MRI Interventions, Inc. — FY2015 Form 10-K
The filing is for the fiscal year ended December 31, 2015, and was signed March 25, 2016. The registrant named in the filing is MRI Interventions, Inc.; the supplied company metadata says Clearpoint Neuro, Inc. The filing describes ClearPoint, an MRI-guided system for minimally invasive brain procedures, as its commercial product platform. ClearTrace, intended for cardiac procedures, remained in development and was suspended in 2015 to prioritize ClearPoint.
Financial performance and position
| Metric | FY2015 / Dec. 31, 2015 | FY2014 / Dec. 31, 2014 |
|---|---|---|
| Total revenue | $4.594 million | $3.604 million |
| Product revenue | $4.416 million | $3.379 million |
| Net loss | $8.449 million; $0.11 per share | $4.525 million; $0.08 per share |
| Operating loss | $8.974 million | $5.321 million |
| Gross margin on product revenue | 55% | 43% |
| Cash used in operating activities | $8.638 million | $7.250 million |
| Cash and cash equivalents | $5.409 million | $9.244 million |
| Total assets | $10.103 million | $13.386 million |
| Total liabilities | $12.084 million | $13.486 million |
| Stockholders’ deficit | $1.981 million | $0.100 million |
ClearPoint disposable sales rose 34% to $3.5 million, attributed mainly to more procedures at a larger installed base; reusable-product sales rose 18% to $907,000. Product revenue growth was 31%, and total revenue growth was 27%. Product cost was $1.988 million. The 55% product gross margin improved from 43%, principally due to lower obsolescence charges, pricing and vendor-cost improvements, and production efficiencies.
At year-end, current assets were $8.532 million and current liabilities $7.653 million. The filing reports note principal of approximately $11.014 million: the Brainlab note ($4.289 million), 2014 secured notes ($3.725 million), and 2010 secured notes ($3.000 million). The notes are secured by company assets, with Brainlab senior to the other lenders. The Brainlab note was due in April 2016; the other notes mature in 2019 and 2020. Net debt carrying values differ from principal because of unamortized discounts.
Material changes and unusual items
- Net loss increased 87%, with operating loss rising as well. FY2014 included a $4.339 million gain from an intellectual-property sale to Boston Scientific; there was no comparable gain in 2015.
- FY2015 included $1.253 million in restructuring charges following closure of the Memphis office and consolidation of operations in Irvine. Charges included severance and non-cash stock-option modifications; seven employees, including three executives, were affected.
- Research and development expense fell to $1.957 million from $3.297 million, mainly reflecting lower ClearTrace and sponsored-research spending. Selling, general and administrative expense increased 4% to $8.371 million. Interest expense increased to $1.262 million from $1.019 million.
- A $1.540 million gain from the change in fair value of warrant liabilities reduced reported loss in 2015; this was a non-cash accounting item. The liability declined to $658,000 from $2.198 million.
- The December 2015 equity placement generated $4.879 million net proceeds and included 16.3 million common shares plus warrants, increasing potential dilution. Cash fell $3.835 million during the year.
Outlook, risks and contingencies
Management expected revenue growth over the next 12 months from increased use at existing ClearPoint sites and new installations, while expecting recurring operating expenses to remain near historical levels. It also expected lower general and administrative costs from restructuring to be offset by higher selling and marketing costs. Management cautioned that these results were not assured and projected continued operating cash consumption for at least the next 12 months. No specific revenue, earnings, or cash-flow guidance was provided.
The auditor’s report and management both identified substantial doubt about the company’s ability to continue as a going concern. The company had cumulative net losses of $85.7 million, FY2015 operating cash use of $8.6 million, and stated that additional financing would be needed. Failure to secure financing could impair commercialization, development, or payment of obligations.
After year-end, on March 22, 2016, the company agreed with Brainlab to restructure the note, subject to closing conditions. The proposed terms included payment of approximately $740,000 accrued interest, reduction of principal by approximately $2.3 million through a license and equity-unit transactions, and extension of the remaining $2.0 million note to December 2018. The filing expected closing by April 4, 2016 but stated it was not assured.
- Commercial adoption risks include hospital MRI-suite availability, physician acceptance, clinical evidence, reimbursement, and reliance on a small number of important customers.
- ClearPoint disposables are not separately reimbursed; hospitals may bear their cost within procedure payments. The filing also cites single-source suppliers and limited internal manufacturing capacity.
- ClearTrace had no regulatory filing or clearance, and development was suspended. Its eventual development, clinical testing, regulatory pathway, and commercialization remain uncertain.
- Medical-device regulation, product liability, intellectual-property protection, healthcare fraud-and-abuse rules, and patient-data privacy obligations are significant risks. The company reported no material pending legal proceedings.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2015; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether the Brainlab restructuring actually closed, including the final debt balance, interest payment, share and warrant issuance, and license terms.
- Available cash, subsequent cash burn, and the timing and terms of any additional financing; the filing does not give a precise cash-runway estimate.
- ClearPoint procedure growth, new installations, recurring disposable sales, customer concentration, and progress toward sustainable gross margins.
- ClearTrace’s future status and any decision to resume development, with associated funding and regulatory requirements.
- The filing’s R&D expense is $1.957 million for 2015 and $3.297 million for 2014 in the audited results table, while a business-section passage cites $3.927 million for 2014; verify the inconsistent comparative figure.
- Customer concentration disclosures merit reconciliation: the risk discussion describes two hospitals as accounting for a disproportionately large share of product revenue, while the audited notes report no single customer above 12% of 2015 product revenue.