Clearpoint Neuro, Inc. (then MRI Interventions, Inc.) — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; unaudited. The filing was submitted under the name MRI Interventions, Inc. The company commercialized the ClearPoint brain-surgery guidance system; development of its ClearTrace heart platform was suspended in 2015.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 or comparison |
|---|---|---|
| Total revenue | $1.394 million | $1.010 million; up 38% |
| Operating loss | $1.934 million | $2.945 million |
| Net loss | $2.044 million | $3.945 million |
| Net loss per share | $0.02 | $0.05 |
| Operating cash used | $1.609 million | $2.799 million |
| Cash and equivalents | $3.582 million at March 31 | $5.409 million at December 31, 2015 |
- Product revenue was $1.366 million and service revenue $28,000. Disposable-product sales rose 31% to $1.1 million; reusable-product sales rose 92% to $262,000.
- Gross margin on product revenue declined to 49% from 61%, primarily due to higher indirect production labor and an unfavorable reusable-product sales mix.
- Research and development expense increased 25% to $657,000. Selling, general and administrative expense fell 14% to $1.974 million. Q1 2015 included $753,000 of restructuring charges; Q1 2016 had none.
- Q1 2016 included a $160,000 gain from the change in fair value of warrant liabilities, compared with a $783,000 loss in Q1 2015. Interest expense was $350,000, versus $308,000.
- At March 31, total assets were $8.292 million, total liabilities $11.905 million, and stockholders’ deficit $3.614 million. Debt carrying amounts included a $4.289 million Brainlab note, $3.291 million in 2014 junior notes, and $518,000 in 2010 junior notes; accrued interest was $577,000.
Material changes, outlook and risks
- Management attributed revenue growth mainly to more procedures at a larger installed base and increased sales of both disposable and reusable ClearPoint products. Management anticipated further ClearPoint revenue growth from higher utilization and installations at new sites.
- The company expected to keep recurring operating costs around historical levels, with lower general and administrative expenses offset by higher selling and marketing costs. It nevertheless expected to continue using cash over at least the next 12 months.
- The filing states there was substantial doubt about the company’s ability to continue as a going concern. Management said additional financing would be necessary and might not be available on acceptable terms or in time; failure to obtain it could impair the company’s ability to meet obligations. Additional equity financing could dilute existing holders.
- Subsequent event: On April 4, 2016, Brainlab’s senior secured note was amended and restated with $2.0 million principal and a December 31, 2018 maturity. The company paid about $740,000 of accrued interest, cancelled $1.0 million of principal in exchange for a SmartFrame-related software license, and cancelled approximately $1.3 million in exchange for 3,972,410 units, each including a common share and warrants. The transaction reduced and extended the Brainlab debt but involved equity and warrant dilution. The filing reported 91,916,634 shares outstanding at March 31 and 95,889,044 as of April 14.
- Other notable risks include dependence on ClearPoint market acceptance and recurring disposable sales, customer concentration, continuing losses, and the need for regulatory clearance before ClearTrace could be commercialized. Two customers each represented 11% of receivables at quarter-end; one customer represented 11% of Q1 product revenue.
- No material changes to the risk factors in the 2015 Form 10-K were reported; no legal proceedings were listed. Management concluded disclosure controls were effective.
Investor facts to verify
- Whether post-quarter Brainlab debt restructuring and related registration requirements were completed as disclosed, and the resulting debt service and potential dilution.
- Cash runway, financing availability, and progress toward resolving the disclosed going-concern uncertainty.
- Whether ClearPoint procedure volumes, new installations, and recurring disposable sales sustain growth while product margins recover.
- The scale and timing of spending on ClearPoint development and any resumption of ClearTrace development.