UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-K/A

Amendment No. 1

___________________________

For the fiscal year ended December 31, 2012

or

For the transition period from ______ to ______

Commission File Number: 000-54575

MRI INTERVENTIONS, INC.

(Exact name of registrant as specified in its charter)

(901) 522-9300

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   ☐ Yes  ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   ☐ Yes  ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ☒ Yes  ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

       (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No

As of June 29, 2012, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $73,951,613, based on the closing sale price as reported on OTC Markets.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

DOCUMENTS INCORPORATED BY REFERENCE

None

 EXPLANATORY NOTE

Subsequent to filing its Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) with the Securities and Exchange Commission (the “SEC”) on March 11, 2013, MRI Interventions, Inc. (the “Company”) determined that it should have used derivative liability accounting to account for the fair value of the warrants issued by the Company in its July 2012 equity private placement (the “July 2012 PIPE Financing”) in recording the net proceeds received from that transaction, due to the anti-dilution provision associated with the exercise price of the warrants. The Company previously recorded all of the net proceeds from the July 2012 PIPE Financing as equity.

As a result, the Company is filing this Amendment No. 1 to the 2012 Form 10-K (“Amendment No. 1”) for the purpose of restating its financial statements for the year ended December 31, 2012 included in “Item 8. Financial Statements and Supplementary Data,” to correct that non-cash accounting error. See Note 12 to the financial statements included in this Amendment No. 1 for further information relating to the restatements. Conforming changes have been made to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, “Item 9A. Controls and Procedures” has been revised to reflect management’s re-evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2012. “Item 15. Exhibits and Financial Statement Schedules” has been amended to include a new consent from the Company’s independent registered public accounting firm as reflected in Exhibit 23.1, and new certificationss as reflected in Exhibits 31.1, 31.2 and 32.

Items 7, 8, 9A and 15 of the 2012 Form 10-K are the only portions of the 2012 Form 10-K being amended and restated by this Amendment No. 1. The Company has not otherwise modified or updated disclosures presented in the 2012 Form 10-K, except to reflect the effects of the restatements. This Amendment No. 1 does not reflect events occurring after the original filing date of the 2012 Form 10-K on March 11, 2013, and does not modify or update those disclosures affected by subsequent events, except as specifically referenced herein with respect to the restatements. Information not affected by the restatements is unchanged and reflects the disclosures made at the time of the original filing of the 2012 Form 10-K. Accordingly, this Amendment No. 1 should be read in conjunction with the 2012 Form 10-K and the Company’s filings with the SEC subsequent to the filing of the 2012 Form 10-K. The Company will also file an amended Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 regarding the above-described non-cash accounting error.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. You should review the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

Overview

We are a medical device company that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain and heart under direct, intra-procedural magnetic resonance imaging, or MRI. We have two product platforms. Our ClearPoint system, which is in commercial use in the United States, is used to perform minimally invasive surgical procedures in the brain. We anticipate that the ClearTrace system, which is still in development, will be used to perform minimally invasive surgical procedures in the heart. Both systems utilize intra-procedural MRI to guide the procedures. Both systems are designed to work in a hospital’s existing MRI suite. We believe that our two product platforms, subject to appropriate regulatory clearance and approval, will deliver better patient outcomes, enhance revenue potential for both physicians and hospitals, and reduce costs to the healthcare system.

In 2010, we received regulatory clearance from the FDA to market our ClearPoint system in the United States for general neurological procedures. In 2011, we also obtained CE marking approval for the ClearPoint system, which enables us to sell the ClearPoint system in the European Union. Substantially all of our product revenues for 2012 and 2011 relate to sales of our ClearPoint system products.  We do not have regulatory clearance or approval to sell our ClearTrace system, and, therefore, we have not generated revenues from sales of that product candidate. In 2008, we received licensing fees totaling $13.0 million from Boston Scientific for our MRI-safety technologies, which we used to finance our operations and internal growth. We have also financed our operations and internal growth through private placements of securities, borrowings and interest earned on the net proceeds from our private placements and the Boston Scientific licensing fees. Prior to 2008, we were a development stage enterprise. We have incurred significant losses since our inception in 1998 as we devoted substantial efforts to research and development. As of December 31, 2012, we had an accumulated deficit of $65.7 million. We may continue to incur operating losses as we commercialize our ClearPoint system products, continue to develop our product candidates and to expand our business generally.

