Magna-Lab comeback attempt hinges on cardiac MRI project

Company was forced to slash operations in 1997

Niche MRI developer Magna-Lab is in a dormant mode due to a lack of operating cash, but executives with the Brentwood, NY, company are trying to get the firm back on its feet by raising additional capital. Magna-Lab's recovery plans are based on a research project in cardiac MRI that the company plans to conduct in collaboration with the Cardiac Institute of the Mount Sinai School of Medicine in New York City.

Lack of capital forced Magna-Lab to sharply curtail its operations last year (SCAN 6/25/97). The company ceased manufacturing, put much of its assets into storage, and cut its work force down to a handful of executives, including founder Lawrence Minkoff and CFO Kenneth Riscica. The firm's financial problems were due to its inability to win market acceptance for its Magna-SL scanner, a niche MRI system designed for imaging extremities.

Although the vendor's prospects look bleak, Magna-Lab executives still keep the flame burning. Last month the company announced that it had secured a private stock placement that brought the company $1.9 million in funding. The money will be used to jump-start the Mount Sinai project, which will examine the use of MRI for cardiac arterial vascular imaging. Magna-Lab declined to provide specifics explaining the nature of the work, other than to say that it uses certain unique approaches and hardware.

Under the agreement with Mount Sinai, Magna-Lab has agreed to pay the hospital $1.5 million over the next three years, of which $150,000 was paid in December. In return, Magna-Lab will have exclusive worldwide rights to exploit the technology developed through the collaboration, in keeping with the company's desire to base its future operations on royalties and R&D work rather than manufacturing. Mount Sinai will also receive royalties under the deal.

According to documents on file with the Securities and Exchange Commission, a proposal from Israeli multimodality vendor Elscint is integral to Magna-Lab's restructuring plan, but the company declined to specify the nature of that proposal. An Elscint spokesperson said that his company is still in discussions regarding taking over the manufacturing and distribution of the Magna-SL scanner, but nothing has been finalized yet. Elscint is not involved in Magna-Lab's cardiac MRI project, the spokesperson said. Magna-Lab executives declined to return phone calls.

While the $1.9 million investment Magna-Lab placed last month is a step forward, the company still faces major problems. It owes hundreds of thousands of dollars to creditors and former employees, but is trying to settle the claims by paying reduced amounts. In addition, Magna-Lab estimates that the January private placement will only give it enough operating capital for the next six months before additional financing is needed, according to the SEC filings.