Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 01, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | MRI INTERVENTIONS, INC. | |
Entity Central Index Key | 1,285,550 | |
Document Type | 10-Q | |
Trading Symbol | MRICD | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,401,115 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 11,028,973 | $ 3,315,774 |
Accounts receivable, net of allowance for doubtful accounts of $26,714 and $25,000 at September 30, 2017 and December 31, 2016, respectively | 863,758 | 865,943 |
Inventory, net | 2,181,245 | 1,768,382 |
Prepaid expenses and other current assets | 239,326 | 134,996 |
Total current assets | 14,313,302 | 6,085,095 |
Property and equipment, net | 246,381 | 328,249 |
Software license inventory | 889,400 | 976,900 |
Other assets | 10,641 | 10,641 |
Total assets | 15,459,724 | 7,400,885 |
Current liabilities: | ||
Accounts payable | 957,660 | 1,546,926 |
Accrued compensation | 809,323 | 666,060 |
Other accrued liabilities | 529,942 | 450,424 |
Derivative liabilities | 72,450 | 131,173 |
Deferred product and service revenues | 281,826 | 223,117 |
Total current liabilities | 2,651,201 | 3,017,700 |
Accrued interest | 734,625 | 647,500 |
Senior secured note payable | 2,000,000 | 2,000,000 |
Total liabilities | 8,179,445 | 8,156,954 |
Commitments and contingencies | ||
Stockholders' equity (deficit): | ||
Preferred stock, $0.01 par value; 25,000,000 shares authorized at September 30, 2017 and December 31, 2016; none issued and outstanding at September 30, 2017 and December 31, 2016 | ||
Common stock, $0.01 par value; 200,000,000 shares authorized; 10,339,210 shares issued and outstanding at September 30, 2017; and 3,622,032 issued and outstanding at December 31, 2016 | 103,391 | 36,220 |
Additional paid-in capital | 106,131,322 | 93,076,475 |
Accumulated deficit | (98,954,434) | (93,868,764) |
Total stockholders' equity (deficit) | 7,280,279 | (756,069) |
Total liabilities and stockholders' equity (deficit) | 15,459,724 | 7,400,885 |
12% Junior Secured Notes Payable 2014 [Member] | ||
Current liabilities: | ||
Junior secured notes payable | 1,854,484 | 1,794,226 |
Junior Secured Notes Payable 2010 [Member] | ||
Current liabilities: | ||
Junior secured notes payable | $ 939,135 | $ 697,528 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts receivable, allowance for doubtful accounts | $ 26,714 | $ 25,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 25,000,000 | 25,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, issued | 10,339,210 | 3,622,032 |
Common stock, outstanding | 10,339,210 | 3,622,032 |
12% Junior Secured Notes Payable 2014 [Member] | ||
Unamortized discount and deferred issuance costs | $ 120,516 | $ 180,774 |
Junior Secured Notes Payable 2010 [Member] | ||
Unamortized discount non-current | $ 2,060,865 | $ 2,302,472 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Product revenues | $ 1,628,435 | $ 1,580,826 | $ 5,443,287 | $ 4,013,531 |
Service and other revenues | 88,635 | 35,507 | 256,860 | 100,818 |
Total revenues | 1,717,070 | 1,616,333 | 5,700,147 | 4,114,349 |
Cost of product revenues | 688,847 | 748,305 | 2,239,808 | 1,965,839 |
Research and development costs | 589,716 | 691,330 | 2,231,616 | 2,098,465 |
Selling, general, and administrative expenses | 1,765,830 | 1,886,220 | 5,731,961 | 5,748,524 |
Operating loss | (1,327,323) | (1,709,522) | (4,503,238) | (5,698,479) |
Other income (expense): | ||||
Loss from debt restructuring | (933,134) | (811,909) | ||
Gain from change in fair value of derivative liabilities | 109,803 | 324,035 | 48,064 | 748,080 |
Other income (expense), net | 3,363 | (4,877) | 6,774 | 209,504 |
Interest expense, net | (211,362) | (239,733) | (637,270) | (836,208) |
Net loss | $ (1,425,519) | $ (2,563,231) | $ (5,085,670) | $ (6,389,012) |
Net loss per share attributable to common stockholders: | ||||
Basic and diluted (in dollars per share) | $ (0.14) | $ (0.92) | $ (0.75) | $ (2.59) |
Weighted average shares outstanding: | ||||
Basic and diluted (in shares) | 10,339,210 | 2,779,803 | 6,783,605 | 2,467,437 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (5,085,670) | $ (6,389,012) |
Adjustments to reconcile net loss to net cash flows from operating activities: | ||
Depreciation and amortization | 92,656 | 125,076 |
Share-based compensation | 616,007 | 736,982 |
Expenses paid through the issuance of common stock | 502,032 | 259,898 |
Gain from change in fair value of derivative liabilities | (48,064) | (748,080) |
Amortization of debt issuance costs and original issue discounts | 301,865 | 323,016 |
Loss from retirement of fixed assets | 1,689 | |
Loss from debt restructuring | 811,909 | |
Increase (decrease) in cash resulting from changes in: | ||
Accounts receivable | 2,185 | 414,506 |
Inventory, net | (311,637) | (33,958) |
Prepaid expenses and other current assets | (104,329) | (96,358) |
Accounts payable and accrued expenses | (270,535) | (220,304) |
Deferred revenue | 58,709 | 106,479 |
Net cash flows from operating activities | (4,246,781) | (4,708,157) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (24,515) | (100,324) |
Net cash flows from investing activities | (24,515) | (100,324) |
Cash flows from financing activities: | ||
Proceeds from private equity offering | 13,250,000 | 4,255,000 |
Offering costs | (1,265,505) | (417,865) |
Other | (4,756) | |
Net cash flows from financing activities | 11,984,495 | 3,832,379 |
Net change in cash and cash equivalents | 7,713,199 | (976,102) |
Cash and cash equivalents, beginning of period | 3,315,774 | 5,408,523 |
Cash and cash equivalents, end of period | 11,028,973 | 4,432,421 |
Cash paid for: | ||
Income taxes | ||
Interest | 146,611 | 976,295 |
Noncash Investing and Financing Items | ||
Transfer from inventory to property and equipment | 30,047 | 16,541 |
The fair value of the derivatives | 192,173 | |
Reduced of derivative liabilities | $ 1,207,813 | $ 37,672 |
Description of the Business and
Description of the Business and Liquidity | 9 Months Ended |
Sep. 30, 2017 | |
Description Of Business And Liquidity | |
Description of the Business and Liquidity | 1. Description of the Business and Liquidity MRI Interventions, Inc. (the “Company”) is a medical device company focused on the development and commercialization of technology that enables physicians to see inside the brain and heart using direct, intra-procedural magnetic resonance imaging (“MRI”) guidance while performing minimally invasive surgical procedures. The Company was incorporated in the state of Delaware in March 1998. The Company’s principal executive office and principal operations are located in Irvine, California. The Company established MRI Interventions (Canada) Inc., a wholly-owned subsidiary incorporated in Canada, in August 2013. This subsidiary was established primarily for the purpose of performing software development, and its activities are reflected in these condensed consolidated financial statements. The Company’s ClearPoint system, an integrated system comprised of reusable and disposable products, is designed to allow minimally invasive procedures in the brain to be performed in an MRI suite. The Company received 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2010 to market the ClearPoint system in the United States for general neurological interventional procedures. The Company’s ClearTrace system is a product candidate that is designed to allow catheter-based minimally invasive procedures in the heart to be performed in an MRI suite. Although still a product candidate, the Company has suspended its efforts to commercialize the ClearTrace system. Liquidity The Company has incurred net losses since its inception which has resulted in a cumulative deficit at September 30, 2017 of $99.0 million. As a result, management historically has expressed substantial doubt as to the Company’s ability to continue as a going concern. As discussed in Note 5, in May 2017, the Company completed a private offering of equity units (the “2017 PIPE”) through which the Company received aggregate gross proceeds of approximately $13.25 million, before deducting placement agents’ fees and offering expenses aggregating approximately $1.3 million. As a result, the Company’s cash and cash equivalent balances at September 30, 2017 aggregated $11.0 million, which, in management’s opinion, is sufficient to support the Company’s operations for at least the next twelve months and to alleviate doubt as to the Company’s ability to continue as a going concern. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a basis consistent with the Company’s December 31, 2016 audited consolidated financial statements, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth therein. These condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) Securities and Exchange Commission (“SEC”) rules for interim financial information, and, therefore, omit certain information and footnote disclosures necessary to present such statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 9, 2017 (the “2016 Form 10-K”). The accompanying unaudited condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date, but does not include all information and footnotes required by GAAP for a complete set of financial statements. The results of operations for the three and nine months ended September 30, 2017 may not be indicative of the results to be expected for the entire year or any future periods. Derivative Liabilities Derivative liabilities represent the fair value of conversion features of certain notes and of certain warrants to purchase common stock (see Note 6). These derivative liabilities are calculated utilizing the Monte Carlo simulation valuation method. Changes in the fair values of these warrants are recognized as other income or expense in the related condensed consolidated statements of operations. Fair Value Measurements The Company measures and records certain financial assets and liabilities at fair value on a recurring basis. GAAP provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority, referred to as Level 1, to quoted prices in active markets for identical assets and liabilities. The next priority, referred to as Level 2, is given to quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active; that is, markets in which there are few transactions for the asset or liability, or inputs other than quoted prices that are observable for the asset or liability. The lowest priority, referred to as Level 3, is given to unobservable inputs. The table below reflects the level of the inputs used in the Company’s fair value calculations: Quoted Prices in Active Markets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value September 30, 2017 Derivative liabilities - warrants $ - $ - $ 54,950 $ 54,950 Derivative liabilities – debt conversion feature $ - $ - $ 17,500 $ 17,500 December 31, 2016 Derivative liabilities - warrants $ - $ - $ 91,173 $ 91,173 Derivative liabilities – debt conversion feature $ - $ - $ 40,000 $ 40,000 Inputs used in the Company’s Level 3 calculation of fair value include the assumed dividend rate on the Company’s common stock, risk-free interest rates, stock price volatility and the likelihood of a future equity financing transaction, all of which are further discussed in Note 6. Carrying amounts of the Company’s The table below reflects the carrying values and the estimated fair values, based on Level 3 inputs, of the Company’s outstanding notes payable, including the related accrued interest, at September 30, 2017: Carrying Values Estimated Fair Values Senior secured note payable, including accrued interest $ 2,028,111 $ 2,028,111 2014 junior secured notes payable, including accrued interest 1,862,859 1,983,375 2010 junior secured notes payable, including accrued interest 1,665,385 2,724,293 Inventory Inventory is carried at the lower of cost (first-in, first-out method) or net realizable value. Items in inventory relate predominantly to the Company’s ClearPoint system. Software license inventory that is not expected to be utilized within the next twelve months is classified as a non-current asset. The Company periodically reviews its inventory for obsolete items and provides a reserve upon identification of potential obsolete items. Revenue Recognition The Company’s revenues are comprised of: (1) product revenues resulting from the sale of ClearPoint system reusable products and disposable products; and (2) service revenues. The Company recognizes revenue when persuasive evidence of an arrangement exists, the selling price or fee is fixed or determinable, collection is reasonably assured, and, for product revenues, risk of loss has transferred to the customer. For all sales, the Company requires either a purchase agreement or a purchase order as evidence of an arrangement. The Company analyzes revenue recognition on a case-by-case basis, and determines if the deliverables under the arrangement represent separate units of accounting as defined by GAAP. Application of GAAP regarding multiple-element arrangements requires the Company to make subjective judgments about the values of the individual elements and whether delivered elements are separable from the other aspects of the contractual relationship. (1) Product Revenues Sales of ClearPoint system reusable products Sales of ClearPoint system disposable products (2) Service Revenues Service revenues are comprised of installation fees, training fees, shipping fees and service fees charged in connection with ClearPoint system installations and ClearPoint system service agreements. Typically, the Company bills upfront for service agreements, which have terms ranging from one to three years. These amounts are recognized as revenue ratably over the term of the related service agreement. Net Loss Per Share The Company computes net loss per share using the weighted-average number of common shares outstanding during the period. Basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the entire amount of the Company’s outstanding common stock options and warrants as described in Note 5, would be anti-dilutive. Concentration Risks and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company holds its cash and cash equivalents on deposit with financial institutions in the U.S. insured by the Federal Deposit Insurance Corporation. At September 30, 2017, the Company had $245,820 in bank balances that were in excess of the insured limits. Information with respect to customers that accounted for sales in excess of 10% of total sales in the three-month and nine-month periods ended September 30, 2017 and 2016 is as follows: Three Months Ended September 30, 2017 2016 Customer - 1 11% 11% Nine Months Ended September 30, 2017 2016 Customer - 1 - 10% Information with respect to accounts receivable from those customers who comprised more than 10% of accounts receivable at September 30, 2017 and December 31, 2016 is as follows: September 30, 2017 December 31, 2016 Customer – 1 18% 20% Customer – 2 - 13% Customer – 3 - 10% Prior to granting credit, the Company performs credit evaluations of its customers’ financial condition, and generally does not require collateral from its customers. The Company will provide an allowance for doubtful accounts when collections become doubtful. The allowance for doubtful accounts at September 30, 2017 and December 31, 2016 was $27,000 and $25,000, respectively. The Company is subject to risks common to emerging companies in the medical device industry, including, but not limited to: new technological innovations; acceptance and competitiveness of its products; dependence on key personnel; dependence on key suppliers; changes in general economic conditions and interest rates; protection of proprietary technology; compliance with changing government regulations; uncertainty of widespread market acceptance of products; access to credit for capital purchases by customers; and product liability claims. Certain components used in manufacturing have relatively few alternative sources of supply, and establishing additional or replacement suppliers for such components cannot be accomplished quickly. The inability of any of these suppliers to fulfill the Company’s supply requirements may negatively impact future operating results. Recent Accounting Pronouncements In August 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-14 as an amendment to ASU 2014-09, “Revenue from Contracts with Customers,” which created a new Topic, Accounting Standards Codification (“ASC”) Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard, and ASUs 2016-10, 2016-12 and 2016-20 discussed below, are effective for the Company beginning in 2018. Earlier application is permitted only as of 2017. ● In April 2016, the FASB issued ASU 2016-10, “Revenues from Contracts With Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarified guidance related to identifying performance obligations and licensing implementation guidance contained in ASC Topic 606 as promulgated by ASU 2015-14 discussed above. ● In May 2016, the FASB issued ASU 2016-12, “Revenues from Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which address narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. ● In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts With Customers,” which provided for minor corrections and minor improvements to previously issued Topic 606 guidance. ● In September 2017, the FASB issued ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842),” which added and deleted paragraphs pursuant to SEC Staff Announcements and SEC Observer Comments. The Company believes, based on a preliminary assessment in which the Company considered such factors as the short duration of its contract terms with customers, that the adoption of ASU 2015-14, and the subsequently issued related ASUs discussed above, will not have a material effect on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” which created a new Topic, ASC Topic 842 and established the core principle that a lessee should recognize the assets, representing rights-of-use, and liabilities to make lease payments, that arise from leases. For leases with a term of 12 months or less, a lessee is permitted to make an election under which such assets and liabilities would not be recognized, and lease expense would be recognized generally on a straight-line basis over the lease term. This standard is effective for the Company beginning in 2019, and early application is permitted. The Company currently has two leases for manufacturing and office space that would be subject to the provisions of ASU 2016-02. The Company believes that adoption of ASC Topic 842 (as amended by ASC 2017-13 described above) will result in the establishment on the Company’s consolidated balance sheet of an asset and liability for each such lease, but that neither such assets and liabilities nor the resulting lease expense recognition will have a material effect on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. The standard is effective for the Company beginning in 2018, and early adoption is permitted. The Company believes that adoption of ASU 2016-15 will not have a material effect on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718),” which clarifies and reduces both (i) diversity in practice and (ii) cost and complexity when a company changes the terms or conditions of a share-based payment award. The standard is effective for the Company beginning in 2018, and early adoption is permitted. The Company believes that adoption of ASU 2017-09 will not have a material effect on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception,” which, among other items, changes the classification of certain equity-linked financial instruments (or embedded features) with down round features. The standard is effective for the Company beginning in 2019, and early adoption is permitted. Because the terms of the Company’s currently existing derivative liabilities described in Note 6, all of which the Company believes are included in the scope of the standard, will have expired prior to the standard’s effective date, the Company believes that adoption of the standard on its effective date will not have a material effect on the Company’s consolidated financial statements. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | 3. Inventory Inventory consists of the following as of: September 30, 2017 December 31, 2016 Raw materials and work in process $ 1,230,481 $ 1,025,368 Software licenses 52,500 70,000 Finished goods 898,264 673,014 Inventory, net, included in current assets 2,181,245 1,768,382 Software licenses – non-current 889,400 976,900 $ 3,070,645 $ 2,745,282 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Notes Payable | 4. Notes Payable Senior Secured Note Payable The indebtedness outstanding under the senior secured note payable to Brainlab, originally issued to Brainlab on April 5, 2011, and subsequently amended and restated on March 6, 2013 (the “Brainlab Note”), at December 31, 2015 was approximately $5.0 million, including approximately $740,000 of accrued interest which accrued at a rate of 5.5% and was payable in a single aggregate installment upon maturity of the indebtedness. The Brainlab Note was to mature in April 2016. On April 4, 2016 (the “Closing Date”), the Company and Brainlab finalized a securities purchase agreement (the “2016 Purchase Agreement”), as discussed below. 