Factors Which May Influence Future Results of Operations

The following is a description of factors which may influence our future results of operations, and which we believe are important to an understanding of our business and results of operations.

Revenues

In June 2010, we received 510(k) clearance from the FDA to market our ClearPoint system in the United States for general neurological procedures. Future revenues from sales of our ClearPoint system products are difficult to predict and may not be sufficient to offset our continuing  research and development expenses and our increasing selling, general and administrative expenses. We cannot sell any of our product candidates until we receive regulatory clearance or approval.

The generation of recurring revenues through sales of our disposable components is an important part of our business model for our ClearPoint system. We first generated revenues through the sale of ClearPoint system disposable components in the third quarter of 2010. We anticipate that recurring revenues will constitute an increasing percentage of our total revenues as we leverage each new installation of our ClearPoint system to generate recurring sales of these disposable components.

Since inception, the most significant source of our revenues has been related to our collaborative agreements with Boston Scientific, principally from recognition of portions of the $13.0 million of licensing fees, which we received in 2008. Revenues associated with these licensing fees are recognized on a straight-line basis over a five year period, representing our estimated period of continuing involvement in the development activities, which period we estimate will end in the first quarter of 2013. Any additional payments related to substantive, performance-based milestones that may be received under the agreement regarding implantable cardiac leads will be recognized upon receipt. These revenue recognition policies are more fully described in the “Critical Accounting Policies and Significant Judgments and Estimates” section below.

Cost of Product Revenues

Cost of product revenues includes the direct costs associated with the assembly and purchase of disposable and reusable components of our ClearPoint system which we have sold, and for which we have recognized the revenue in accordance with our revenue recognition policy. Cost of product revenues also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our ClearPoint Placement Program, as well as write-offs of obsolete, impaired or excess inventory.

Research and Development Costs

Our research and development costs consist primarily of costs associated with the conceptualization, design, testing and prototyping of our ClearPoint system products and our product candidates. This includes: the salaries, travel and benefits of research and development personnel; materials and laboratory supplies used by our research personnel; consultant costs; sponsored contract research and product development with third parties; and licensing costs. We anticipate that, over time, our research and development expenses may increase as we: (1) continue our product development efforts for the ClearTrace system; (2) continue to develop enhancements to our ClearPoint system; and (3) expand our research to apply our technologies to additional product applications. From our inception through December 31, 2012, we have incurred approximately $37 million in research and development expenses.

Product development timelines, likelihood of success and total costs vary widely by product candidate. At this time, given the stage of development of the ClearTrace system and due to the risks inherent in the product clearance and approval process, we are unable to estimate with any certainty the costs that we will incur in the continuing development of that product candidate for commercialization.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of: salaries, sales incentive payments, travel and benefits; share-based compensation; professional fees, including fees for attorneys and outside accountants; occupancy costs; insurance; marketing costs; and other general and administrative expenses, which include corporate licenses, director fees, hiring costs, taxes, postage, office supplies and meeting costs. Our selling, general and administrative expenses are expected to increase due to costs associated with the commercialization of our ClearPoint system, increased headcount necessary to support our continued growth in operations, and the operational and regulatory burdens and costs associated with operating as a public company.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements as well as the reported expenses during the reporting periods. The accounting estimates that require our most significant, difficult and subjective judgments include revenue recognition, impairment of long-lived assets, computing the fair value of our derivative liability and the determination of share-based compensation and financial instruments. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report on Form    10-K, we believe that the following accounting policies and estimates are most critical to a full understanding and evaluation of our reported financial results.

Revenue Recognition. Our revenues arise from: (1) the sale of ClearPoint system reusable components, including associated installation services; (2) the sale of ClearPoint disposable products; and (3) license and development arrangements. We evaluate the various elements of our arrangements based upon GAAP for multiple element arrangements to determine whether the various elements represent separate units of accounting. This evaluation requires subjective determinations about the fair value or estimated selling price of each element and whether delivered elements have stand-alone value and, therefore, are separable from the undelivered contract elements for revenue recognition purposes. We recognize revenue, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-10-S99, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the fee is fixed or determinable, collection of the fee is probable and delivery has occurred. For all sales, we require either a purchase agreement or a purchase order as evidence of an arrangement.

