Inventory is carried at the lower of cost or net realizable value. The costs of inventory are determined using the standard cost method, which approximates actual cost based on a first-in, first-out method. Items in inventory relate predominantly to the Company’s ClearPoint system and related disposables. Software license inventory related to ClearPoint systems undergoing on-site customer evaluation is included in inventory in the accompanying condensed consolidated balance sheets. All other software license inventory is classified as a non-current asset. The Company periodically reviews its inventory for excess and obsolete items and provides a reserve upon identification of potentially excess or obsolete items.
Intangible Assets
The Company is a party to a license agreement that provides rights to the Company for the development and commercialization of products. Under the terms of the license agreement, the Company made payments to the licensor upon execution of the license agreement for access to the underlying technology, and future payments will be based upon achievement of regulatory and commercialization milestones as defined in the license agreement. In 2022, the Company made a payment to the licensor for the achievement of a regulatory milestone, which acts as a prepayment for future royalties.
In conformity with Accounting Standards Codification Section (ASC) 350, "Intangibles – Goodwill and Other," the Company amortizes the payments related to the license rights described above over an expected useful life of up to five years, or as commercial sales occur that are related to the royalty prepayment. In addition, the Company periodically evaluates the recoverability of its investment in the license rights and records an impairment charge in the event such evaluation indicates that the Company’s investment is not likely to be recovered.
8
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Revenue Recognition
The Company’s revenue is comprised primarily of: (1) product revenue resulting from the sale of neurosurgery, navigation, therapy, and biologics and drug delivery disposable products; (2) product revenue resulting from the sale of ClearPoint capital equipment and software; (3) service revenue and case support revenue in connection with customer-sponsored preclinical and clinical trials; (4) license revenue for the granting of licenses to develop and commercialize the Company's SmartFlow Cannula devices with the Company's customers' proprietary biologics as a combination product; and (5) revenue resulting from the service, installation, training, and shipping related to ClearPoint capital equipment and software. The Company recognizes revenue when (i) control of the Company’s products is transferred to its customers or (ii) services are provided to customers, each in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services, in a process that involves identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when or as the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. When a contract calls for the satisfaction of multiple performance obligations for a single contract price, the Company typically allocates the contract price among the performance obligations based on the relative stand-alone selling prices for each such performance obligation customarily charged by the Company. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when it determines there are no uncertainties regarding payment terms or transfer of control.
Lines of Business; Timing of Revenue Recognition
•Neurosurgery navigation product, biologics and drug delivery systems product, and therapy product sales: Revenue from the sale of neurosurgery navigation products (consisting of disposable products sold commercially and related to cases utilizing the Company's ClearPoint system), biologics and drug delivery products (consisting primarily of disposable products related to customer-sponsored clinical trials utilizing the ClearPoint system), and therapy products (consisting primarily of disposable laser-related products used in neurosurgical procedures) is generally based on customer purchase orders, the predominance of which require delivery within one week of the order having been placed, and is generally recognized at the point in time of shipping to the customer, which is the point at which legal title, and risks and rewards of ownership, transfer to the customer. For certain customers, legal title and risks and rewards of ownership transfer upon delivery to the customer as stated in their respective contracts, in which case revenue is recognized upon delivery.
•Capital equipment and software sales:
◦Capital equipment and software sales preceded by evaluation periods: The predominance of capital equipment and software sales (consisting of integrated computer hardware and software that are integral components of the Company's ClearPoint system) are precededby customer evaluation periods. During these evaluation periods, installation of, and training of customer personnel on, the systems have been completed and the systems have been in operation. Accordingly, revenue from capital equipment and software sales following such evaluation periods is recognized at the point in time that the Company is in receipt of an executed purchase agreement or purchase order.
◦Capital equipment and software sales not preceded by evaluation periods: Revenue from sales of capital equipment and software not having been preceded by an evaluation period is recognized upon delivery to the customer and installation. For capital equipment that does not require installation, revenue is recognized upon shipment; however, for those customers where legal title and risks and rewards of ownership transfer upon delivery, revenue is recognized at such time.
For both types of capital equipment and software sales described above, the determination of the point in time at which to recognize revenue represents that point at which the customer has legal title, physical possession, and the risks and rewards of ownership, and the Company has a present right to payment.
9
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
•Neurosurgery navigation and therapy services: The Company recognizes revenue for such services over time as the services are delivered to the customer based on the extent of progress towards completion of the performance obligation.
•Biologics and drug delivery services and other revenue:
◦Professional and Consulting Services: The Company recognizes professional and consulting revenue over time as the services are delivered to the customer based on the extent of progress towards completion of the performance obligation. The Company may use output methods, such as time elapsed, or input methods, such as labor hours expended or costs incurred, to measure progress depending on which better depicts the transfer of control to the customer.
