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Basis of Presentation | 6 Months Ended
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Jun. 30, 2019
Basis of Presentation |
Basis of Presentation | 1 — Basis of Presentation The accompanying interim condensed financial statements of IRADIMED CORPORATION (“IRADIMED”, the “Company”, “we”, “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The interim financial information is unaudited, but reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. These accompanying interim condensed financial statements should be read with the financial statements and related footnotes to financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. The accounting policies followed in the preparation of these interim condensed financial statements, except as described in Note 1, are consistent in all material respects with those described in Note 1 of our Form 10-K. We operate in one reportable segment which is the development, manufacture and sale of MRI compatible medical devices, related accessories, disposables and services for use by hospitals and acute care facilities during MRI procedures. FDA Warning Letter The FDA conducted a routine inspection of our prior facility between April 7 and April 16, 2014. This was the first FDA inspection of our facility since the voluntary product recall in August 2012 of certain infusion sets and the voluntary recall in July 2013 of our DERS software. The FDA issued a Form 483 on April 16, 2014 that identified eight observations. Most of the observations related to procedural and documentation issues associated with the design, development, validation testing and documentation of software used in certain of our products. Other observations were related to the design validation of pump labeling, design analysis of tube stretching, procedures for post-market design review, and control and procedures related to handling certain reported complaints. We submitted responses to the Form 483 in May 2014 and June 2014 in which we described our proposed corrective and preventative actions to address each of the FDA’s observations. On September 2, 2014, we received a warning letter from the FDA relating to this inspection (the “Warning Letter”). The Warning Letter states that the FDA accepted as adequate several of our responses to Form 483 observations, identified two responses whose accuracy will be determined in the next scheduled inspection of our facility and identified issues for which our response was determined to be inadequate. The issues identified as inadequate concern our procedures for validating device design primarily related to software quality assurance. Also, the Warning Letter raised a new issue. The Warning Letter states that modifications made to software on our previously cleared infusion pumps, the MRidium 3860 and MRidium 3850, were “significant” and required submission of new premarket notifications under Section 510(k) (a “510(k) submission”) of the FDC Act. These modifications had been made over time. We believed they were insignificant and did not require premarket notification submissions. However, the FDA indicated that the modifications of the software for the MRidium 3860 and the software for the MRidium 3850 were “significant” modifications because they could significantly affect the safety or effectiveness of these devices. As a result, the Warning Letter states that the products being sold by us are “adulterated” and “misbranded” under the FDC Act. The Warning Letter also indicates that the MRidium 3860+ infusion pump requires separate FDA clearance from the MRidium 3860 and MRidium 3850. The Warning Letter requested that we immediately cease activities that result in the misbranding or adulteration of the MRidium 3860 MRI infusion pump, MRidium 3850 MRI infusion pump, and the MRidium 3860+ MRI infusion pump, including the commercial distribution of the devices. We immediately complied with the Warning Letter and ceased sale and distribution of the identified products in the United States. On September 4, 2014, we submitted to the FDA our initial response to the Warning Letter and on September 17, 2014 we sent an additional response that included supplemental information related to the Form 483 inspection observations for which the FDA considered our initial responses inadequate. On November 25, 2014, we announced that we filed the 510(k) submission related to our MRidium 3860+ MRI IV infusion pumps and on December 12, 2014 we were notified that our 510(k) submission had been formally accepted for review by the FDA. On December 22, 2014, under FDA enforcement discretion, we announced that we resumed domestic distribution of our MRI compatible MRidium 3860+ MRI IV infusion pump systems, without the DERS option. On January 28, 2015, under FDA enforcement discretion, we announced that we resumed domestic distribution of our DERS option. On December 9, 2015, we met with the FDA to review responses to the agency’s additional information letter. Between July 11 and July 18, 2016, the FDA conducted a routine inspection of our facility. This was the first FDA inspection of our facility since the receipt of the Warning Letter. During this inspection, the updated documents and actions implemented in response to the Warning Letter findings were reviewed, and the FDA determined that no further actions were necessary. On December 15, 2016, we received FDA 510(k) clearance for our MRidium 3860+ MRI IV infusion pump system, including the DERS software feature. As of June 30, 2019, the Warning Letter remains open. CE Mark for Products On January 16, 2019, we were notified by the U.K. Notified Body, UL International Ltd. (“UL”) that their recent technical file review of our 3880 MRI