2016 Purchase Agreement Under the 2016 Purchase Agreement, the Company: (i) paid to Brainlab all accrued and unpaid interest on the Brainlab Note, in the amount of approximately $740,000; (ii) amended and restated the Brainlab Note on the terms described below; (iii) entered into a patent and technology license agreement with Brainlab (the “License Agreement”) for software relating to the Company’s SmartFrame device, in consideration for the cancellation of $1.0 million of the principal amount of the Brainlab Note; (iv) issued to Brainlab, in consideration for the cancellation of approximately $1.3 million of the principal amount of the Brainlab Note, 99,310 units, consisting of: (a) one share of the Company’s common stock; (b) warrants to purchase 0.4 share of common stock (the “2016 Series A Warrants”); and (c) warrants to purchase 0.3 shares of common stock (the “2016 Series B Warrants”) (collectively, the “Equity Units”); and (v) entered into a Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement with the SEC covering the resale of the shares of common stock issued to Brainlab under the 2016 Purchase Agreement, as well as the shares of common stock that are issuable upon exercise of the 2016 Series A Warrants and 2016 Series B Warrants. The 2016 Purchase Agreement contains covenants, representations and warranties by the Company and Brainlab (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type. As a result of the foregoing, on the Closing Date, the Company recorded a debt restructuring gain of approximately $941,000 representing the difference between (a) the aggregate fair value of the License Agreement, which had no cost basis on the Company’s consolidated balance sheets, and the Equity Units, and (b) the aggregate principal amount of the Brainlab Note cancelled as consideration. 2016 Warrants The 2016 Series A Warrants and 2016 Series B Warrants are exercisable, in full or in part, at any time prior to the fifth anniversary of their issuance, at an exercise price of $16.23 per share (before giving effect to the Note Conversion as defined below) and $21.10 per share, respectively, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. Amended and Restated Promissory Note On the Closing Date and pursuant to the 2016 Purchase Agreement, the Company issued Brainlab an unregistered, amended and restated secured note (the “New Brainlab Note”), which has the same terms and conditions as the Brainlab Note, except that: (i) the principal amount of the New Brainlab Note is $2 million; (ii) interest will be paid quarterly in arrears; and (iii) the maturity date of the New Brainlab Note is December 31, 2018. Non-Exclusive License Agreement On the Closing Date and pursuant to the 2016 Purchase Agreement, the Company and Brainlab entered into the License Agreement, for software relating to the Company’s SmartFrame device, for use in neurosurgery. The License Agreement does not affect the Company’s ability to continue to independently develop, market and sell its own software for the SmartFrame device. The New Brainlab Note is collateralized by a senior security interest in all of the assets of the Company. 2014 Junior Secured Notes Payable In March 2014, the Company entered into securities purchase agreements for the private placement of: (i) second-priority secured non-convertible promissory notes (the “2014 Secured Notes); and (ii) warrants to purchase 0.01 shares of the Company’s common stock for each dollar in principal amount of the 2014 Secured Notes sold by the Company (the “investor warrants”). Pursuant to those securities purchase agreements, the Company sold 2014 Secured Notes in a total aggregate principal amount of $3,725,000, together with warrants to purchase up to 27,937 shares of common stock, for aggregate gross proceeds of $3,725,000, before placement agent commissions and other expenses. The 2014 Secured Notes have a five-year term and bear interest at a rate of 12% per year, payable semi-annually, in arrears. The 2014 Secured Notes are not convertible into shares of the Company’s common stock. Following the third anniversary of the issuance date, the 2014 Secured Notes may be prepaid, without penalty or premium, provided that all principal and unpaid accrued interest under all 2014 Secured Notes is prepaid at the same time. The 2014 Secured Notes are collateralized by a security interest in all of the Company’s assets, which security interest is junior and subordinate to the security interest that collateralizes the New Brainlab Note. The investor warrants are exercisable, in full or in part, at any time prior to the fifth anniversary of the issuance date, at an original exercise price of $70.00 per share, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. Under GAAP, the Company allocated the $3,725,000 in proceeds proportionately between the 2014 Secured Notes and the investor warrants based on their relative fair values, with $413,057 being allocated to the fair value of the investor warrants, recorded as equity and as a discount to the carrying amount at the date of issuance. After giving effect to the conversions discussed below under the heading “August 31, 2016 Amendments,” Non-employee directors of the Company purchased a total of $1,100,000 of the 2014 Secured Notes, either directly or through a trust. The Company’s placement agents earned cash commissions of $145,500 as well as warrants (the “placement agent warrants”) to purchase 1,818 shares of the Company’s common stock. The placement agent warrants have the same terms and conditions as the investor warrants. The placement agent cash commissions, the $30,210 fair value of the placement agent warrants, and other offering expenses, aggregating $76,186, were recorded as deferred financing costs and are presented as reductions of the carrying amount of the 2014 Secured Notes in the accompanying condensed consolidated balance sheets. These deferred financing costs, having an unamortized balance of $39,193 and $58,789 at September 30, 2017 and December 31, 2016, respectively, are being amortized to interest expense over the term of the 2014 Secured Notes using the effective interest method. 2010 Junior Secured Notes Payable In November 2010, the Company issued units consisting of a junior secured note (the “2010 Secured Notes”) and one share of the Company’s common stock. An aggregate of 267,857 units were issued, and the Company received proceeds of $3,000,000 representing the aggregate principal amount of the 2010 Secured Notes. The 2010 Secured Notes mature in November 2020, accrue interest at the rate of 3.5% per year, and are collateralized by a security interest in all of the assets of the Company, which security interest is junior and subordinate to the security interests that collateralize the New Brainlab Note and the 2014 Secured Notes. All outstanding principal and interest on the 2010 Secured Notes will be due and payable in a single payment upon maturity. Under GAAP, the Company allocated the $3 million in proceeds from the sale of the units between the 2010 Secured Notes and the shares of common stock based on their relative fair values that resulted in $2,775,300 being allocated to the value of the shares of common stock, which was recorded as equity and as a discount to the carrying value of the 2010 Secured Notes at their date of issuance. The unamortized discount at September 30, 2017 and December 31, 2016 was $2,060,865 and $2,302,472, respectively. This discount is being amortized to interest expense over the 10-year term of the notes using the effective interest method. Four then-serving officers of the Company purchased an aggregate of 22,068 units in the offering for $247,164. In addition, three non-employee directors of the Company also purchased an aggregate of 14,180 units in the offering for $158,816. June 30, 2016 Amendments On June 30, 2016, the Company entered into amendments (the “June 2016 Amendments”) with: (a) Brainlab, with respect to the New Brainlab Note; and (b) two holders of the 2014 Secured Notes (the “2014 Convertible Note Holders”), one of which is a trust for which one of the Company’s then non-employee directors serves as a trustee, having an aggregate principal balance of $3 million. Pursuant to the June 2016 Amendments, the parties agreed that, in the event the Company closes a qualified public offering: (i) $500,000 of the principal balance of the New Brainlab Note and an aggregate $1.5 million of the principal balance of the 2014 Secured Notes, plus all unpaid accrued interest on such principal amounts, would automatically convert into the security offered in the qualified public offering, based on the public offering price of that security; and (ii) the exercise price for 34,957 shares of common stock underlying warrants issued in connection with the New Brainlab Note and 11,250 shares of common stock underlying warrants issued in connection with the 2014 Secured Notes would be reduced to equal the greater of (x) the public offering price of the security offered in the qualified public offering, or (y) if the security offered in the qualified public offering is or includes convertible stock or common stock warrants, the highest price per whole share for which the Company’s common stock is issuable upon conversion of such convertible stock or upon exercise of such common stock warrants. As discussed under the heading “ August 31, 2016 Amendments, The provisions of the June 2016 Amendments created: (a) a conversion feature allowing for the principal balances described above, plus all unpaid related accrued interest, to be converted into the security offered in the qualified public offering, and at a price that may be less than the market value per share of the Company’s common stock; and (b) down round strike price protection with respect to the warrants, both of which, under GAAP, are required to be accounted for as derivatives, the calculation and accounting for which is described in Note 6. In addition, based on the provisions of the June 2016 Amendments, the Company recorded a debt restructuring loss of approximately $820,000 resulting from the restructuring of the New Brainlab Note and the 2014 Secured Notes subject to the June 2016 Amendments. August 31, 2016 Amendments On August 31, 2016, the Company entered into second amendments (the “August 2016 Amendments”) with the 2014 Convertible Note Holders. Pursuant to the August 2016 Amendments, the parties agreed that, in the event the Company closes a PIPE Transaction (as that term is defined in the August 2016 Amendments; the “2016 PIPE”): (i) an aggregate $1.75 million of aggregate principal balance of the 2014 Convertible Note Holders’ 2014 Secured Notes (the “2014 Principal”) would automatically convert into the security offered by the Company in the 2016 PIPE, based on the offering price of that security in the 2016 PIPE (the “Note Conversion”); and (ii) the exercise price for 13,125 shares of common stock that may be purchased upon exercise of warrants issued in connection with the issuance of the 2014 Secured Notes (the “2014 Warrants”) will be reduced to equal the greater of (x) the offering price of the security offered in the 2016 PIPE, or (y) if the security offered in the 2016 PIPE is or includes convertible stock or common stock warrants, the highest price per whole share for which the Company’s