MGT Capital Investments, parent of computer-aided detection (CAD) software developer Medicsight, has provided an update on recent corporate developments, including progress on an investigation into its financial statements.
While the company's internal investigations into potential misappropriation and/or misdirection of corporate funds remain ongoing, it has concluded that no adjustments or restatement of prior financial statements is required. MGT's board is also confident that its financial statements will not require a material restatement as a result of any additional irregularities discovered in the future. MGT said it intends to seek all possible methods of recovery or restitution where appropriate.
However, preliminary results of the investigation identified an additional weakness in internal controls over financial reporting, relating to identification and disclosure for related-party relationships and related-party transactions. MGT said it would assess the effectiveness of its remediation efforts in connection with management's tests of internal control over financial reporting in conjunction with its December 31, 2011, financial statements.
In other news, MGT said that Medicsight has withdrawn its submission to the Japanese Ministry of Health, Labor, and Welfare (MHLW) for its MedicRead CT colonography software. MHLW had informed Medicsight that errors were encountered in its review of the application, and Medicsight elected to withdraw the application following informal guidance from MHLW. While it assesses its next course of action, Medicsight's board of directors has decided to close the company's Tokyo office.
Medicsight is also closing several other subsidiaries in Australia, China, and the United Arab Emirates due to unjustifiably high legal, regulatory, and accounting costs of maintaining such entities, according to MGT. Medicsight will open a U.S. subsidiary in New York, however, in support of the recent U.S. Food and Drug Administration (FDA) clearance of its ColonCAD software.
In financial developments, Medicsight's board of directors has agreed to call a general stockholder meeting on September 14 to vote on whether to cancel its ordinary shares from trading on the London Stock Exchange's AIM and to reregister as a private company. The board is recommending this course of action as being in the best interest of the company and all stockholders, citing a diminished ability to raise new capital and the relatively large expense of maintaining a public listing.
Medicsight reported a net loss of $2.9 million U.S. in its second quarter (end-June 30), compared with a net loss of $4 million U.S. in the corresponding quarter last year.
As of June 30, MGT had cash and cash equivalents of $5.7 million U.S. The company said it has sufficient cash on hand and availability in the line of credit facility with a related party to continue operations through October 2011. Additional planned actions, such as the relocation of MGT's and Medicsight's operations to a less costly space following expiration of their office lease in London, will allow MGT to continue operations through March 2012, at which time it may need to seek additional financing sources.
