Magna-Lab continues fight for survival as cash runs low

Company needs additional funds to operate

Niche MRI developer Magna-Lab continues clinging to life. Despite having no sales and marketing operations and a skeleton staff, the Edgewood, NY, company has refused to throw in the towel and is looking for additional funding to bankroll a cardiac MRI initiative that could help it return to financial health. The firm may face problems if it does not secure funding in the next several months, however.

In the mid-1990s, Magna-Lab developed the Magna-SL niche MRI scanner with the goal of carving out a place for itself in a market dominated by huge vendors. Starved by a shortage of cash, the firm laid off much of its staff and ceased manufacturing operations in 1997 (SCAN 6/25/97).

Magna-Lab now sees the company's salvation in a cardiac MRI initiative it is working on with Dr. Valentin Fuster at the Cardiac Institute of Mount Sinai School of Medicine in New York City. Although Magna-Lab has not described the nature of the work, it involves using MRI for cardiac arterial imaging.

Magna-Lab's comeback plan, as presented in early 1998, was based on the work at Mount Sinai and a proposed relationship with Elscint involving contract manufacturing. The companies were unable to strike a deal, however, and Elscint's divestiture of its MRI business to GE Medical Systems last year has probably killed the likelihood of an arrangement. Magna-Lab is in discussions with another company regarding a manufacturing deal for the first product under the cardiac MRI project, but that deal is dependent on securing additional financing.

Magna-Lab is running low on cash, having exhausted $1.9 million garnered through a private stock placement in December 1997. In a Securities and Exchange Commission statement filed Jan. 14, the company reported cash and cash equivalents of $13,000 as of Nov. 30, 1998, compared with $599,000 in cash as of Feb. 28, 1998. The company also reported $1 million in current liabilities as of the end of November. The company had no revenues for the period, while its net loss was $279,000 for the quarter.

In its SEC statement, Magna-Lab said that it is "in need of immediate significant additional financing and/or a strategic business arrangement" in order to continue operations. Its cash resources as of Nov. 30 are insufficient to fund the business in the current fiscal quarter, the company said.

Whether Magna-Lab can secure that financing is unclear. It gained some breathing room with another private stock placement in January that has raised $223,000 so far, and more funds could be on the way through the same investors. Company representatives were not available to comment as of press time.