common stock is issuable upon conversion of such convertible stock or upon exercise of such common stock warrants. These provisions maintained but modified: (a) the conversion feature allowing for the 2014 Principal to be converted into the security offered in the 2016 PIPE, and at a price that may be less than the market value per share of the Company’s common stock; and (b) the down round strike price protection with respect to the 2014 Warrants, both of which, under GAAP, are required to be accounted for as derivatives, the calculation and accounting for which is described in Note 6. Execution of the August 2016 Amendments constituted a debt extinguishment under GAAP, necessitating the Company to record a debt restructuring loss of approximately $933,000, representing the aggregate difference in the fair value of the derivatives described in the preceding paragraph between the points in time (i) immediately preceding, and (ii) immediately subsequent to, the execution of the August 2016 Amendments. As described in Note 5, the 2016 PIPE was completed on September 2, 2016, resulting in (i) conversion of the 2014 Principal, and (ii) establishment of a fixed exercise price and elimination of the down round price protection with respect to the 2014 Warrants, in conformity with the terms set forth in the August 2016 Amendments. Accordingly, concurrent with completion of the 2016 PIPE,derivative liabilities associated with the conversion feature of the 2014 Principal and the down round price protection for the 2014 Warrants were reduced by $1,207,813, with a corresponding amount being recorded as an increase to stockholders’ equity. Scheduled Notes Payable Maturities Scheduled principal payments as of September 30, 2017 with respect to notes payable are summarized as follows: Years ending December 31, 2018 $ 2,000,000 2019 1,975,000 2020 3,000,000 Total scheduled principal payments 6,975,000 Less: Unamortized discounts (2,142,188 ) Unamortized deferred financing costs (39,193 ) $ 4,793,619 |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' equity (deficit): | |
Stockholders' Equity | 5. Stockholders’ Equity 2016 Private Placement On September 2, 2016, the Company completed the 2016 PIPE, pursuant to the terms of a Securities Purchase Agreement dated August 31, 2016 (the “2016 PIPE Purchase Agreement”), by and among the Company and certain investors (collectively, the “2016 PIPE Investors”). At the closing, in accordance with the terms and conditions of the 2016 PIPE Purchase Agreement, the Company sold to the 2016 PIPE Investors an aggregate of 851,000 units (the “2016 PIPE Units”), with each 2016 PIPE Unit consisting of: (i) one share of the Company’s common stock; and (ii) a warrant to purchase 0.90 shares of the Company’s common stock (each, a “2016 PIPE Warrant” and collectively, the “2016 PIPE Warrants”). In connection with the sale of the 2016 PIPE Units, the Company received aggregate gross proceeds of approximately $4.25 million, before deducting placement agents’ fees and offering expenses aggregating approximately $418,000. In addition, the placement agents for the 2016 PIPE received, in the aggregate, warrants (“2016 PIPE Placement Agent Warrants”) to purchase up to 29,680 shares of common stock. Purchase Agreement The 2016 PIPE Purchase Agreement contains representations and warranties by the Company and the 2016 PIPE Investors and covenants of the Company and the 2016 PIPE Investors (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type. Warrants The 2016 PIPE Warrants are exercisable, in full or in part, at any time prior to September 2, 2021, at an exercise price of $5.50 per share, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. The 2016 PIPE Placement Agent Warrants have the same terms and conditions as the 2016 PIPE Warrants. Related Debt Conversion As discussed in Note 4, pursuant to the August 2016 Amendments, in addition to and simultaneously with the sale of the 2016 PIPE Units, on September 2, 2016: (i) the 2014 Principal automatically converted into 350,000 2016 PIPE Units on the same terms and conditions as applied to purchasers of 2016 PIPE Units; and (ii) the exercise price for 13,125 shares of common stock that may be purchased upon exercise of the holders’ 2014 Warrants was reduced to $5.50 per share, which is equal to the per share exercise price of the 2016 PIPE Warrants. 2017 Private Placement On May 26, 2017, the Company completed the 2017 PIPE pursuant to a Securities Purchase Agreement dated May 25, 2017 (the “2017 PIPE Purchase Agreement”) with certain accredited investors (collectively, the “2017 PIPE Investors”) for the private placement of 6,625,000 units (the “2017 PIPE Units”) at a purchase price of $2.00 per unit, with each unit consisting of: (i) one share of the Company’s common stock; and (ii) a warrant to purchase one share of the Company’s common stock (each, a “2017 PIPE Warrant” and collectively, the “2017 PIPE Warrants”). In connection with the sale of the 2017 PIPE Units, the Company received aggregate gross proceeds of approximately $13.25 million, before deducting placement agents’ fees and offering expenses aggregating approximately $1.3 million. In addition, the placement agents for the 2017 PIPE received, in the aggregate, warrants (“2017 PIPE Placement Agent Warrants”) to purchase up to 509,200 shares of common stock. Purchase Agreement The 2017 PIPE Purchase Agreement contains representations and warranties by the Company and the 2017 PIPE Investors and covenants of the Company and the 2017 PIPE Investors (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type. Registration Rights Agreement Concurrent with completion of the 2017 PIPE, the Company and the 2017 PIPE Investors entered into a Registration Rights Agreement (the “2017 PIPE Registration Rights Agreement”) pursuant to which the Company is required to prepare and file a registration statement (the “2017 PIPE Registration Statement”) with the SEC under the Securities Act of 1933, as amended, covering the resale of the shares of common stock to be issued to the 2017 PIPE Investors under the 2017 PIPE Purchase Agreement as well as the shares of common stock underlying the 2017 PIPE Warrants and the 2017 PIPE Placement Agent Warrants. The Company was required to file such 2017 PIPE Registration Statement on or before June 26, 2017, and was required to use its best efforts to have the 2017 PIPE Registration Statement declared effective as soon as practicable. The Company filed the 2017 PIPE Registration Statement on June 26, 2017, and the 2017 PIPE Registration Statement was declared effective by the SEC on July 7, 2016, both dates being in conformity with the foregoing requirements. Pursuant to the 2017 PIPE Registration Rights Agreement, if the Company fails to continuously maintain the effectiveness of the 2017 PIPE Registration Statement (with certain permitted exceptions), the Company will incur certain liquidated damages to the 2017 PIPE Investors. The 2017 PIPE Registration Rights Agreement also contains mutual indemnifications by the Company and each 2017 PIPE Investor, which the Company believes are customary for transactions of this type. Warrants The 2017 PIPE Warrants are exercisable, in full or in part, at any time prior to the fifth anniversary of their issuance, at an exercise price of $2.20 per share, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. The 2017 PIPE Placement Agent Warrants have the same terms and conditions as the 2017 PIPE Warrants. Issuance of Common Stock in Lieu of Cash Payments Under the terms of the Amended and Restated Non-Employee Director Compensation Plan, each non-employee member of the Company’s Board of Directors may elect to receive all or part of his or her director fees in shares of the Company’s common stock. Director fees, whether paid in cash or in shares of common stock, are payable quarterly on the last day of each fiscal quarter. The number of shares of common stock issued to directors is determined by dividing the product of: (i) the fees otherwise payable to each director in cash, times (ii) the percentage of fees the director elected to receive in shares of common stock, by (iii) the volume weighted average price per share of common stock over the last five trading days of the quarter. No shares were issued to directors as payment for director fees during the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, 4,431 and 10,805 shares, respectively, were issued to directors as payment for director fees in lieu of cash. Stock Incentive Plans The Company has various share-based compensation plans and share-based compensatory contracts (collectively, the “Plans”) under which it has granted share-based awards, such as stock grants, and incentive and non-qualified stock options, to employees, directors, consultants and advisors. Awards may be subject to a vesting schedule as set forth in individual award agreements. Certain of the Plans also have provided for cash-based performance bonus awards. Since June 2015, the Company has granted share-based awards under the MRI Interventions, Inc. Amended and Restated 2013 Incentive Compensation Plan (the “2013 Plan”). Under the 2013 Plan, a total of 156,250 shares of the Company’s common stock are reserved for issuance. Of this amount, stock grants of 38,294 shares have been awarded and option grants, net of options terminated, expired or forfeited, of 103,625 shares were outstanding as of September 30, 2017. Accordingly, 14,331 shares remained available for grants under the 2013 Plan as of that date. Stock option activity under all of the Company’s Plans during the nine months ended September 30, 2017 is summarized below: Shares Weighted - Average Exercise Price Outstanding at December 31, 2016 337,441 $ 42.07 Granted 13,625 2.90 Forfeited (40,117 ) 36.06 Outstanding at September 30, 2017 310,949 $ 41.95 The estimated grant date fair values of options granted during the three months ended September 30, 2017 were calculated using the Black-Scholes valuation model, based on the following assumptions: Dividend yield 0% Expected volatility 43.38% - 48.62% Risk free interest rates 1.91% - 2.05% Expected lives (in years) 6 The Company records share-based compensation expense on a straight-line basis over the related vesting period. For the three and nine months ended September 30, 2017 and 2016, share-based compensation expense related to options was: Three Months Ended September 30, 2017 2016 $ 186,982 $ 238,101 Nine Months Ended September 30, 2017 2016 $ 616,007 $ 736,982 As of September 30, 2017, there was unrecognized compensation expense of $243,254 related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.12 years. Warrants Warrants have generally been issued for terms of up to five years. Common stock warrant activity for the nine months ended September 30, 2017 was as follows: Shares Weighted - Average Exercise Price Outstanding at December 31, 2016 1,991,293 $ 13.00 Issued 7,134,200 2.20 Exercised (3,845 ) 2.00 Terminated (172,070 ) 32.77 Outstanding at September 30, 2017 8,949,578 $ 4.12 |