◦Clinical Service Access Fees: For contracts in which the Company receives a periodic fixed fee, irrespective of the number of cases attended by the Company's personnel or hours incurred during such periods, revenue is recognized ratably over the period covered by such fees. A time-elapsed output method is used for such fees because the Company transfers control evenly by providing a stand-ready service.
◦Procedure-Based Service Fees: The Company recognizes revenue at the point in time a relevant case is completed.
◦License fees: License fees represent the use of functional intellectual property as it exists at the point in time at which the license is granted and does not require any significant development or customization. Accordingly, the Company recognizes license revenue at the point in time in which the license becomes effective and the intellectual property is made available to the customer.
◦Milestone fees: Event-based payments which are subject to the customer's achievement of specified development or regulatory milestones are included in the transaction price if, in the Company's judgment, it is probable that these milestones will be achieved and a significant future reversal of cumulative revenue under the contract will not occur. The Company re-evaluates the probability of achievement of such milestones at the end of each reporting period and adjusts the transaction price as necessary.
•Capital equipment-related services:
◦Equipment service: Revenue from service of ClearPoint capital equipment and software previously sold to customers is based on agreements with terms ranging from one to three years and is recognized ratably on a monthly basis over the term of the service agreement. A time-elapsed output method is used for service revenue because the Company transfers control evenly by providing a stand-ready service.
The Company may also enter into contracts with customers who own ClearPoint capital equipment, which bundle maintenance and support services and access to software and hardware upgrades made commercially available over the term of the contract, for a single contract price, typically paid on an annual basis. The Company allocates the contract price among the performance obligations based on the relative stand-alone prices for each such performance obligation and recognizes the revenue ratably on a monthly basis. A time-elapsed output method is used as the Company is providing a stand-ready service for each of the performance obligations.
◦Installation, training and shipping: Consistent with the Company’s recognition of revenue for capital equipment and software sales as described above, fees for installation, training and shipping in connection with sales of capital equipment and software that have been preceded by customer evaluation periods are recognized as revenue at the point in time the Company is in receipt of an executed purchase agreement or purchase order for the equipment and software. Installation, training and shipping fees related to capital equipment and software sales not having been preceded by an evaluation period are recognized as revenue concurrent with the recognition of revenue from sales of the related capital equipment.
10
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company operates in one industry segment, and the predominance of its sales are to U.S.-based customers.
Payment terms under contracts with customers generally are in a range of 30-60 days after the customers’ receipt of the Company’s invoices.
The Company’s terms and conditions do not provide for a right of return unless for: (a) product defects; or (b) other conditions subject to the Company’s approval.
See Note 3 for additional information regarding revenue recognition.
Net Loss Per Share
The Company computes net loss per share using the weighted-average number of common shares outstanding during the period. Basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the Company’s outstanding common stock options and unvested restricted stock units, as described in Note 8, would be anti-dilutive, due to the reporting of a net loss for each of the periods in the accompanying condensed consolidated statements of operations.
Concentration Risks and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company may at times invest its excess cash in interest bearing accounts and U.S. government debt securities. It classifies all highly liquid investments with original stated maturities of three months or less from the date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months but less than twelve months as short-term investments.
The Company holds the remainder of its cash and cash equivalents on deposit with financial institutions in the U.S. insured by the Federal Deposit Insurance Corporation. At September 30, 2024, the Company had approximately $1.1 million in bank balances that were in excess of the insured limits.
At September 30, 2024, there was one customer whose accounts receivable balance represented 11% of accounts receivable at that date. At December 31, 2023, there were four customers whose accounts receivable balances represented 80% of accounts receivable at that date.
One pharmaceutical customer, a related party who is a stockholder and whose chief executive officer is a member of the Company's Board of Directors, for whom the Company provides hardware, software, clinical services and market development services in support of the customer's clinical trials, and from whom the Company earns a quarterly fee, accounted for 9% and 12% of total sales in both the three and nine-month periods ended September 30, 2024 and 2023, respectively. There was one additional customer, who comprised 13% of the total sales in the three-month period ended September 30, 2024, and another customer who comprised 10% of the total sales in the three-month period ended September 30, 2023.
Prior to granting credit to a customer, the Company generally performs credit evaluations of the customer's financial condition. In general, the Company does not require collateral from customers in connection with an extension of credit. The accounts receivable balance is reduced by an allowance for credit losses from the potential inability of the Company's customers to make required payments. The allowance for credit losses at September 30, 2024, and December 31, 2023, was $0.9 million and $1.4 million, respectively. The Company evaluates the historic loss experience on the accounts receivable balance and also considers separately customers with receivable balances that may be negatively impacted by current economic developments and market conditions. The estimate is a result of the Company's ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses and future expectations.