(1) Sale of ClearPoint system reusable components — Revenues related to ClearPoint system sales are recognized upon installation of the system and the completion of training of at least one of the customer’s physicians, which typically occurs concurrently with the ClearPoint system installation. ClearPoint system reusable components include software. This software is integral to the utility of the ClearPoint system as a whole, and as such, the provisions of FASB ASC 985-605, “Software Revenue Recognition,” are not applicable. Sales of reusable components that have stand-alone value to the customer are recognized when risk of loss passes to the customer. Sales of reusable components to a distributor that has been trained to perform ClearPoint system installations are recognized at the time risk of loss passes to the distributor.

(2) Sales of ClearPoint disposable products — Revenues from the sale of ClearPoint disposable products utilized in procedures performed using the ClearPoint system, which occurs after the system installation is completed for a given customer, are recognized at the time risk of loss passes, which is generally at shipping point or the customer’s location, based on the specific terms with that customer.

(3) License and development arrangements — Historically we have evaluated revenue recognition on an agreement-by-agreement basis, which has principally involved two license agreements with Boston Scientific. Both agreements provide for various potential revenue streams for us, including an up-front licensing fee for one of the licenses, various milestone payments, payments for research and development and consulting services, and royalties. In both license agreements, we concluded that all of the contract elements should be treated as a single unit of accounting. As such, all amounts received were initially recorded as deferred revenue and thereafter recognized as revenue over our estimated period of performance on a straight-line basis. In the case of the license with a possible repayment obligation provision, revenue was not recognized until the repayment obligation period expired; the revenue that had been deferred was recognized in the year ended December 31, 2012.  Note 2 to our financial statements, “Significant Accounting Policies—Revenue Recognition,” more fully describes the deliverables under these license agreements including our rights, obligations and cash flows.

Inventory. Inventory is carried at the lower of cost (first-in, first-out (“FIFO”) method) or net realizable value. All items included in inventory relate 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.  We periodically review our inventory for obsolete items and provide a reserve upon identification of potential obsolete items.

Derivative Liability for Warrants to Purchase Common Stock. Our derivative liability for warrants represents the fair value of warrants issued in connection with a private placement of shares of our common stock. These warrants are presented as liabilities based on an exercise price reduction provision. The liability, which is recorded at fair value on our balance sheet, is calculated using the Monte Carlo simulation valuation method. The change in fair value of these warrants is recognized as other income or expense in our statement of operations.

Share-based compensation. We account for compensation for all arrangements under which employees and others receive shares of stock or other equity instruments (including options and warrants) in accordance with FASB ASC 718,“Compensation – Stock Compensation.” Under ASC 718, the fair value of each award is estimated and amortized as compensation expense over the requisite vesting period. The fair value of our share-based awards is estimated on the grant date using the Black-Scholes valuation model. This valuation model requires the input of highly subjective assumptions, including the expected stock volatility, estimated award terms and risk-free interest rates during the expected terms. To estimate the expected terms, we utilize the “simplified” method for “plain vanilla” options discussed in the SEC’s Staff Accounting Bulletin 107, or SAB 107. We believe that all factors listed within SAB 107 as pre-requisites for utilizing the simplified method apply to us and for our share-based compensation arrangements. We intend to utilize the simplified method for the foreseeable future until more detailed information about exercise behavior becomes available. We based our estimate of expected volatility on the average of historical volatilities of publicly traded companies we deemed similar to us because we lack adequate relevant historical volatility data. We will consistently apply this methodology until a sufficient amount of historical information regarding the volatility of our share prices becomes available. We utilize risk-free interest rates based on zero-coupon United States treasury instruments, the terms of which are consistent with the expected terms of the share-based awards. We have not paid and do not anticipate paying cash dividends on shares of our common stock; therefore, the expected dividend yield is assumed to be zero. The fair value of share-based payments are generally amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. We believe there is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation under ASC 718. Currently, there is not a market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. Although the fair value of share-based awards is determined in accordance with ASC 718 using an option pricing model, that value may not be indicative of the fair value observed in a market transaction between a willing buyer and a willing seller. If factors change and we employ different assumptions in the application of ASC 718 in future periods than those currently applied under ASC 718, the compensation expense we record in future periods under ASC 718 may differ significantly from what we have historically reported.