Derivative Liabilities
Derivative Liabilities | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | 6. Derivative Liabilities As discussed in Note 4, on June 30, 2016, the Company entered into amendments with Brainlab, with respect to the New Brainlab Note, and with the 2014 Convertible Note Holders, the provisions of which created: (a) a conversion feature allowing for the principal balance described above to be converted at a public offering price that may be less than market value per share of the Company’s common stock; and (b) down round strike price protection with respect to the warrants. In addition, warrants issued in 2013 contain net-cash settlement and down round provisions. Under GAAP, the provisions described above require that the conversion feature and the warrants be accounted for as derivatives, thus requiring that they each be adjusted to estimated fair value at each balance sheet date and shown as liabilities in the accompanying condensed consolidated balance sheets. The fair values of the conversion feature and the warrants were calculated using the Monte Carlo simulation valuation method. Assumptions used in calculating the fair value of the conversion feature at September 30, 2017 are as follows: Risk free interest rates 1.35% Volatility 60% Assumptions used in calculating the fair value of the warrants at September 30, 2017 are as follows: Dividend yield 0% Expected volatility 55% Risk free interest rates 1.06 – 1.70% Expected remaining term (in years) 0.32 – 3.51 In addition to the assumptions above, the Company also estimates the likelihood of whether it will participate in a future qualified public offering, as defined in either the amended note or warrant agreements, as applicable, that would trigger the conversion feature or the repricing of warrants, and, if so, the estimated timing and pricing of its offering of common stock. The fair values and the changes in fair values of derivative liabilities during the nine months ended September 30, 2017 and 2016 are as follows: Nine Months Ended September 30, 2017 2016 Balance, beginning of period $ 131,173 $ 658,286 Conversion of equity warrants to liabilities - 192,173 Additions from debt restructuring - 1,592,134 Reduction from debt conversions - (1,207,813 ) Reduction from warrant exercise (10,659 ) (37,672 ) Gain on change in fair value for the period (48,064 ) (748,080 ) Balance, end of period $ 72,450 $ 449,028 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 7. Subsequent Events Stock Incentive Plan At the Annual Meeting of the Company’s stockholders on October 3, 2017, the Company’s stockholders approved the adoption of the MRI Interventions, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “Amended 2013 Plan”). The material change effected in the Amended 2013 Plan was to increase the number of shares of the Company’s common stock available for awards thereunder by 1,800,000 shares. Management Change On October 6, 2017, Francis P. Grillo entered into a Separation, Transition and Consulting Agreement (the “Separation Agreement”) with the Company, under which Mr. Grillo is voluntarily resigning from his position as the Chief Executive Officer and President of the Company, and as a member of the Company’s Board of Directors, and separating from the Company, effective as of November 7, 2017 (the “Transition Date”). Under the terms of the Separation Agreement, Mr. Grillo will receive the following payments and other benefits, subject to certain conditions, pursuant to the Separation Agreement: (i) his annual bonus, based on his and the Company’s performance for the fiscal year ending December 31, 2017, determined in accordance with the applicable policies and procedures set forth in his employment agreement; (ii) 87,500 unregistered shares of the Company’s common stock; (iii) a lump sum payment of $15,000; and (iv) $30,000 per month for the first two months following his separation from the Company in exchange for transition and consulting services to be provided to the Company by Mr. Grillo, after which Mr. Grillo will be compensated on an hourly basis to the extent he renders any such consulting services. In addition, the option exercise period of all stock options previously granted to Mr. Grillo will be extended to be coterminous with the term of the option award. In conjunction with Mr. Grillo’s resignation from the positions described above, on October 6, 2017, the Company entered into an Employment Agreement (the “Employment Agreement”) with Joseph M. Burnett, whereby Mr. Burnett will serve as the Company’s Chief Executive Officer and President, effective as of the Transition Date. In addition, the Board expects to elect Mr. Burnett to serve as a director of the Company, effective as of the Transition Date. Under the terms of the Employment Agreement, Mr. Burnett’s base salary, effective as of the Transition Date, will be $360,000. Starting with the fiscal year commencing on January 1, 2018 and for each year thereafter, Mr. Burnett will be eligible to receive an annual target incentive bonus of 40% of his annual base salary, subject to certain performance goals to be established by the Compensation Committee of the Board of Directors. In addition, the Company will pay Mr. Burnett up to $50,000 in reasonable relocation expenses during the first two years of his employment, subject to Mr. Burnett’s continued employment through such two-year period. The Employment Agreement also provides for certain payments to be made to Mr. Burnett: (a) in the event the Company terminates his employment without cause or if Mr. Burnett voluntarily terminates his employment with the Company for good reason, as those terms are defined in the Employment Agreement; or (b) if the Company terminates his employment without cause or if Mr. Burnett voluntarily terminates his employment with the Company for good reason within two months of a change of control, as such term is defined in the Employment Agreement. Also, in the event of a change of control, any unvested stock options and restricted stock previously granted to Mr. Burnett will become fully vested. As an inducement to his employment with the Company, Mr. Burnett is entitled to receive an initial signing bonus in the aggregate amount of $100,000 under the Employment Agreement, to be paid in two equal installments on the Transition Date and the 6-month anniversary of the Transition Date, conditioned upon Mr. Burnett’s continued employment. In addition, on the Transition Date Mr. Burnett will be granted: (i) a non-qualified stock option to purchase up to 350,000 shares of the Company’s common stock; and (ii) 200,000 restricted shares of the Company’s common stock. The per share exercise price of such stock option will be equal to the fair market value of the Company’s common stock on the date of grant. The stock option and restricted shares will vest as follows: (i) one-third on the first anniversary of the date of grant; and (ii) the remainder in equal quarterly installments during each of the second and third years following the date of grant. Mr. Burnett is entitled to participate in any benefit plan from time to time in effect for the Company’s executives and/or employees generally, subject to the eligibility provisions of that plan. In connection with the Employment Agreement, Mr. Burnett also entered into a confidentiality agreement and non-compete agreement, which agreements impose on him customary restrictive covenants prohibiting the disclosure of the Company’s confidential information, requiring Mr. Burnett to assign inventions discovered in the scope of his employment to the Company, prohibiting him from competing with the Company during the term of his employment and for one year following the termination of his employment (subject to applicable law), and prohibiting him from soliciting Company employees, consultants and contractors for two years following the termination of his employment. |
Basis of Presentation and Sum13
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Use of Estimates | Basis of Presentation and Use of Estimates In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a basis consistent with the Company’s December 31, 2016 audited consolidated financial statements, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth therein. These condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) Securities and Exchange Commission (“SEC”) rules for interim financial information, and, therefore, omit certain information and footnote disclosures necessary to present such statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 9, 2017 (the “2016 Form 10-K”). The accompanying unaudited condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date, but does not include all information and footnotes required by GAAP for a complete set of financial statements. The results of operations for the three and nine months ended September 30, 2017 may not be indicative of the results to be expected for the entire year or any future periods. |
Derivative Liabilities | Derivative Liabilities Derivative liabilities represent the fair value of conversion features of certain notes and of certain warrants to purchase common stock (see Note 6). These derivative liabilities are calculated utilizing the Monte Carlo simulation valuation method. Changes in the fair values of these warrants are recognized as other income or expense in the related condensed consolidated statements of operations. |
Fair Value Measurements | Fair Value Measurements The Company measures and records certain financial assets and liabilities at fair value on a recurring basis. GAAP provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority, referred to as Level 1, to quoted prices in active markets for identical assets and liabilities. The next priority, referred to as Level 2, is given to quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active; that is, markets in which there are few transactions for the asset or liability, or inputs other than quoted prices that are observable for the asset or liability. The lowest priority, referred to as Level 3, is given to unobservable inputs. The table below reflects the level of the inputs used in the Company’s fair value calculations: Quoted Prices in Active Markets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value September 30, 2017 Derivative liabilities - warrants $ - $ - $ 54,950 $ 54,950 Derivative liabilities – debt conversion feature $ - $ - $ 17,500 $ 17,500 December 31, 2016 Derivative liabilities - warrants $ - $ - $ 91,173 $ 91,173 Derivative liabilities – debt conversion feature $ - $ - $ 40,000 $ 40,000 Inputs used in the Company’s Level 3 calculation of fair value include the assumed dividend rate on the Company’s common stock, risk-free interest rates, stock price volatility and the likelihood of a future equity financing transaction, all of which are further discussed in Note 6. Carrying amounts of the Company’s The table below reflects the carrying values and the estimated fair values, based on Level 3 inputs, of the Company’s outstanding notes payable, including the related accrued interest, at September 30, 2017: Carrying Values Estimated Fair Values Senior secured note payable, including accrued interest $ 2,028,111 $ 2,028,111 2014 junior secured notes payable, including accrued interest 1,862,859 1,983,375 2010 junior secured notes payable, including accrued interest 1,665,385 2,724,293 |
