for guidance, that will work really well if the GPS is perfect. But if the GPS is a little bit off, if kind of the map that's provided to it is a little bit off, then the car can have accidents and can miss turns and can do all sorts of things that it shouldn't do.

We don't get full perfect mapping information. And so we -- so because of that, we're limited in what we can do. The Tesla car, obviously, accommodates for that by having cameras and having all sorts of sensors on the car itself to look for lines on the street, to look for stop signs and red lights, to measure -- it's right on the windshield, so it knows to slow down when it does a turn. We don't have any of those sensors really built in. And so either by getting better data from mapping systems or by gradually building in those data feeds, that would be the thing that I think ultimately allows us to have rapid, reproducible, reliable automation.

And we'll take another question, and it comes from [Ronald Davis], a private investor.

I think you're doing a terrific job in what you've done so far. I came in late into the conversation at about the time when you said you're contemplating getting relisted on the NASDAQ to acquire more interest. And in order to do that, you were thinking about possible reverse split at some point. I've been involved with a number of companies who've have reverse splits and who got onto the NASDAQ as a result. Ultimately, nothing happens, the stock moves back down. And the only people that are affected are the existing current public stockholders. Frankly, if you can't get the stock onto NASDAQ by creating interest in the stock with this insignificant current float, you're not going to keep it up there with even less float because there'll be less interest from any kind of institution or, for that matter, even the public. Your current activity, you're trading 30,000 shares a day; that's nothing in the real dollar value. What makes you think that if the stock were to reverse split, let's say 4 for 1, and it goes to $2, there's 0 float. Who's going to buy it?

The only benefit for a reverse split is a temporary listing, and then stock will come right back down, as 90% of reverse splits do. They return to their low level. There's no liquidity. And you'll never have any interest from the public. I say, absolutely no benefit for a reverse split, and there is no difficulty in buying the stock today. It'll be twice as difficult with half as many shares, or with 25% as many of shares, in the hands of the public. So I get -- I can go out and I have accumulated personally, let's say, 125,000 shares in the open market with no difficulty over a period of a couple months. There's anybody that's interested in the stock can buy it where it's trading. The NASDAQ listing is of insignificant value. There's only one benefit to any stockholder, and that's increasing sales and earnings. I don't care how few you have out and where you're listed. It's meaningless. That's just my personal opinion.

I very much appreciate that commentary. And just to be very clear, I mentioned that I also am averse typically to a reverse stock split. That's not at all in the plan. If we seek it in the annual shareholder vote, again, it does not reflect anything being imminent. It's just good to have the flexibility in case, for some point in the future, it makes sense. But I completely agree with you, and I hope we can get to NASDAQ without having to do anything like that. And the one point that I would just bring up about NASDAQ and reverse stock splits, that perhaps has some validity and is just different -- typically, I do the same thing. I've spent my entire life in kind of similar shoes as you on the buy side, investing in companies. I don't view it as a real difference whether a company is on NASDAQ or not.

Sometimes, it feels like physicians or hospitals are not as financially aware that a $5 dollar stock versus a $0.50 stock or a $50 stock are really the same thing. And the only thing that matters is the market cap and enterprise value, and sometimes there's a perception difference there. There's also a perception difference sometimes to being on NASDAQ or not. And so there might be some fundamental benefits that are accrued to the base business. Like you say, and really, that's the core and that's what I spend 95% of my time on is on the base business. There might be sometimes some fundamental benefits that accrue from having a stock that is not a penny stock and is listed on NASDAQ. But again, that's not anything in our near-term plans. And that's why also I don't want to commit to people that we're going to be on NASDAQ imminently because then -- because I think it's better to make sure we do it from a position of strength, and then not just kind of rushing into things.

Look, I can only tell you this. You can reverse split it, but you'll be back down to $0.75 within 6 months and off NASDAQ again. You'll have no float in the hands of the public, you'll have no activity. Currently, somebody spends $25,000 a day. There's no volume and there's no interest and there will be no way to generate interest with half as much or a 1/4 as much float because there's no float right now.

I know. Ronald, you're completely right. The way we're going to generate interest is by following through on our commercial and innovation initiative and building a great, growing company. That's the way we're going to do it.

Yes, I 100% agree with you, and I certainly hope that you can recognize, with the limited number, almost no stock in the hands of public, based on a reverse split there'll be 0 interest from anybody of any significance because they can't get in and they can't get out. I'm sorry to be the negative guy in the conversation because I think you're doing a terrific job in management. But I think that philosophy is totally detrimental to not only the current stockholders but to the company itself.

Yes. Thank you. I appreciate that.

I have no further questions. I'll turn it back to Mr. Fischel.

Okay. So thank you, everyone, for your good questions and for your feedback. I do appreciate it that you take the time to listen to this call. And I do appreciate your continued support. We look forward to working hard on your behalf over the coming months and speaking again at our next quarterly call. Have a great afternoon. Bye.

And that does conclude our conference today. Thank you for your participation. You may now disconnect.