Total share-based compensation expense for the years ended December 31, 2012, 2011 and 2010 was $2.0 million, $990,000 and $245,000, respectively. As of December 31, 2012 there was $1.9 million of unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

Research and development costs. Expenses related to research, design and development of products are charged to research and development costs as incurred. These expenditures include direct salary and employee benefit related costs for research and development personnel, costs for materials used in research and development activities and costs for outside services.  Since most of the expenses associated with our development service revenues relate to existing internal resources, these amounts are included in research and development costs.

Results of Operations

Comparison of the Year Ended December 31, 2012 to the Year Ended December 31, 2011

 NM= not meaningful

Revenues. Revenues were $5.1 million for the year ended December 31, 2012, compared to $3.8 million for the year ended December 31, 2011, an increase of $1.3 million, or 32%. License fee revenues related to our license agreements with Boston Scientific were $3.3 million for the year ended December 31, 2012 compared with $2.6 million for the year ended December 31, 2011.  During the year ended December 31, 2012, we recorded development service revenues of $541,000 related to development services we provided to a third party, compared to $63,000 for the year ended December 31, 2011. Product revenues for both of the years ended December 31, 2012 and 2011 were $1.2 million. Approximately $150,000 of the product revenues for the year ended December 31, 2012 relate to the sale of ClearPoint system reusable components, compared to $730,000 in the year ended December 31, 2011. Substantially all of the remaining product revenues for the year ended December 31, 2012 and 2011 relate to sales of ClearPoint disposable products. The increase in disposable product sales reflects an increasing number of ClearPoint procedures being performed as adoption of the ClearPoint system increases.

Cost of Product Revenues. Cost of product revenues was $556,000 for the year ended December 31, 2012, compared to $656,000 for the year ended December 31, 2011, a decrease of $100,000, or 15%. The decrease in cost of product revenues resulted from the change in sales mix as ClearPoint disposable sales represented 87% of product sales for the year ended December 31, 2012, compared with only 39% for the prior year. Margins on the sale of our ClearPoint system disposable components are typically significantly higher than on the sale of our ClearPoint system’s reusable components. The decrease due to the change in sales mix was partially offset an increase of $110,000 in depreciation expense for loaned systems installed under our ClearPoint Placement Program, which was driven by the additional number of loaned systems installed at customer facilities during the year ended December 31, 2012, compared with the year ended December 31, 2011.

Research and Development Costs.  Research and development costs were $2.5 million for the year ended December 31, 2012, compared to $4.3 million for the year ended December 31, 2011, a decrease of $1.8 million, or 42%.  The primary driver of the decrease was a reduction in spending related to our ClearTrace development program, as we incurred $750,000 in expense for ClearTrace related sponsored research during the year ended December 31, 2011, compared to none for the year ended December 31, 2012. A reduction of $584,000 in consulting and personnel costs, again mostly related to ClearTrace system development, also contributed to the decrease. We scaled back our ClearTrace development program spending while we were seeking additional funding and as we focused more time and resources on ClearPoint commercialization efforts. We experienced a decrease in research and development costs of $362,000 related to our Key Personnel Incentive Program (see the explanation of reversal of R&D obligation below) when comparing the year ended December 31, 2012 with the year ended December 31, 2011.  In addition, we recorded a credit of $97,000 during the year ended December 31, 2012 related to sponsored research as we negotiated with a research partner to reduce amounts we were invoiced prior to December 31, 2011, but which we had not yet paid, in order to reflect an adjustment for work that was specified in our agreement with the research partner but was not completed.