The Company is subject to risks common to emerging companies in the medical device industry, including, but not limited to: new technological innovations; acceptance and competitiveness of its products; dependence on key personnel; dependence on key suppliers; its ability to maintain its third-party collaboration, license and joint development partners, and enter into new relationships; changes in general economic conditions and interest rates; its
11
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
ability to obtain additional funding to support its business; regulatory uncertainty; protection of proprietary technology; compliance with changing government regulations; uncertainty of widespread market acceptance of products; access to credit for capital purchases by customers; and intellectual property and product liability claims. Certain components used in manufacturing have relatively few alternative sources of supply and establishing additional or replacement suppliers for such components cannot be accomplished quickly. The inability of any of these suppliers to fulfill the Company’s supply requirements may negatively impact future operating results.
Recent Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. ASU 2023-07 is effective for calendar year-end public business entities in 2024 annual reporting and in 2025 interim reporting. Early adoption is permitted. The Company expects to adopt ASU 2023-07 retrospectively in its 2024 annual financial reporting and its 2025 interim financial reporting, and is currently evaluating the impact of this ASU on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures," which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The provisions of the ASU are intended to enhance the transparency and decision usefulness of income tax disclosures. The guidance may be applied on a prospective basis with the option to apply the standard retrospectively and is effective for calendar year-end public business entities in the 2025 annual period and in 2026 for interim periods with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
3.
Revenue Recognition
Revenue by Service Line
Three Months Ended September 30,
(in thousands)
2024
2023
Biologics and drug delivery
Disposable products
$
2,062
$
455
Services and license fees
2,369
3,032
Subtotal – Biologics and drug delivery revenue
4,431
3,487
Neurosurgery navigation and therapy
Disposable products
2,860
1,874
Services
—
44
Subtotal – Neurosurgery navigation and therapy
2,860
1,918
Capital equipment and software
Systems and software products
552
81
Services
279
276
Subtotal – Capital equipment and software revenue
831
357
Total revenue
$
8,122
$
5,762
12
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Nine Months Ended September 30,
(in thousands)
2024
2023
Biologics and drug delivery
Disposable products
$
4,286
$
1,395
Services and license fees
8,779
8,136
Subtotal – Biologics and drug delivery revenue
13,065
9,531
Neurosurgery navigation and therapy
Disposable products
7,373
5,550
Services
—
930
Subtotal – Neurosurgery navigation and therapy
7,373
6,480
Capital equipment and software
Systems and software products
2,394
432
Services
787
702
Subtotal – Capital equipment and software revenue
3,181
1,134
Total revenue
$
23,619
$
17,145
Contract Balances
•Contract assets – The timing of revenue recognition may differ from the time of billing to the Company's customers. In most cases, customers are billed upon shipment of such products or delivery of such services and the related contract assets, which represent an unconditional right to consideration, comprise the accounts receivable balance. When revenue is recognized in advance of its right to bill and receive consideration, the Company records this unbilled receivable as a contract asset, which is classified as other current assets in the accompanying condensed consolidated balance sheets.
September 30, 2024
December 31, 2023
(in thousands)
Accounts receivable, net
$
3,875
$
3,211
Other contract assets
Unbilled receivables
$
662
$
733
•Contract liabilities – Contract liabilities consist of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue as the related goods or services have not been transferred. The Company's contract liabilities are generally comprised of the following: (1) capital equipment and software-related service fees that are typically billed and collected at the inception of the service agreements, which have terms ranging from one to three years; (2) annual fees for agreements with customers that bundle the capital equipment and software-related service fees with software and hardware upgrades that are made commercially available over the term of the contract; and (3) up-front payments from customers made in connection with consulting services. The unearned portion of all such fees is classified as deferred revenue.
September 30, 2024
December 31, 2023
(in thousands)
Deferred revenues
$
1,732
$
3,154
During the three and nine months ended September 30, 2024, the Company recognized approximately $0.2 million and $2.2 million of revenue, respectively, which was previously included in deferred revenue in the accompanying condensed consolidated balance sheet at December 31, 2023.
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue that will be recognized as revenue in future periods. The majority of the remaining performance obligations relate to capital equipment and software-related service agreements and the upfront
13
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
payments discussed under the heading "Contract Liabilities" above, which amounted to approximately $1.7 million at September 30, 2024. The Company expects to recognize 71% of this revenue over the next twelve months and the remainder thereafter.
