Firm’s auditor issues ‘going concern’ statementAlthough denying his company is in imminent danger, Magna-Lab CEO Lawrence Minkoff is negotiating for equity capital and a strategic partner, which the firm's auditor has stated are
Firms auditor issues going concern statement
Although denying his company is in imminent danger, Magna-Lab CEO Lawrence Minkoff is negotiating for equity capital and a strategic partner, which the firm's auditor has stated are crucial to keeping the MRI scanner manufacturer in business this year.
A weakening balance sheet led Magna-Lab's outside accountant to question its prospects. As of Nov. 30, the Edgewood, NY, company reported a $100,000 working capital deficit and had about $223,000 in cash. Through the previous three quarters, Magna-Lab lost $1.8 million as it expanded its production capacity.
A Securities and Exchange Commission 10-Q report, filed after the end of Magna-Lab's fiscal year on Feb. 28, noted that further losses incurred since November have required the firm to seek additional financing or a strategic business arrangement to continue operations in fiscal 1997. Without supplementary funding, Magna-Lab may have difficulty continuing as a going concern, according to the statement.
Without disclosing details, Minkoff said that he is seeking new funding. An equity arrangement is being negotiated to break the company's immediate cash crunch. He is also talking with Elscint and others about a partnership.
"The company is going through a certain amount of reorientation on what it can and can't do," he said.
One of the things Magna-Lab hasn't done is find many customers for its $400,000 Magna-SL extremity scanner, which began shipping in 1995. Most of its sales success has been with parties closely associated with the firm. Two of three commercial systems shipped last year were acquired by Beta Numerics, a Canandaigua, NY, company owned by Magna-Lab directors and minority shareholders Irwin Rosenthal and Herbert Moscowitz.
Implementation of Magna-Lab's manufacturing and international distribution relationship with Elscint Cryomagnetics, formed in June 1996, is behind schedule (SCAN 6/19/96). Elscint is gearing up its Fort Collins, CO, assembly plant to build niche scanners that it will sell in selected international markets, according to Minkoff. But the companies have argued about delays in design changes that Magna-Lab promised for the product.