Gross Profit

Gross profit was $2.8 million in the third quarter compared with $2.1 million in Q3 2011. The third quarter 2012 gross profit as a percentage of sales was 23.8% compared to 28.9% in Q3 2011. Gross profit for the nine months ended September 30, 2012 was $10.8 million compared with $12.9 million during the same period in 2011. Gross profit as a percentage of sales was also lower at 33.4% in the first nine months of 2012, compared with 34.6% in 2011. The lower gross margin performance in the third quarter and year to date was attributable to the planned delivery of equipment for a collaborative research arrangement, together with higher costs associated with the installation of the first VISIUS Surgical Theatre in the Japanese market.


Operating Expenses

Research and development activities to support commercialization of IMRIS's MR guided radiation therapy product, image guided surgical robotics system and intraoperative CT continues in 2012. These expenditures were $3.8 million in the third quarter of 2012 compared with $2.5 million in Q3 2011 and $10.8 million in the first nine of 2012 compared with $7.2 million in 2011. Other cash operating expenses in total increased in the third quarter, primarily reflecting higher employee and travel costs during the period. Through the first nine months of 2012, other cash operating expense have decreased as the Company continues to carefully control expenditures. Amortization increased by 21% to $1.1 million in the third quarter of 2012 and by 16% to $3.0 million in the first nine months of the year, reflecting additions in fixed assets.

Adjusted EBITDA and Operating Loss

Adjusted EBITDA in the third quarter of 2012 was negative $7.1 million compared with negative $5.9 million in the third quarter of 2011. In the first nine months of 2012 adjusted EBITDA was negative $17.1 million versus $11.6 million during the same period of 2011. Operating loss was $8.6 million in the third quarter of 2012 and $21.2 million for the nine months ended September 30, 2012. This compares with operating losses of $7.2 million and $15.3 million in the third quarter and first nine months of 2011 respectively. The year over year changes in adjusted EBITDA and operating losses are due to lower gross margins and higher research and development costs in 2012.

Net Loss

Net loss for the third quarter of 2012 was $8.5 million, effectively unchanged from the third quarter of 2011. Net loss for the nine months of 2012 was $21.2 million compared with a net loss of $16.0 million during the period in 2011. The higher net losses in 2012 reflect the year-over-year increases in operating losses, driven primarily by lower revenue, lower gross profit and higher operating expenses.

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