compatible patient vital signs monitoring system could not be completed as aspects of clinical evaluation reporting, as required by newly issued guidance from the European Union, was not acceptable, resulting in a technical non-conformity. Accordingly, UL issued temporary EC Certificates that include our MRI compatible IV infusion pump system and related IV tubing sets and excludes our 3880 patient vital signs monitoring system. These temporary EC Certificates extended through July 27, 2019. We immediately suspended shipments of our 3880 patient vital signs monitor to all markets requiring a CE Mark. On July 3, 2019, during the process of addressing the technical non-conformity associated with the review of our 3880 MRI compatible patient vital signs monitoring system, UL notified its customers of their decision to cease operations as a notified body and would continue the process of transferring all customers to the Polish Center for Testing and Certification (Polskie Centrum Badań i Certyfikacji S.A.) (“PCBC”) based in Warsaw, Poland. UL notified us that they have transferred our EC Certificates to PCBC and we are currently awaiting PCBC to process the transfer and re-issue new EC Certificates for our MRI compatible IV infusion pump system and related IV tubing sets with an additional 4-year term. We expect to receive these renewed EC Certificates from PCBC before the end of August 2019. UL’s decision to cease operations as a medical device notified body caused us to seek a new notified body for certification of our 3880 MRI compatible patient vital signs monitoring system. Concurrent to UL’s announcement, we engaged Ente Certificazione Macchine (“ECM”) as our notified body for the 3880 MRI compatible patient vital signs monitoring system. We are actively working through the recertification process with ECM and expect to complete this process and resume shipments into all markets requiring a CE Mark near the beginning of our fiscal fourth quarter 2019, however,there can be no assurance that these efforts will be successful. Certain Significant Risks and Uncertainties We market our products to end users in the United States and to distributors internationally. Sales to end users in the United States are generally made on open credit terms. Management maintains an allowance for potential credit losses. Recent Accounting Pronouncements Accounting Pronouncements Implemented in 2019 In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This update requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by all leases not considered short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying assets under which right-of-use assets and lease liabilities are not recognized and lease payments are generally recognized as expense over the lease term on a straight-line basis. We adopted this update on January 1, 2019 and, as part of that process, made the following elections:
| · |  | We elected to use the hindsight practical expedient.
| · |  | We elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019 whereby contracts were not reassessed or reclassified from their previous assessment as of December 31, 2018.
| · |  | In March 2018, the FASB approved an optional transition method that allows companies to use the effective date as the date of initial application on transition. We elected this transition method, and as a result, did not adjust comparative period financial information or make the newly required lease disclosures for periods before the effective date.
| · |  | We elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term.
| · |  | We elected to not separate lease and nonlease components, for all leases.
| · |  | We did not elect the land easement practical expedient.
The impact of Topic 842 on our Balance Sheet beginning January 1, 2019 was through the recognition of an operating lease right-of-use asset and operating lease liability. Amounts recognized at January 1, 2109 for operating leases were as follows:
|  | January 1,
|  | 2019
Operating lease right-of-use asset |  | $ | 3,182,724
Current portion of operating lease liability |  | $ | 226,852
Operating lease liability, less current portion |  | $ | 2,955,872
There was no impact to our Condensed Statements of Operations, Condensed Statements of Cash Flows or beginning retained earnings related to the adoption of Topic 842. Recently Issued Accounting Pronouncements to be Implemented In August 2018, the FASB issued ASU 2018-03, Fair Value Measurement (Topic 820). This update modifies disclosure requirements related to fair value measurements. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The ASU also allows for early adoption of any removed or modified disclosures upon issuance of this ASU, while delaying adoption of the additional disclosures until their effective date. We do not expect the adoption of this guidance will have a material impact upon our footnote disclosures. In June 2016, the FASB issued 2016-03, Financial Instruments – Credit Losses (Topic 326). This update requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, for available-for-sale debt securities, this ASU replaces the other-than-temporary impairment model and requires the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit quality, instead of a direct write-down of the security, when a valuation decline is determined to be other-than-temporary. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and for interim periods therein. Companies may choose to adopt this ASU as of its fiscal year beginning after December 15, 2018. We did not early adopt this standard. We do not believe this ASU will have a material impact on our financial condition or statements of operations.

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