4.
Fair Value Measurement
Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The fair value of cash and cash equivalents of $21.6 million and $23.1 million as of September 30, 2024, and December 31, 2023, respectively, is derived using Level 1 inputs. The cash equivalents are comprised of short-term bank deposits, money market funds, and U.S. Government debt securities with original maturities of three months or less, and the carrying value is a reasonable estimate of fair value.
5.
Inventory
Inventory consists of the following as of September 30, 2024 and December 31, 2023:
(in thousands)
September 30, 2024
December 31, 2023
Raw materials and work in process
$
5,591
$
6,466
Software licenses
174
211
Finished goods
1,294
1,234
Inventory, net, included in current assets
7,059
7,911
Software licenses – non-current
198
386
Total
$
7,257
$
8,297
6.
Note Payable
In January 2020, the Company completed a financing transaction with two investors (the "2020 Convertible Noteholders"), whereby the Company issued an aggregate principal amount of $17.5 million of secured convertible notes (the "First Closing Notes") pursuant to the SPA, which, unless earlier converted or redeemed, were to mature on January 29, 2025, and bore interest at a rate equal to the sum of (i) the greater of (a) the three (3)-month Secured Overnight Financing Rate ("SOFR") and (b) two percent (2%), plus (ii) a margin of 2% on the outstanding balance of the First Closing Notes, payable quarterly on the first business day of each calendar quarter. The First Closing Notes were convertible at a price of $6.00 per share, subject to certain adjustments set forth in the SPA and the note agreement, and could not be pre-paid without the consent of the noteholder. In May 2021, one of the 2020 Convertible Noteholders (the "Converting Noteholder") converted the entire $7.5 million principal amount of such Converting Noteholder’s First Closing Note, and related accrued interest of approximately $0.04 million, into 1,256,143 shares of the Company’s common stock.
In December 2020, the Company issued the Second Closing Note (as defined in the SPA) to one of the 2020 Convertible Noteholders in an aggregate principal amount of $7.5 million. In November 2021, the holder of the Second Closing Note converted the entire $7.5 million principal amount of such note, along with related accrued and payment in-kind interest aggregating $0.3 million, into 773,446 shares of the Company's common stock.
On August 23, 2024, the Company repaid all amounts owing under the remaining First Closing Note, which included the principal amount of $10 million, and related accrued interest of $0.1 million. In connection with the prepayment, the noteholder waived all prohibitions on prepayment of the note, and all collateral securing the note was released.
14
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7.
Leases
The Company subleases office space in Solana Beach, California, that serves as its corporate headquarters and houses certain management and personnel. The sublease term commenced on December 15, 2020, is set to expire on December 31, 2026, and is renewable for an additional five-year period, at the Company’s option, provided that the Company’s landlord has entered into an extension of its prime lease for the office space that encompasses the Company’s office space for at least five years.
The Company leases space in Carlsbad, California, that serves as office space and a manufacturing facility under a lease that commenced on June 1, 2023 and ends on May 31, 2033. The Company has two options to extend the lease term for thirty-six or sixty months, at the then fair market rental value. Upon establishment of the new manufacturing facility in Carlsbad, the Company terminated its prior manufacturing facility lease in Irvine, California, effective October 2023. The lease termination did not have a material impact to the financial statements.
The aforementioned leases are classified as operating leases in conformity with GAAP. The aggregate lease costs, included in general and administrative expense, were $0.2 million for each of the three months ended September 30, 2024 and 2023, and $0.7 millionand$0.5 million for the nine months ended September 30, 2024 and 2023, respectively.
8.
Stockholders’ Equity
2024 Public Offering
In March 2024, the Company completed a public offering of 2,653,848 shares of its common stock, composed of 2,307,694shares of common stock offered at a public offering price of $6.50per share and an additional 346,154shares of common stock sold pursuant to the exercise of the underwriters' option to purchase additional shares at the public offering price.
Net proceeds from the offering totaled approximately $16.2 millionafter deducting underwriting discounts and commissions, and other offering expenses paid by the Company.
The underwriting agreement contains representations, warranties, agreements and indemnification obligations by the Company that are customary for this type of transaction.
Equity Compensation Plans
In May 2024, the Company's stockholders approved the Fifth Amended and Restated 2013 Incentive Compensation Plan, which increased the number of shares of common stock available for awards under the plan by 1.95 million shares. The plan permits the issuance of options, restricted stock, restricted stock units and other awards to select
15
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
employees, directors and consultants of the Company.The equity incentive plans are more fully described in Note 9 to the consolidated financial statements in the 2023 Form 10-K.