Reversal of R&D Obligation. For the year ended December 31, 2012, we recorded a credit to research and development expense of $883,000. This credit was recorded to reverse expenses previously recorded as research and development costs under our Key Personnel Incentive Program. The reversal occurred as a result of the program participants’ voluntary and irrevocable relinquishment, in June 2012, of their rights to receive incentive bonus payments related to performance of services under the program, and our corresponding discharge from our obligations to make any and all such service-based payments. Of the amount reversed, $121,000 of the expense had been recorded during the three months ended March 31, 2012, and the remaining amounts had been accrued as research and development costs in the years ended December 31, 2011 and 2010.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $6.0 million for the year ended December 31, 2012, compared with $4.8 million for the year ended December 31, 2011, an increase of $1.2 million, or 25%. The increase relates mostly to share-based compensation expense of $862,000 associated with warrants we issued in May 2012 to two non-employee directors to purchase 1.25 million shares of our common stock and additional warrants we issued during the year to a service provider, two research contributors and a long-time financial adviser to purchase 411,666 shares of our common stock. All of these warrants had an exercise price of $1.00 per share and were immediately vested upon issuance, and the fair value of these warrants was computed using the Black-Scholes pricing model. We also experienced increased spending of approximately $215,000 related to fees paid for investor relations services and filing agent costs associated with our being a public company.  In addition, our hiring costs increased by $161,000, and our share-based compensation expense related to employee stock options increased by $108,000. These increases were partially offset by a reduction in expenses for professional services, which were down $96,000 when comparing the year ended December 31, 2012 with the year ended December 31, 2011.

Other Expense, Net. Net interest expense for the year ended December 31, 2012 was $2.6 million, compared with $2.5 million for the year ended December 31, 2011, an increase of $86,000. Interest expense which was accrued during the year ended December 31, 2012 was $534,000, compared to $1.2 million for the year ended December 31, 2011. The reduction in interest that was accrued related to the conversion of convertible notes payable into shares of our common stock in February 2012, which notes payable were outstanding for all or part of the year ended December 31, 2011. The remainder of the interest expense recorded during year ended December 31, 2012 was mostly related to the $1.9 million write-off of deferred debt issuance costs and unamortized debt discounts associated with the conversion of convertible notes payable into shares of our common stock in February 2012. The remainder of interest expense recorded during the year ended December 31, 2011 related to amortization of debt discounts and deferred debt issuance costs. Interest income was approximately $14,000 for the year ended December 31, 2012, compared with $3,000 for the year ended December 31, 2011. Also, included in other expense, net, for the year ended December 31, 2012 is a loss of $171,000 related to the change in the fair value of derivative liabilities associated with warrants issued in our July 2012 PIPE financing transaction. No such gain or loss was recorded for the year ended December 31, 2011.

Comparison of the Year Ended December 31, 2011 to the Year Ended December 31, 2010

NM = not meaningful

Revenues.  Revenues were $3.8 million for the year ended December 31, 2011, compared to $2.7 million for the year ended December 31, 2010. License fee revenue related to our license agreement with Boston Scientific for implantable cardiac medical leads was $2.6 million during both years. Product revenues for the years ended December 31, 2011 and 2010 were $1.2 million and $69,000, respectively. The increase relates to sales of our ClearPoint system reusable and disposable components. We initiated the commercial launch of our ClearPoint system in 2010 after receiving FDA regulatory clearance in June 2010. Higher ClearPoint product sales during the year ended December 31, 2011 reflect increased adoption of our ClearPoint system.

Cost of Product Revenues. Cost of product revenues was $656,000 for the year ended December 31, 2011, compared to $16,000 for the year ended December 31, 2010. The increase in cost of product revenues was due to the increase in product revenues and the change in our sales mix. All product revenues for the year ended December 31, 2010 were related to sales of our ClearPoint system disposable products. On the other hand, approximately 38% of our product revenues for the year ended December 31, 2011 were from sales of our disposable products with the remainder representing sales of our reusable components. Gross margin is significantly higher on sales of our ClearPoint system disposable products than sales of our ClearPoint system reusable products.

Research and Development Costs. Research and development costs were $4.3 million for the year ended December 31, 2011, compared to $5.7 million for the year ended December 31, 2010, a decrease of $1.4 million, or 25%. This decrease was due primarily to: (i) a decrease of $976,000 in ClearTrace system software development expenses related to the timing of achievement of development milestones by our third party software development partner; (ii) a decrease of $349,000 in software development expenses related to our ClearPoint system as very little development work was left to be completed in 2011; and (iii) a decrease of $344,000 due to a reduction in the use of outside consultants. These decreases were partially offset by an increase in compensation related to our Key Personnel Incentive Program of $206,000 and an increase in share-based compensation expense related to R&D personnel of $215,000.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $4.8 million for the year ended December 31, 2011 compared to $4.7 million for the year ended December 31, 2010, an increase of $133,000, or 3%. The change relates to an increase of $530,000 in share-based compensation expense related to stock options granted in December 2010, which was mostly offset by a decrease related to the costs associated with the settlement of a trademark dispute recorded in 2010 of $425,000. All monies owed under the terms of the settlement agreement were paid in 2011, except for approximately $71,000 which was paid in early 2012.