Inventory | Inventory Inventory is carried at the lower of cost (first-in, first-out method) or net realizable value. Items in inventory relate predominantly to the Company’s ClearPoint system. Software license inventory that is not expected to be utilized within the next twelve months is classified as a non-current asset. The Company periodically reviews its inventory for obsolete items and provides a reserve upon identification of potential obsolete items. |
Revenue Recognition | Revenue Recognition The Company’s revenues are comprised of: (1) product revenues resulting from the sale of ClearPoint system reusable products and disposable products; and (2) service revenues. The Company recognizes revenue when persuasive evidence of an arrangement exists, the selling price or fee is fixed or determinable, collection is reasonably assured, and, for product revenues, risk of loss has transferred to the customer. For all sales, the Company requires either a purchase agreement or a purchase order as evidence of an arrangement. The Company analyzes revenue recognition on a case-by-case basis, and determines if the deliverables under the arrangement represent separate units of accounting as defined by GAAP. Application of GAAP regarding multiple-element arrangements requires the Company to make subjective judgments about the values of the individual elements and whether delivered elements are separable from the other aspects of the contractual relationship. (1) Product Revenues Sales of ClearPoint system reusable products Sales of ClearPoint system disposable products (2) Service Revenues Service revenues are comprised of installation fees, training fees, shipping fees and service fees charged in connection with ClearPoint system installations and ClearPoint system service agreements. Typically, the Company bills upfront for service agreements, which have terms ranging from one to three years. These amounts are recognized as revenue ratably over the term of the related service agreement. |
Net Loss Per Share | Net Loss Per Share The Company computes net loss per share using the weighted-average number of common shares outstanding during the period. Basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the entire amount of the Company’s outstanding common stock options and warrants as described in Note 5, would be anti-dilutive. |
Concentration Risks and Other Risks and Uncertainties | Concentration Risks and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company holds its cash and cash equivalents on deposit with financial institutions in the U.S. insured by the Federal Deposit Insurance Corporation. At September 30, 2017, the Company had $245,820 in bank balances that were in excess of the insured limits. Information with respect to customers that accounted for sales in excess of 10% of total sales in the three-month and nine-month periods ended September 30, 2017 and 2016 is as follows: Three Months Ended September 30, 2017 2016 Customer - 1 11% 11% Nine Months Ended September 30, 2017 2016 Customer - 1 - 10% Information with respect to accounts receivable from those customers who comprised more than 10% of accounts receivable at September 30, 2017 and December 31, 2016 is as follows: September 30, 2017 December 31, 2016 Customer – 1 18% 20% Customer – 2 - 13% Customer – 3 - 10% Prior to granting credit, the Company performs credit evaluations of its customers’ financial condition, and generally does not require collateral from its customers. The Company will provide an allowance for doubtful accounts when collections become doubtful. The allowance for doubtful accounts at September 30, 2017 and December 31, 2016 was $27,000 and $25,000, respectively. The Company is subject to risks common to emerging companies in the medical device industry, including, but not limited to: new technological innovations; acceptance and competitiveness of its products; dependence on key personnel; dependence on key suppliers; changes in general economic conditions and interest rates; protection of proprietary technology; compliance with changing government regulations; uncertainty of widespread market acceptance of products; access to credit for capital purchases by customers; and product liability claims. Certain components used in manufacturing have relatively few alternative sources of supply, and establishing additional or replacement suppliers for such components cannot be accomplished quickly. The inability of any of these suppliers to fulfill the Company’s supply requirements may negatively impact future operating results. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-14 as an amendment to ASU 2014-09, “Revenue from Contracts with Customers,” which created a new Topic, Accounting Standards Codification (“ASC”) Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard, and ASUs 2016-10, 2016-12 and 2016-20 discussed below, are effective for the Company beginning in 2018. Earlier application is permitted only as of 2017. ● In April 2016, the FASB issued ASU 2016-10, “Revenues from Contracts With Customers (Topic 606): Identifying Performance Obligations and Licensing,” which clarified guidance related to identifying performance obligations and licensing implementation guidance contained in ASC Topic 606 as promulgated by ASU 2015-14 discussed above. ● In May 2016, the FASB issued ASU 2016-12, “Revenues from Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which address narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. ● In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts With Customers,” which provided for minor corrections and minor improvements to previously issued Topic 606 guidance. ● In September 2017, the FASB issued ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842),” which added and deleted paragraphs pursuant to SEC Staff Announcements and SEC Observer Comments. The Company believes, based on a preliminary assessment in which the Company considered such factors as the short duration of its contract terms with customers, that the adoption of ASU 2015-14, and the subsequently issued related ASUs discussed above, will not have a material effect on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” which created a new Topic, ASC Topic 842 and established the core principle that a lessee should recognize the assets, representing rights-of-use, and liabilities to make lease payments, that arise from leases. For leases with a term of 12 months or less, a lessee is permitted to make an election under which such assets and liabilities would not be recognized, and lease expense would be recognized generally on a straight-line basis over the lease term. This standard is effective for the Company beginning in 2019, and early application is permitted. The Company currently has two leases for manufacturing and office space that would be subject to the provisions of ASU 2016-02. The Company believes that adoption of ASC Topic 842 (as amended by ASC 2017-13 described above) will result in the establishment on the Company’s consolidated balance sheet of an asset and liability for each such lease, but that neither such assets and liabilities nor the resulting lease expense recognition will have a material effect on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. The standard is effective for the Company beginning in 2018, and early adoption is permitted. The Company believes that adoption of ASU 2016-15 will not have a material effect on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718),” which clarifies and reduces both (i) diversity in practice and (ii) cost and complexity when a company changes the terms or conditions of a share-based payment award. The standard is effective for the Company beginning in 2018, and early adoption is permitted. The Company believes that adoption of ASU 2017-09 will not have a material effect on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception,” which, among other items, changes the classification of certain equity-linked financial instruments (or embedded features) with down round features. The standard is effective for the Company beginning in 2019, and early adoption is permitted. Because the terms of the Company’s currently existing derivative liabilities described in Note 6, all of which the Company believes are included in the scope of the standard, will have expired prior to the standard’s effective date, the Company believes that adoption of the standard on its effective date will not have a material effect on the Company’s consolidated financial statements. |
Basis of Presentation and Sum14
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Schedule of the level of the inputs used in the company's fair value calculation for instruments carried at fair value | The lowest priority, referred to as Level 3, is given to unobservable inputs. The table below reflects the level of the inputs used in the Company’s fair value calculations: Quoted Prices in Active Markets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value September 30, 2017 Derivative liabilities - warrants $ - $ - $ 54,950 $ 54,950 Derivative liabilities – debt conversion feature $ - $ - $ 17,500 $ 17,500 December 31, 2016 Derivative liabilities - warrants $ - $ - $ 91,173 $ 91,173 Derivative liabilities – debt conversion feature $ - $ - $ 40,000 $ 40,000 |
Schedule of the carrying values and the estimated fair values, based on level 3 inputs | Information with respect to customers that accounted for sales in excess of 10% of total sales in the three-month and nine-month periods ended September 30, 2017 and 2016 is as follows: Three Months Ended September 30, 2017 2016 Customer - 1 11% 11% Nine Months Ended September 30, 2017 2016 Customer - 1 - 10% |
Sales Revenue, Net [Member] | |
Schedule of concentration of risk | The table below reflects the carrying values and the estimated fair values, based on Level 3 inputs, of the Company’s outstanding notes payable, including the related accrued interest, at September 30, 2017: Carrying Values Estimated Fair Values Senior secured note payable, including accrued interest $ 2,028,111 $ 2,028,111 2014 junior secured notes payable, including accrued interest 1,862,859 1,983,375 2010 junior secured notes payable, including accrued interest 1,665,385 2,724,293 |