Share-Based Compensation Expense
The Company records share-based compensation expense on a straight-line basis over the vesting periods of the related grants and recognizes forfeitures as they occur. The following table sets forth share-based compensation expense included in the condensed consolidated statements of operations:
Three Months Ended September 30,
(in thousands)
2024
2023
Cost of revenue
$
31
$
26
Research and development
461
357
Sales and marketing
537
431
General and administrative
875
770
Share-based compensation expense
$
1,904
$
1,584
Nine Months Ended September 30,
(in thousands)
2024
2023
Cost of revenue
$
82
$
74
Research and development
1,204
1,009
Sales and marketing
1,482
1,277
General and administrative
2,436
2,176
Share-based compensation expense
$
5,204
$
4,536
Share-based compensation expense by type of share-based award is summarized below:
Three Months Ended September 30,
(in thousands)
2024
2023
Stock options
$
151
$
233
RSAs and RSUs
1,719
1,308
ESPP
34
43
$
1,904
$
1,584
Nine Months Ended September 30,
(in thousands)
2024
2023
Stock options
$
554
$
747
RSAs and RSUs
4,495
3,612
ESPP
155
177
$
5,204
$
4,536
Total unrecognized compensation expense by type of award and the weighted-average remaining requisite holding period over which such expense is expected to be recognized is as follows (in thousands, unless otherwise noted):
16
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2024
Unrecognized Expense
Remaining Weighted-Average Recognition Period (in years)
Stock options
$
446
1.13
RSAs and RSUs
$
9,548
1.85
Stock Option Activity
Stock option activity during the nine months ended September 30, 2024 is summarized below:
Stock Options
Weighted-average Exercise price per share
Weighted-average Remaining Contractual Life (in years)
Intrinsic
Value(1)
(in thousands)
Outstanding at December 31, 2023
1,478,157
$
8.40
Exercised
(12,000)
$
2.89
Forfeited or expired
(7,237)
$
42.19
Outstanding at September 30, 2024
1,458,920
$
8.28
4.74
$
8,187
Exercisable at September 30, 2024
1,328,249
$
8.19
4.40
$
7,911
Vested and expected to vest at September 30, 2024
1,458,920
$
8.28
4.74
$
8,187
17
ClearPoint Neuro, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1)
Intrinsic value is calculated as the estimated fair value of the Company’s stock at the end of the related period less the option exercise price of in-the-money options.
Restricted Stock Award Activity
Restricted stock award ("RSA") activity for the nine months ended September 30, 2024 is summarized below:
Restricted Stock Awards
Weighted - Average Grant Date Fair Value
Outstanding at December 31, 2023
376,914
$
12.02
Vested
(195,173)
$
12.93
Forfeited
(6,019)
$
12.35
Outstanding at September 30, 2024
175,722
$
10.99
Restricted Stock Unit Activity
Restricted stock unit ("RSU") activity for the nine months ended September 30, 2024 is summarized below:
Restricted Stock Units
Weighted - Average Grant Date Fair Value
Outstanding at December 31, 2023
768,139
$
8.15
Granted
1,197,646
$
6.16
Vested
(267,328)
$
7.99
Forfeited
(17,849)
$
8.40
Outstanding at September 30, 2024
1,680,608
$
6.75
ESPP
On June 3, 2021, the Company’s stockholders adopted and approved the ClearPoint Neuro, Inc. Employee Stock Purchase Plan (the "ESPP"), which allows eligible employees to acquire shares of the Company’s common stock through payroll deductions at a discount to market price. A total of 400,000 shares of the Company’s common stock were made available for issuance pursuant to the terms of the ESPP. Each offering period is for six months, and the first offering period commenced on July 1, 2021. During the first offering period of 2024, 62,800shares were purchased at an average per share price of $4.58.
18
ITEM 2. 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 unaudited Condensed Consolidated Financial Statements and the related notes thereto appearing in Part I, Item 1 of this Quarterly Report. This discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. You should review the section titled "Risk Factors" appearing in the 2023 Form 10-K and in Part II, Item 1.A of this Quarterly Report for a discussion of important risk 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. In addition, historical results and trends that might appear in this Quarterly Report should not be interpreted as being indicative of future operations.
Overview
We are a commercial-stage medical device company that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain. We have deployed significant resources to fund our efforts to develop the capabilities for enabling neurosurgery interventions, building an intellectual property portfolio, and identifying and building out commercial applications for the technologies developed by our company.
