Business context and reporting period
MRI Interventions, Inc. (the registrant named in this filing) filed this unaudited Form 10-Q for the quarter ended March 31, 2018. It develops and commercializes MRI-guided medical-device technology. Its ClearPoint system is commercially available for neurological procedures; commercialization of its ClearTrace heart-procedure product candidate is suspended.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / prior period |
|---|---|---|
| Total revenue | $1.623 million | $2.007 million; down 19% |
| Product revenue | $1.539 million | $1.922 million; down 20% |
| Gross profit and margin | $1.034 million; 64% | $1.255 million; 63% |
| Operating loss | $1.427 million | $1.354 million |
| Net loss | $1.641 million | $1.656 million |
| Net loss per share | $0.15 | $0.46 |
| Operating cash flow | $(1.961) million | $(1.346) million |
| Cash and cash equivalents | $7.514 million at March 31, 2018 | $9.290 million at December 31, 2017 |
Revenue declines reflected lower functional neurology disposable sales (down 11%), biologics and drug-delivery sales (down 43%, driven partly by customer trial purchasing patterns), and capital-equipment revenue (down 23%). Gross margin improved slightly on revenue mix. Operating expenses declined modestly overall, but operating loss widened as revenue fell. Net loss was nearly unchanged; the reported per-share loss improved largely alongside a higher weighted-average share count (10.742 million versus 3.622 million), following the prior-year equity financing.
At quarter-end, total assets were $12.348 million, current assets $11.110 million, current liabilities $5.652 million, total liabilities $7.599 million, and stockholders’ equity $4.749 million. Notes payable had $6.975 million of scheduled principal payments: $2.0 million in 2018, $1.975 million in 2019, and $3.0 million in 2020. Cash used in investing was $21,000; financing provided $205,000, primarily from warrant exercises. Cash declined by $1.776 million during the quarter.
Material changes, outlook and risks
- Management anticipates revenue growth from greater use at existing ClearPoint sites and installations at new sites, with recurring expenses expected broadly near historical levels; potential R&D and G&A reductions may be offset by higher sales and marketing costs. This is an expectation, not quantified guidance.
- Management expects continued operating cash consumption for at least the next 12 months and believes additional financing will be necessary. Financing may dilute shareholders, may not be available on acceptable terms, and failure to obtain sufficient funding would create substantial doubt about the company’s ability to continue as a going concern.
- The Brainlab senior secured note carries 5.5% interest and matures December 31, 2018. The 2014 junior secured notes carry 12% interest and mature March 25, 2019. The 2010 junior notes carry 3.5% interest, with $3.0 million principal due in 2020.
- Other risks include uncertain market adoption, quarterly variability in trial-related sales, reliance on key suppliers with limited alternatives, regulatory and product-development uncertainty, customer access to capital, and potential product liability. One customer represented 13% of Q1 sales and 20% of quarter-end receivables.
- ASC 606 was adopted January 1, 2018; management reported no material financial-statement effect. No material changes to previously disclosed risk factors, no legal proceedings, and no material change in internal control were reported. Disclosure controls were deemed effective.
Important facts for investors to verify
- Whether ClearPoint utilization, new installations, and recurring disposable sales can produce the anticipated revenue growth.
- Cash runway against quarterly operating cash use and the timing and availability of financing before the 2018 and 2019 note maturities.
- Drivers and sustainability of the revenue decline, particularly trial-related customer purchasing patterns and capital-equipment sales.
- Debt terms, collateral priorities, interest costs, and the effect of potential financing or equity issuance on existing shareholders.
- Customer concentration, supplier availability, regulatory status, and the status of suspended ClearTrace development.