Business context and reporting period
MRI Interventions, Inc. filed this unaudited Form 10-Q for the three months ended March 31, 2013. The company develops and commercializes MRI-guided minimally invasive procedure systems. ClearPoint is commercially available in the U.S. and Europe; ClearTrace, intended for cardiac procedures, remained in development. The filing identifies MRI Interventions, Inc., not ClearPoint Neuro, Inc.
Key financial metrics
| Metric | Q1 2013 | Q1 2012 or prior balance-sheet date |
|---|---|---|
| Revenue | $1.264 million | $980,000 |
| Product revenue | $460,000 | $222,000 |
| Operating loss | $1.367 million | $1.151 million |
| Net loss | $950,000 | $3.474 million |
| Net loss per share | $0.02 | $0.14 |
| Cash used in operations | $2.243 million | $1.884 million |
| Cash and cash equivalents | $9.198 million | $1.620 million at Dec. 31, 2012 |
| Total liabilities | $14.855 million | $11.289 million at Dec. 31, 2012 |
| Stockholders’ deficit | $1.832 million | $5.737 million at Dec. 31, 2012 |
Q1 2013 gross margin on product revenue was approximately 51%, versus approximately 54% in Q1 2012. Current assets were $10.684 million and current liabilities $6.290 million at March 31, 2013. Reported liabilities included $3.771 million of warrant derivative liabilities. Debt included $4.339 million of related-party convertible notes, a modified note with $4.289 million principal (reported carrying value $3.751 million, net of discount), and $203,000 of junior secured notes.
Changes versus the prior comparable period
- Total revenue rose 29%; product revenue more than doubled, including disposable product sales growth of 56% to $347,000. License revenue from Boston Scientific remained $650,000.
- Operating loss widened by $216,000 as product costs, research and development, and selling, general and administrative expenses increased. SG&A rose 22%, including increased sales and clinical-support spending.
- Net loss narrowed substantially, largely because Q1 2012 included approximately $2.0 million of debt-discount and financing-cost write-offs. Q1 2013 results also included a $1.497 million noncash gain from a lower warrant derivative valuation, a $1.356 million loss on a loan modification, and $374,000 of other income, primarily negotiated reductions in amounts payable to service providers.
- Cash increased by $7.578 million, primarily from the January private placement, despite $2.243 million of operating cash use. Operating cash use increased year over year.
Outlook, risks and unusual items
- Management expected continuing losses through at least year-end 2013 and said March 31 cash, together with expected product and service revenue, should fund anticipated requirements through at least March 2014. It planned higher sales and marketing spending during the remainder of 2013; discretionary spending could be deferred. Additional financing may be needed later and could dilute shareholders; availability and terms were not assured.
- The January 2013 private placement generated $11.042 million gross and $9.829 million net proceeds, selling approximately 9.2 million shares and warrants for approximately 4.6 million shares. Warrants have a $1.75 exercise price, five-year term, and specified price-adjustment and net-cash-settlement provisions. Their fair-value liability was $3.771 million at quarter-end.
- In March, the company amended its Brainlab note: principal increased to $4.289 million, the interest rate fell from 10% to 5.5%, the conversion feature was removed, and maturity remained April 2016. The change produced a $1.356 million accounting loss. The note is secured, subordinate to Boston Scientific’s security interest, and payable at maturity.
- The company’s commercial and financing outlook depends on ClearPoint adoption, recurring disposable sales, sales-force expansion, and regulatory and development progress. ClearTrace had no regulatory clearance or sales. Key disclosed risks include continued losses, dependence on further financing, reimbursement and market-acceptance uncertainty, competition, reliance on suppliers, regulatory compliance, and product liability. The filing also notes potential registration-rights damages of up to approximately $1.3 million if specified registration requirements are not maintained.
- Management reported disclosure controls and procedures were effective as of March 31, 2013, with no material change in internal control over financial reporting during the quarter. No legal proceedings were reported as applicable.
Important facts for investors to verify
- Confirm the issuer identity and filing match the intended company: this filing is for MRI Interventions, Inc.
- Assess cash runway against the company’s operating burn, planned commercialization spending, and management’s stated March 2014 funding horizon.
- Review the full terms, security priority, maturity, and accounting treatment of the Brainlab and Boston Scientific notes, including any related covenant requirements.
- Separate recurring operating performance from noncash derivative remeasurement and other one-time or unusual income and expense items.
- Track ClearPoint system installations and disposable sales, product margins, and any evidence of ClearTrace development or regulatory progress.