Costs of Withdrawn IPO. In 2009, we filed a registration statement with the SEC relating to the initial public offering, or IPO, of shares of our common stock. In 2010, we made the decision to withdraw our registration statement and to cancel the planned IPO. Costs which had been deferred, totaling $1.8 million, were recorded as costs of withdrawn IPO in the statement of operations in 2010.

Other Income (Expense), Net. Net other expense was $2.4 million for the year ended December 31, 2011 compared with net other income of $61,000 for the year ended December 31, 2010. Net interest expense was $2.5 million for the year ended December 31, 2011, compared to $1.6 million for the year ended December 31, 2010. The increase in interest expense relates to interest on increased borrowings and related amortization of debt discounts and deferred financing costs. We issued notes payable in the principal amount of $7.1 million during 2010 that were outstanding for the full year in 2011. In addition, we issued notes payable during 2011 in the principal amount of $4.9 million. Net interest expense for the year ended December 31, 2010 was more than offset by a gain of $1.2 million recorded on the revaluation of our derivative liability and other income of $416,000 related to grants received under the Qualifying Therapeutic Discovery Project provided by the United States Treasury Department.

Liquidity and Capital Resources

For the years ended December 31, 2012, 2011 and 2010, we incurred net losses of $5.9 million, $8.3 million, and $9.5 million, respectively, and the cumulative net loss since our inception through December 31, 2012 was $65.7 million. We expect such losses to continue through at least the year ended December 31, 2013 as we continue to commercialize our ClearPoint system and pursue research and development activities. Net cash used in operations was $7.4 million, $6.2 million, and $7.7 million for the years ended December 31, 2012, 2011, and 2010, respectively. Since inception, we have financed our activities principally from the sale of equity securities, the issuance of convertible notes and license arrangements.

Our primary financing activities during the years ended December 31, 2012, 2011, and 2010 were:

In January 2013, we completed a private offering in which we sold securities for net proceeds of approximately $9.9 million. While we expect to continue to use cash in operations, we believe our existing cash and cash equivalents at December 31, 2012 of $1.6 million, combined with the net proceeds from our January 2013 private offering, will be sufficient to meets our anticipated cash requirements through at least March 2014. During 2013, we plan to increase our spending on sales and marketing activities as we complete the commercial rollout of our ClearPoint system, from which we expect to increase ClearPoint product revenues. Certain planned expenditures are discretionary and could be deferred if required to do so to fund critical operations. To the extent our available cash and cash equivalents are insufficient to satisfy our long-term operating requirements, we will need to seek additional sources of funds, from the sale of additional equity, debt or other securities or through a credit facility, or modify our current business plan. There can be no assurance that we will be able to obtain additional financing on commercially reasonable terms.  The sale of additional equity or convertible debt securities will likely result in dilution to our current stockholders.

The table below summarizes the impact to our balance sheet and to shares outstanding of the conversions to common stock that occurred upon the effectiveness of our Form 10 registration statement, which occurred on February 27, 2012:

* See Note 8 to our December 31, 2012 audited financial statements.

Cash Flows

Net Cash Flows from Operating Activities. Net cash used in operating activities for the years ended December 31, 2012, 2011, and 2010 primarily reflects the net loss for each year, which was reduced in part by amortization, depreciation and share-based compensation expense, but which increased by the change in deferred revenue.  Net cash used in operating activities for the year ended December 31, 2012 also reflects a use of cash related to the $3.0 million reduction in accounts payable and certain accrued expenses as we paid down certain outstanding balances. Net cash used in operating activities for the years ended December 31, 2011 and 2010 reflect increases in accounts payable and accrued expenses of $2.2 million and $3.5 million, respectively, as sources of cash as we extended payment terms while we sought additional funding. The losses for each year resulted mostly from selling, general and administrative expenses and from funding research and development activities.

Net Cash Flows from Investing Activities. Net cash flows from investing activities for the years ended December 31, 2012, 2011 and 2010 were $(127,000), $(26,000) and $(62,000), respectively. Net cash used in investing activities for each of the periods was primarily related to the purchase of property and equipment to support operations at our Irvine, California facility and the acquisition of intellectual property licenses.