The foundational part of our business is providing medical devices for neurosurgery applications. Our primary medical device product, the ClearPoint system, is an integrated system comprised of hardware components, disposable components, and intuitive, menu-driven software, which is in commercial use globally. The primary applications for the ClearPoint system are to target and guide the insertion of deep brain stimulation electrodes, biopsy needles, and laser catheters, as well as the delivery of pharmaceuticals into the brain. The ClearPoint system was originally designed for use in an MRI setting. In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, which allow for operating room placement of the ClearPoint system, and in 2024, we released the SmartFrame OR Stereotactic System, which allows for complete procedures to be performed in the operating room. In 2022, we commercialized the ClearPoint Prism Neuro Laser Therapy System as our first therapy product offering. We have exclusive global commercialization rights to the ClearPoint Prism Neuro Laser Therapy System through our Swedish partner, CLS.
The second part of our business is focused on partnerships in the biologics and drug delivery space. Our services include protocol consultation and solutions for preclinical study design and execution for the delivery of pharmaceutical agents to the brain. We also partner with customers to develop devices used for administration of therapies into the central nervous system. Currently, we have more than 50 biologics and drug delivery customers who are evaluating or using our products and services in trials to inject gene and cell therapies directly into the brain. These partnerships involve drug development programs that are at various stages of development ranging from preclinical research to late-stage regulatory trials for multiple distinct disease states. This part of our business potentially represents the largest opportunity for growth; however, our ability to grow in this market is dependent on our ability to maintain and establish new relationships with customers, such customers' continuation of research and development plans, and such customers' achievement of success in completion of clinical trials and subsequent regulatory approvals of their biologics and drugs.
Substantially all our revenue for the three and nine months ended September 30, 2024 and 2023 relates to (i) sales of our ClearPoint system products and related services and (ii) providing services to our customers in the biologics and drug delivery space. We have financed our operations and internal growth primarily through the sale of equity securities and the issuance of notes payable. We have incurred significant losses since our inception in 1998 as we have devoted substantial efforts to research and development. As of September 30, 2024, we had accumulated losses of $186.0 million. We may continue to incur operating losses as we expand our ClearPoint system platform, services to our pharmaceutical and other medical technology customers, and our business generally.
Factors Which May Influence Future Results of Operations
The following is a description of factors that may influence our future results of operations, and that we believe are important to an understanding of our business and results of operations.
Macroeconomic Trends
We continue to monitor the impact of various macroeconomic trends, such as global economic and supply chain disruptions, geopolitical instability (including instability resulting from military conflicts), labor shortages, inflationary
19
conditions, and legislative and political developments. Impacts from inflationary pressures, such as increasing costs for research and development of our products, administrative and other costs of doing business, and our access to capital markets and other sources of funding in the future could adversely affect our business, financial condition and results of operations. Additionally, these trends could adversely affect our customers, which could impact their willingness to spend on our products and services, or their ability to make payment, which could harm the Company's collection of accounts receivable and financial results. The continued development and fluidity of these situations precludes any prediction as to the ultimate impact they will have on our business, financial condition, results of operation and cash flows.
Revenue
In 2010, we received 510(k) clearance from the U.S. Food and Drug Administration (the "FDA") to market our ClearPoint system in the U.S. for general neurosurgical procedures; in February 2011 and May 2018, we also obtained CE marking for our ClearPoint system and SmartFlow cannula, respectively; and in June 2020, we obtained CE marking for version 2.0 of our ClearPoint software and our Inflexion head fixation frame. In January 2021, we received 510(k) clearance for the SmartFrame Array Neuro Navigation System. In September 2022, the ClearPoint Prism Neuro Laser Therapy System, for which we have exclusive global rights to commercialize, received 510(k) clearance through our Swedish partner, CLS. The Prism laser represents the first therapy product we have commercialized. In January 2024, we received 510(k) clearance from the FDA for the SmartFrame OR Stereotactic System.
In 2021, we started providing services to our pharmaceutical and other medical technology customers for improving outcome predictability and optimizing preclinical and clinical workflows. Our expertise is concentrated in benchtop testing, preclinical studies, clinical trial support, regulatory consultation, and over-arching translation from the preclinical to the clinical setting to enhance accuracy and precision of drug delivery. In 2024, we expanded our services to our pharmaceutical and other medical technology customers to include development of devices used for administration of therapies into the central nervous system.
Future revenue from sales of products and services is difficult to predict and may not be sufficient to offset our continuing research and development expenses and selling, general and administrative expenses.
Generating recurring revenue from the sale of products is an important part of our business model for our ClearPoint system. Our product revenue was approximately $5.5 million and $14.1 million for the three and nine months ended September 30, 2024, respectively. Our service and other revenue was approximately $2.6 million and $9.6 million for the three and nine months ended September 30, 2024, respectively, of which 89% and 92%, respectively, is related to the biologics and drug delivery service line.
