MRI Interventions, Inc. — Form 10-Q Summary
The filing is for the quarter ended September 30, 2015. The registrant identifies as MRI Interventions, Inc.; its principal commercial product is the ClearPoint system. Financial statements are unaudited.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Total revenue | $1.246 million | $0.633 million | $3.083 million | $2.645 million |
| Operating loss | $1.927 million | $2.618 million | $7.554 million | $2.642 million |
| Net loss | $0.245 million | $3.647 million | $7.251 million | $2.610 million |
| Net loss per share | $0.00 | $0.06 | $0.10 | $0.04 |
| Cash used in operating activities | Not stated for the quarter | Not stated for the quarter | $7.320 million | $5.256 million |
- Q3 product and other service revenue increased 96%. ClearPoint disposable sales rose 68%, primarily attributed to more procedures at a larger installed base; reusable product sales were also higher.
- Product gross margin improved to 54% in Q3 from 46%, and to 55% for the nine-month period from 49%. Management cited higher average selling prices, better vendor pricing and production efficiencies; increased obsolescence provisions partly offset these improvements.
- Nine-month SG&A rose 14% to $6.609 million, while R&D fell 45% to $1.435 million, largely reflecting lower ClearTrace and sponsored research spending.
- Cash and cash equivalents were $1.852 million at September 30, 2015, versus $9.244 million at December 31, 2014. Total current assets were $4.625 million and current liabilities $7.745 million. Stockholders’ deficit was $5.822 million.
- Total liabilities were $12.096 million. The Brainlab senior secured note had $4.289 million principal outstanding and matures in April 2016; the filing estimates $4.3 million principal plus $740,000 accrued interest due in one payment at maturity. Junior secured notes also remain outstanding.
Changes, outlook and material items
- Nine-month net loss increased substantially year over year. The comparison is affected by the $4.339 million gain recognized in 2014 from selling intellectual property to Boston Scientific in exchange for cancellation of related-party debt. No comparable gain occurred in 2015.
- The 2015 nine-month results include $1.253 million of restructuring charges following closure of the Memphis office and consolidation of major functions in Irvine. Seven employees, including three executives, were affected; charges included severance and noncash option modifications.
- Q3 net loss was much lower than the prior-year quarter, substantially because of a $1.950 million gain from changes in the fair value of warrant derivative liabilities. This is a valuation-related item, not an operating revenue source.
- Management expected ClearPoint revenue to grow over the next twelve months through greater utilization at existing sites and installations at new sites. It anticipated operating expenses broadly at historical levels, with lower G&A from restructuring partly offset by higher selling and marketing expense. No quantified revenue or earnings guidance was provided.
- ClearTrace development was suspended in 2015 so limited resources could focus on ClearPoint. ClearTrace was not cleared for commercial sale.
- The company stated it expects to continue using cash for at least the next twelve months and will likely need additional equity, debt or credit-facility financing. Management warned that financing might not be available on acceptable terms or in sufficient amounts; failure to obtain it would create substantial doubt about the company’s ability to continue as a going concern. Additional equity financing could dilute shareholders.
- Management reported disclosure controls and procedures were effective as of September 30, 2015. The filing reported no legal proceedings, defaults upon senior securities, or material off-balance-sheet arrangements.
Key risks and investor verification points
- Verify the company’s cash runway, financing plans and ability to repay or refinance the Brainlab note and accrued interest at its April 2016 maturity.
- Assess whether ClearPoint procedure volumes, disposable sales and new installations can grow enough to offset continuing operating cash burn.
- Distinguish recurring operating performance from noncash warrant fair-value gains and prior-period gains on the Boston Scientific intellectual-property transaction.
- Review the effects of customer concentration, reimbursement and adoption risks, dependence on suppliers, and the company’s limited manufacturing capacity.
- Confirm the status and implications of the ClearTrace suspension, restructuring savings and remaining restructuring obligations.