Accounts Receivable [Member] | |
Schedule of concentration of risk | Information with respect to accounts receivable from those customers who comprised more than 10% of accounts receivable at September 30, 2017 and December 31, 2016 is as follows: September 30, 2017 December 31, 2016 Customer – 1 18% 20% Customer – 2 - 13% Customer – 3 - 10% |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventory consists of the following as of: September 30, 2017 December 31, 2016 Raw materials and work in process $ 1,230,481 $ 1,025,368 Software licenses 52,500 70,000 Finished goods 898,264 673,014 Inventory, net, included in current assets 2,181,245 1,768,382 Software licenses – non-current 889,400 976,900 $ 3,070,645 $ 2,745,282 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable maturities | Scheduled principal payments as of September 30, 2017 with respect to notes payable are summarized as follows: Years ending December 31, 2018 $ 2,000,000 2019 1,975,000 2020 3,000,000 Total scheduled principal payments 6,975,000 Less: Unamortized discounts (2,142,188 ) Unamortized deferred financing costs (39,193 ) $ 4,793,619 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' equity (deficit): | |
Schedule of equity compensation plans | Stock option activity under all of the Company’s Plans during the nine months ended September 30, 2017 is summarized below: Shares Weighted - Outstanding at December 31, 2016 337,441 $ 42.07 Granted 13,625 2.90 Forfeited (40,117 ) 36.06 Outstanding at September 30, 2017 310,949 $ 41.95 |
Schedule of assumptions used in calculating the fair value under the Black-Scholes option-pricing model | The estimated grant date fair values of options granted during the three months ended September 30, 2017 were calculated using the Black-Scholes valuation model, based on the following assumptions: Dividend yield 0% Expected volatility 43.38% - 48.62% Risk free interest rates 1.91% - 2.05% Expected lives (in years) 6 |
Schedule of share-based compensation expense | The Company records share-based compensation expense on a straight-line basis over the related vesting period. For the three and nine months ended September 30, 2017 and 2016, share-based compensation expense related to options was: Three Months Ended September 30, 2017 2016 $ 186,982 $ 238,101 Nine Months Ended September 30, 2017 2016 $ 616,007 $ 736,982 |
Schedule of common stock warrant activity | Warrants have generally been issued for terms of up to five years. Common stock warrant activity for the nine months ended September 30, 2017 was as follows: Shares Weighted - Outstanding at December 31, 2016 1,991,293 $ 13.00 Issued 7,134,200 2.20 Exercised (3,845 ) 2.00 Terminated (172,070 ) 32.77 Outstanding at September 30, 2017 8,949,578 $ 4.12 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair value valuation method | The fair values of the conversion feature and the warrants were calculated using the Monte Carlo simulation valuation method. Assumptions used in calculating the fair value of the conversion feature at September 30, 2017 are as follows: Risk free interest rates 1.35% Volatility 60% |
Schedule of assumptions used in calculating the fair value of the warrants | Assumptions used in calculating the fair value of the warrants at September 30, 2017 are as follows: Dividend yield 0% Expected volatility 55% Risk free interest rates 1.06 – 1.70% Expected remaining term (in years) 0.32 – 3.51 |
Schedule of fair values and the changes in fair values of derivative liabiliti | The fair values and the changes in fair values of derivative liabilities during the nine months ended September 30, 2017 and 2016 are as follows: Nine Months Ended September 30, 2017 2016 Balance, beginning of period $ 131,173 $ 658,286 Conversion of equity warrants to liabilities - 192,173 Additions from debt restructuring - 1,592,134 Reduction from debt conversions - (1,207,813 ) Reduction from warrant exercise (10,659 ) (37,672 ) Gain on change in fair value for the period (48,064 ) (748,080 ) Balance, end of period $ 72,450 $ 449,028 |
Description of the Business a19
Description of the Business and Liquidity (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |||
May 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cumulative net loss | $ (98,954,434) | $ (93,868,764) | |||
Proceeds from issuance of private placement | 13,250,000 | $ 4,255,000 | |||
Cash and cash equivalents | $ 11,028,973 | $ 4,432,421 | $ 3,315,774 | $ 5,408,523 | |
2017 Private Placement [Member] | |||||
Proceeds from issuance of private placement | $ 13,250,000 | ||||
Agents' fees and offering expenses | $ 1,300,000 |
Basis of Presentation and Sum20
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Warrant [Member] - Fair Value, Measurements, Recurring [Member] - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Derivative liabilities - warrants | $ 54,950 | $ 91,173 |
Derivative liabilities - debt conversion feature | 17,500 | 40,000 |
Fair Value, Inputs, Level 1 [Member] | ||
Derivative liabilities - warrants | ||
Derivative liabilities - debt conversion feature | ||
Fair Value, Inputs, Level 2 [Member] | ||
Derivative liabilities - warrants | ||
Derivative liabilities - debt conversion feature | ||
Fair Value, Inputs, Level 3 [Member] | ||
Derivative liabilities - warrants | 54,950 | 91,173 |
Derivative liabilities - debt conversion feature | $ 17,500 | $ 40,000 |
Basis of Presentation and Sum21
Basis of Presentation and Summary of Significant Accounting Policies (Details 1) | Sep. 30, 2017USD ($) |
Brainlab Senior Secured Note Payable [Member] | |
Debt Instrument [Line Items] | |
Carrying Values | $ 2,028,111 |
Estimated Fair Values | 2,028,111 |
12% Junior Secured Notes Payable 2014 [Member] | |
Debt Instrument [Line Items] | |
Carrying Values | 1,862,859 |
Estimated Fair Values | 1,983,375 |
Junior Secured Notes Payable 2010 [Member] | |
Debt Instrument [Line Items] | |
Carrying Values | 1,665,385 |
Estimated Fair Values | $ 2,724,293 |
Basis of Presentation and Sum22
Basis of Presentation and Summary of Significant Accounting Policies (Details 2) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Sales Revenue, Net [Member] | Customer - 1 [Member] | |||||
Concentration risk, percentage | 11.00% | 11.00% | 10.00% | ||
Accounts Receivable [Member] | Customer - 1 [Member] | |||||
Concentration risk, percentage | 18.00% | 20.00% | |||
Accounts Receivable [Member] | Customer - 2 [Member] | |||||
Concentration risk, percentage | 13.00% | ||||
Accounts Receivable [Member] | Customer - 3 [Member] | |||||
Concentration risk, percentage | 10.00% |
Basis of Presentation and Sum23
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
FDIC insured limit | $ 245,820 | |
Allowance for doubtful accounts | $ 27,000 | $ 25,000 |
Minimum [Member] | ||
Term of service agreements (in years) | 1 year | |
Maximum [Member] | ||
Term of service agreements (in years) | 3 years |
Inventory (Details)
Inventory (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials and work in process | $ 1,230,481 | $ 1,025,368 |
Software licenses | 52,500 | 70,000 |
Finished goods | 898,264 | 673,014 |
Inventory, net, included in current assets | 2,181,245 | 1,768,382 |
Software licenses - non-current | 889,400 | 976,900 |
Total inventory | $ 3,070,645 | $ 2,745,282 |
Notes Payable (Details)
Notes Payable (Details) | Sep. 30, 2017USD ($) |
Debt Disclosure [Abstract] | |
2,018 | $ 2,000,000 |
2,019 | 1,975,000 |
2,020 | 3,000,000 |
Total scheduled principal payments | 6,975,000 |
Less unamortized discounts | (2,142,188) |
Less unamortized deferred financing costs | (39,193) |
Total | $ 4,793,619 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Apr. 04, 2017 | Mar. 31, 2014 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||||||
Proceeds from common stock called | $ 13,250,000 | $ 4,255,000 | ||||
Unamortized discount | 2,142,188 | |||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt face amount | $ 3,725,000 | |||||
Maturity period | 5 years | |||||
Debt frequency of periodic payment | Semi-annually | |||||
Description of collateral terms | The 2014 Secured Notes are collateralized by a security interest in all of the Companys assets, which security interest is junior and subordinate to the security interest that collateralizes the New Brainlab note. | |||||
Unamortized discount | 81,323 | $ 121,985 | ||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | Non-Employee Directors [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt face amount | $ 1,100,000 | |||||
Other offering expenses | 39,193 | $ 58,789 | ||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | Placement Agents [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Fair value | 30,210 | |||||
Placement agents cash commission | 145,500 | |||||
Other offering expenses | $ 76,186 | |||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | Warrant [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Number of each common stock called | 0.01 | |||||
Proceeds from common stock called | $ 3,725,000 | |||||
Warrant exercise price (in dollars per share) | $ 70 | |||||
Fair value | $ 413,057 | |||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | Warrant [Member] | Maximum [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Number of common stock called | 27,937 | |||||
12% Junior Secured Notes Payable 2014 [Member] | Private Placement (Securities Purchase Agreements) [Member] | Warrant [Member] | Placement Agents [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Number of warrants issued to placement agent | 1,818 | |||||
Brainlab Senior Secured Note Payable [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Stated interest rate | 5.50% | |||||
Debt face amount | $ 5,000,000 | |||||
Maturity date | Apr. 30, 2016 | |||||
Accrued interest | $ 740,000 | |||||
Brainlab Senior Secured Note Payable [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | 740,000 | |||||
Debt cancelled principal amount | $ 1,300,000 | |||||
Number of units issued | 99,310 | |||||
Gain on foregoing of debt | $ 941,000 | |||||
Brainlab Senior Secured Note Payable [Member] | 2016 Securities Purchase Agreement (Patent And Technology License Agreement) [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt cancelled principal amount | $ 1,000,000 | |||||
Brainlab Senior Secured Note Payable [Member] | 2016 Securities Purchase Agreement (Patent And Technology License Agreement) [Member] | Common Stock [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Number of common shares issued | 1 | |||||
Brainlab Senior Secured Note Payable [Member] | 2016 Securities Purchase Agreement (Patent And Technology License Agreement) [Member] | 2016 Series A Warrants [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Warrant exercise price (in dollars per share) | $ 16.23 | |||||
Number of common shares issued | 0.4 | |||||