Our revenue recognition policies are more fully described in Note 2 to the Condensed Consolidated Financial Statements included above in Part I, Item 1 in this Quarterly Report.
Underlying the revenue from sales of products and services to our biologics and drug delivery customers is the number of direct customers and end users of our products and/or services ("Partners"). Our Partners consist of pharmaceutical and biotech companies, academic institutions, and customer-sponsored contract research organizations that are developing methods to deliver a wide variety of molecules, genes or proteins to targeted brain tissue or structures that would need to bypass the blood-brain barrier for the treatment of a variety of disorders. This is a novel area in which commercialization must be preceded by FDA-mandated clinical trials, which are expensive and time consuming to conduct, and for which the commercial success is uncertain, pending, in part, the outcome of those trials. While our revenue from sales of products and services to our biologics and drug delivery customers is indicative of growth, the number of Partner relationships is also of importance as we recognize the possibility that some Partners’ research will reach commercial success, and others may not. To the extent our Partners achieve commercial success, our expectation is that we will share in such success through our Partners’ use of our products and services in their delivery of therapies. At September 30, 2024, we had more than 50 Partners, which is similar to the number of Partners as of the same date in 2023.
Cost of Revenue
Cost of revenue includes the direct costs associated with the assembly and purchase of components for neurosurgery navigation products, biologics and drug delivery products, non-neurosurgery therapy products, and ClearPoint capital equipment and software that we have sold, and for which we have recognized the revenue in accordance with our revenue recognition policy, as well as labor hours and materials for the cost of providing preclinical, consulting, and service
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revenue. Cost of revenue also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our ClearPoint placement program, as well as provisions for 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 enhancements. Such costs include salaries, travel, and benefits for research and development personnel; materials and laboratory supplies in research and development activities; outside consultant costs; and licensing costs related to technology not yet commercialized. We anticipate that, over time, our research and development costs may increase as we: (i) develop devices and services for delivery of therapeutics into the central nervous system; (ii) expand products into the operating room and therapeutics space; and (iii) expand the application of our technological platforms internationally.
Product development timelines, likelihood of success, and total costs can vary widely by product candidate. There are also risks inherent in the regulatory clearance and approval process. At this time, we are unable to estimate with any certainty the costs that we will incur in our efforts to expand the application of our technological platforms.
Sales and Marketing, and General and Administrative Expenses
Our sales and marketing, and general and administrative expenses consist primarily of salaries, incentive-based compensation, travel and benefits, including share-based compensation; marketing costs; professional fees, including fees for outside attorneys and accountants; occupancy costs; insurance; and other general and administrative expenses, which include, but are not limited to, corporate licenses, director fees, hiring costs, taxes, postage, office supplies, information technology and meeting costs. Our sales and marketing expenses are expected to continue to increase due to costs associated with the continued commercialization of our products and services and the increased headcount necessary to support growth in operations.
Critical Accounting Policies and Estimates
There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2024, as compared to the critical accounting policies and estimates described in our 2023 Form 10-K.
Results of Operations
Three Months Ended September 30, 2024, Compared to the Three Months Ended September 30, 2023
Three Months Ended September 30,
(Dollars in thousands)
2024
2023
Percentage Change
Product revenue
$
5,474
$
2,410
127
%
Service and other revenue
2,648
3,352
(21)
%
Total revenue
8,122
5,762
41
%
Cost of revenue
3,275
2,489
32
%
Gross profit
4,847
3,273
48
%
Research and development costs
3,315
2,429
36
%
Sales and marketing expenses
3,549
2,841
25
%
General and administrative expenses
3,155
2,900
9
%
Other income (expense):
Other expense, net
(11)
(12)
NM
Interest income, net
209
100
109
%
Net loss
$
(4,974)
$
(4,809)
3
%
NM – The percentage change is not meaningful.
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Revenue. Total revenue was $8.1 million for the three months ended September 30, 2024, and $5.8 million for the three months ended September 30, 2023, which represents an increase of $2.4 million, or 41%.
Three Months Ended September 30,
(Dollars in thousands)
2024
2023
Percentage Change
Biologics and drug delivery
Disposable products
$
2,062
$
455
353
%
Services and license fees
2,369
3,032
(22)
%
Subtotal – Biologics and drug delivery revenue
4,431
3,487
27
%
Neurosurgery navigation and therapy
Disposable products
2,860
1,874
53
%
Services
—
44
(100)
%
Subtotal – Neurosurgery navigation and therapy
2,860
1,918
49
%
Capital equipment and software
Systems and software products
552
81
581
%
Services
279
276
1
%
Subtotal – Capital equipment and software revenue
831
357
133
%
Total revenue
$
8,122
$
5,762
41
%
Biologics and drug delivery revenue, which includes sales of services and disposable products related to customer-sponsored preclinical and clinical trials utilizing our products, increased 27% to $4.4 million for the three months ended September 30, 2024, from $3.5 million for the same period in 2023. Our overall revenue growth is attributable to a $1.6 million increase in product revenue resulting from higher demand for disposables as multiple partners progress in their trials, partially offset by a decrease of $0.7 million in service and other revenue due to a reduction in the number of preclinical studies performed, during the three months ended September 30, 2024, compared to the same period in 2023.