Net Cash Flows from Financing Activities. Net cash provided by financing activities for the year ended December 31, 2012 relates to the $5.5 million of net proceeds generated from our July 2012 PIPE financing transaction and the $3.4 million of net proceeds generated in 2012 from the unit offering we concluded in February 2012.  Net cash provided by financing activities for the year ended December 31, 2011 relates mostly to the proceeds from our issuance of a $2.0 million convertible note payable in April 2011 and $2.8 million we received in two unit offerings in which we issued both convertible notes payable and warrants to purchase shares of our common stock. Net cash provided by financing activities for the year ended December 31, 2010 relates to the net proceeds of $3.8 million from our issuance of convertible notes payable and $3.0 million we received in a unit offering in which we issued shares of our common stock and secured notes payable.

Operating Capital and Capital Expenditure Requirements

To date, we have not achieved profitability. We could continue to incur net losses as we commercialize our ClearPoint system products, continue to develop the ClearTrace system, expand our corporate infrastructure and pursue additional applications for our technology platforms.  Our cash balances are typically held in a variety of interest bearing instruments, including interest bearing demand accounts and certificates of deposit. Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation.

Because of the numerous risks and uncertainties associated with the development and commercialization of medical devices, we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to successfully commercialize our products and complete the development of our product candidates. Our future capital requirements will depend on many factors, including, but not limited to, the following:

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Report of Independent Registered Public Accounting Firm and Financial Statements are set forth on pages F-1 to F-30 of this Annual Report on Form 10-K.

ITEM 9A.   CONTROLS AND PROCEDURES.

Management’s Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to ensure that material information relating to us is made known to our principal executive officer and principal financial officer by others within our organization. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2012 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.  

Based on that evaluation, our principal executive officer and principal financial officer had concluded that our disclosure controls and procedures were effective as of December 31, 2012 (the end of the period covered by this Annual Report on Form 10-K).

However, in connection with the restatement of our financial statements for the year ended December 31, 2012, as described in Note 12 to the accompanying financial statements, we re-evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2012. As a result of that re-evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of such date.

Management’s Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not include a report on management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control over Financial Reporting

As of the year ended December 31, 2012, there were no significant changes in our internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We are committed to a strong internal control environment. Therefore, we are currently taking steps to remediate the accounting error described in Note 12 to the accompanying financial statements. We will disclose any resulting change in our internal control over financial reporting in a future period.

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)  The following documents are filed under “Item 8.  Financial Statements and Supplementary Data,” pages F-1 through F-30, and are included as part of this Annual Report on Form 10-K:

(a)(2)  Financial statement schedules are omitted as they are not applicable.

(a)(3)  See Item 15(b) below.

(b)  Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

MRI INTERVENTIONS, INC.

Table of Contents

To the Board of Directors and Stockholders of

MRI Interventions, Inc.

We have audited the accompanying balance sheets of MRI Interventions, Inc. (the “Company”) as of December 31, 2012 and 2011, and the related statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2012, 2011 and 2010.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of MRI Interventions, Inc. as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the years ended December 31, 2012, 2011 and 2010 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, during 2012, the Company recognized a net loss of approximately $5.9 million.  Further, the Company had a net loss of approximately $8.3 million in 2011 and $9.5 million in 2010.  At December 31, 2012 the Company had incurred cumulative losses of approximately $65.7 million. Management’s plans in regard to this matter are described in Note 1.

As discussed in Note 12 to the financial statements, the financial statements as of and for the year ended December 31, 2012 have been restated.

/s/ Cherry Bekaert LLP

Tampa, Florida

March 11, 2013 (except for Notes 2, 8 and 12 for which the date is August 19, 2013)

MRI INTERVENTIONS, INC.

Balance Sheets

See notes to financial statements.

MRI INTERVENTIONS, INC.

Statements of Operations

See notes to financial statements.

MRI INTERVENTIONS, INC.

Statements of Stockholders’ Deficit

Years Ended December 31, 2010, 2011, and 2012

(restated for the year ended December 31, 2012)

See notes to financial statements.

MRI INTERVENTIONS, INC.

Statements of Cash Flows