Brainlab Senior Secured Note Payable [Member] | 2016 Securities Purchase Agreement (Patent And Technology License Agreement) [Member] | 2016 Series B Warrants [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Warrant exercise price (in dollars per share) | $ 21.10 | |||||
Number of common shares issued | 0.3 | |||||
New Brainlab Note (amended and restated secured note) [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt face amount | $ 2,000,000 | |||||
Maturity date | Dec. 31, 2018 | |||||
Description of collateral terms | Note is collateralized by a senior security interest in all of the assets of the Company. |
Notes Payable (Details Narrat27
Notes Payable (Details Narrative 1) | Sep. 02, 2016USD ($) | Jun. 30, 2016USD ($)shares | Aug. 31, 2016USD ($)shares | Nov. 30, 2010USD ($)Numbershares | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) | Aug. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Debt Instrument [Line Items] | |||||||||||
Common stock fair value | $ 2,775,300 | ||||||||||
Unamortized discount | $ 2,142,188 | $ 2,142,188 | |||||||||
Reduction in warrants from debt conversions | $ (1,207,813) | ||||||||||
Loss on restructuring of debt | $ (933,134) | (811,909) | |||||||||
June 2016 Amendments [Member] | 12% Junior Secured Notes Payable 2014 [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | 1,500,000 | 1,500,000 | |||||||||
Number of warrants issued | shares | 11,250 | ||||||||||
Second Amendment (2016 PIPE) [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Reduction in warrants from debt conversions | $ 1,207,813 | ||||||||||
Second Amendment (2016 PIPE) [Member] | 12% Junior Secured Notes Payable 2014 [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | $ 1,750,000 | ||||||||||
Number of warrants issued | shares | 13,125 | ||||||||||
Loss on restructuring of debt | $ 933,000 | ||||||||||
Non-Employee Directors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Number of unit issued | shares | 14,180 | ||||||||||
Number of officers and directors | Number | 3 | ||||||||||
Value of unit issued | shares | 158,816 | ||||||||||
Officer [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Number of unit issued | shares | 22,068 | ||||||||||
Number of officers and directors | Number | 4 | ||||||||||
Value of unit issued | shares | 247,164 | ||||||||||
2010 Junior Secured Notes Payable [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Description of unit | Units consisting of a junior secured note (the 2010 Secured Notes) and one share of the Companys common stock. | ||||||||||
Number of unit issued | shares | 267,857 | ||||||||||
Stated interest rate | 3.50% | ||||||||||
Description of collateral terms | Collateralized by a security interest in all of the assets of the Company, which security interest is junior and subordinate to the security interests that collateralize the Brainlab Note and the 2014 Secured Notes. | ||||||||||
Description of payment terms | Interest on the 2010 Secured Notes will be due and payable in a single payment upon maturity. | ||||||||||
Unamortized discount | $ 2,060,865 | $ 2,060,865 | $ 2,302,472 | ||||||||
Interest expense terms | 10-year term of the notes using the effective interest method. | ||||||||||
Proceeds from debt issuance | $ 3,000,000 | ||||||||||
Maturity date | Nov. 30, 2020 | ||||||||||
New Brainlab Note [Member] | June 2016 Amendments [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | 500,000 | 500,000 | |||||||||
Number of warrants issued | shares | 34,957 | ||||||||||
New Brainlab Note [Member] | Non-Employee Directors [Member] | June 2016 Amendments [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | $ 3,000,000 | $ 3,000,000 | |||||||||
Brainlab Senior Secured Note Payable [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | $ 5,000,000 | ||||||||||
Stated interest rate | 5.50% | ||||||||||
Maturity date | Apr. 30, 2016 | ||||||||||
Brainlab Senior Secured Note Payable [Member] | 12% Junior Secured Notes Payable 2014 [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Loss on restructuring of debt | $ 820,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Balance at beginning | shares | 337,441 |
Granted | shares | 13,625 |
Forfeited | shares | (40,117) |
Balance at ending | shares | 310,949 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Balance at beginning | $ / shares | $ 42.07 |
Granted | $ / shares | 2.90 |
Forfeited | $ / shares | 36.06 |
Balance at ending | $ / shares | $ 41.95 |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) | 9 Months Ended |
Sep. 30, 2017 | |
Dividend yield | 0.00% |
Expected lives (in years) | 6 years |
Minimum [Member] | |
Expected volatility | 43.38% |
Risk free interest rates | 1.91% |
Maximum [Member] | |
Expected volatility | 48.62% |
Risk free interest rates | 2.05% |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stockholders' equity (deficit): | ||||
Share-based compensation expense | $ 186,982 | $ 238,101 | $ 616,007 | $ 736,982 |
Stockholders' Equity (Details 3
Stockholders' Equity (Details 3) - Common Stock Warrants [Member] | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance at beginning | shares | 1,991,293 |
Issued | shares | 7,134,200 |
Exercised | shares | (3,845) |
Terminated | shares | (172,070) |
Balance at ending | shares | 8,949,578 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Balance at beginning | $ / shares | $ 13 |
Issued | $ / shares | 2.20 |
Exercised | $ / shares | 2 |
Terminated | $ / shares | 32.77 |
Balance at ending | $ / shares | $ 4.12 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | May 26, 2017 | Sep. 02, 2016 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Number of awards oustanding | 310,949 | 337,441 | ||||
Number of awards granted | 13,625 | |||||
Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | ||||||
Number of shares issued | 13,125 | |||||
Number of unit issued | 350,000 | |||||
Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | Warrant [Member] | ||||||
Warrant exercise price (in dollars per share) | $ 5.50 | |||||
Securities Purchase Agreement (the "2017 PIPE Purchase Agreement") [Member] | Warrant [Member] | ||||||
Warrant exercise price (in dollars per share) | $ 2.20 | |||||
Warrant [Member] | ||||||
Term of warrant | 5 years | |||||
Amended and Restated 2013 Incentive Compensation Plan [Member] | ||||||
Common stock reserved for issuance | 156,250 | |||||
Number of share available for grant | 14,331 | |||||
Number of awards oustanding | 103,625 | |||||
Number of awards granted | 38,294 | |||||
Unrecognized compensation expense | $ 243,254 | |||||
Weighted average period | 1 year 1 month 13 days | |||||
2016 PIPE Investors [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | ||||||
Number of shares issued | 1 | |||||
Number of unit issued | 851,000 | |||||
Value of unit issued | 4,250,000 | |||||
Other offering expenses | $ 418,000 | |||||
2016 PIPE Investors [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | Warrant [Member] | ||||||
Warrant exercise price (in dollars per share) | $ 5.50 | |||||
Number of each common stock called | 0.90 | |||||
Placement Agents [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | Warrant [Member] | ||||||
Number of shares issued | 29,680 | |||||
Placement Agents [Member] | Securities Purchase Agreement (the "2016 PIPE Purchase Agreement") [Member] | Secured Notes 2014 [Member] | Warrant [Member] | Maximum [Member] | ||||||
Warrants exercisable date | Sep. 2, 2021 | |||||
Placement Agents [Member] | Securities Purchase Agreement (the "2017 PIPE Purchase Agreement") [Member] | Warrant [Member] | ||||||
Number of shares issued | 509,200 | |||||
2017 PIPE Investors [Member] | Securities Purchase Agreement (the "2017 PIPE Purchase Agreement") [Member] | ||||||
Number of shares issued | 1 | |||||
Number of unit issued | 6,625,000 | |||||
Value of unit issued | 13,250,000 | |||||
Other offering expenses | $ 1,300,000 | |||||
Share purchase price per share (in dollars per share) | $ 2 | |||||
2017 PIPE Investors [Member] | Securities Purchase Agreement (the "2017 PIPE Purchase Agreement") [Member] | Warrant [Member] | ||||||
Number of shares issued | 1 | |||||
Director [Member] | ||||||
Number of shares issued for services | 4,431 | 10,805 |
Derivative Liabilities (Details
Derivative Liabilities (Details) | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Risk free interest rates | 1.35% |
Volatility | 60.00% |
Derivative Liabilities (Detai34
Derivative Liabilities (Details 1) | 9 Months Ended |
Sep. 30, 2017 | |
Expected volatility | 60.00% |
Risk free interest rates | 1.35% |
Common Stock Warrants [Member] | |
Dividend yield | 0.00% |
Expected volatility | 55.00% |
Valuation method used | Monte Carlo simulation valuation method. |
Common Stock Warrants [Member] | Minimum [Member] | |
Risk free interest rates | 1.06% |
Expected remaining term (in years) | 3 months 25 days |
Common Stock Warrants [Member] | Maximum [Member] | |
Risk free interest rates | 1.70% |
Expected remaining term (in years) | 3 years 6 months 4 days |
Derivative Liabilities (Detai35
Derivative Liabilities (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Derivative Instruments and Hedges, Liabilities [Roll Forward] | ||||
Balance, beginning of period | $ 131,173 | $ 658,286 | ||
Conversion of equity warrants to liabilities | 192,173 | |||
Additions from debt restructuring | 1,592,134 | |||
Reduction from debt conversions | (1,207,813) | |||
Reduction from warrant exercise | (10,659) | (37,672) | ||
Gain on change in fair value for the period | $ (109,803) | $ (324,035) | (48,064) | (748,080) |
Balance, end of period | $ 72,450 | $ 449,028 | $ 72,450 | $ 449,028 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) | Oct. 06, 2017 | Oct. 03, 2017 |
Separation Agreement [Member] | Francis P. Grillo [Member] | ||
Subsequent Event [Line Items] | ||
Number of unregistered shares of common stock | 87,500 | |
Lump sum payment | $ 15,000 | |
Transition and consulting services fees (per month) | 30,000 | |
Employment Agreement [Member] | Joseph M. Burnett [Member] | ||
Subsequent Event [Line Items] | ||
Base salary | $ 360,000 | |
Description of annual target incentive bonus | Mr. Burnett will be eligible to receive an annual target incentive bonus of 40% of his annual base salary, subject to certain performance goals to be established by the Compensation Committee of the Board of Directors. | |
Relocation expenses | $ 50,000 | |
Initial signing bonus amount | $ 100,000 | |
Employment Agreement [Member] | Joseph M. Burnett [Member] | Non-qualified Stock Option [Member] | ||
Subsequent Event [Line Items] | ||
Number of shares issued | 350,000 | |
Employment Agreement [Member] | Joseph M. Burnett [Member] | Restricted Stock [Member] | ||
Subsequent Event [Line Items] | ||
Number of shares issued | 200,000 | |
Amended and Restated 2013 Incentive Compensation Plan [Member] | ||
Subsequent Event [Line Items] | ||
Common stock available for awards | 1,800,000 |