Neurosurgery navigation and therapy revenue, which primarily consists of disposable product commercial sales related to cases utilizing the ClearPoint system, increased 49% to $2.9 million for the three months ended September 30, 2024, from $1.9 million for the same period in 2023. The increase is driven by higher product revenue of $1.0 million resulting from newly activated accounts, increased case count, and new product offerings, including the SmartFrame OR and Prism Laser Therapy, during the three months ended September 30, 2024, compared to the same period in 2023.
Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and related services, increased 133% to $0.8 million for the three months ended September 30, 2024, from $0.4 million for the same period in 2023 due to an increase in the placements of ClearPoint navigation capital equipment and software and Prism laser units.
Cost of Revenue and Gross Profit. Cost of revenue was $3.3 million, resulting in gross profit of $4.8 million and gross margin of 60%, for the three months ended September 30, 2024, and was $2.5 million, resulting in gross profit of $3.3 million and gross margin of 57% for the three months ended September 30, 2023. The increase in gross margin was primarily due to lower costs for the three months ended September 30, 2024 due to the transition to the new manufacturing facility, occurring in 2023, and higher volumes for the three months ended September 30, 2024.
Research and Development Costs. Research and development costs were $3.3 million for the three months ended September 30, 2024, compared to $2.4 million for the same period in 2023, an increase of $0.9 million, or 36%. The increase was due primarily to higher personnel costs and product and software development costs, each in the amount of $0.5 million, partially offset by lower trial costs of $0.1 million.
Sales and Marketing Expenses. Sales and marketing expenses were $3.5 million for the three months ended September 30, 2024, compared to $2.8 million for the same period in 2023, an increase of $0.7 million, or 25%. This increase was due primarily to higher personnel costs, including share-based compensation, of $0.6 million resulting from increases in headcount, and increased travel costs of $0.1 million.
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General and Administrative Expenses. General and administrative expenses were $3.2 million for the three months ended September 30, 2024, compared to $2.9 million for the same period in 2023, an increase of $0.3 million, or 9%. This increase was due primarily to higher personnel costs and share-based compensation of $0.4 million, higher occupancy costs of $0.2 million, and higher professional fees of $0.1 million, partially offset by lower bad debt expense of $0.5 million mainly as a result of subsequent recoveries.
Interest Income (Expense). Net interest income was $0.2 million for the three months ended September 30, 2024, compared to $0.1 million for the same period in 2023, as a result of increased investment in U.S. Government debt securities stemming from the capital raise in March 2024 as well as lower interest expense due to the early repayment of the First Closing Note.
Nine months ended September 30, 2024, Compared to the Nine months ended September 30, 2023
Nine Months Ended September 30,
(Dollars in thousands)
2024
2023
Percentage Change
Product revenue
$
14,053
$
7,377
90
%
Service and other revenue
9,566
9,768
(2)
%
Total revenue
23,619
17,145
38
%
Cost of revenue
9,259
7,544
23
%
Gross profit
14,360
9,601
50
%
Research and development costs
9,060
9,057
—
%
Sales and marketing expenses
10,673
9,248
15
%
General and administrative expenses
8,769
9,036
(3)
%
Other income (expense):
Other expense, net
(32)
(25)
NM
Interest income, net
646
295
119
%
Net loss
$
(13,528)
$
(17,470)
(23)
%
NM – The percentage change is not meaningful.
Revenue. Total revenue was $23.6 million for the nine months ended September 30, 2024, and $17.1 million for the nine months ended September 30, 2023, which represents an increase of $6.5 million, or 38%.
Nine Months Ended September 30,
(Dollars in thousands)
2024
2023
Percentage Change
Biologics and drug delivery
Disposable products
$
4,286
$
1,395
207
%
Services and license fees
8,779
8,136
8
%
Subtotal – Biologics and drug delivery revenue
13,065
9,531
37
%
Neurosurgery navigation and therapy
Disposable products
7,373
5,550
33
%
Services
—
930
(100)
%
Subtotal – Neurosurgery navigation and therapy
7,373
6,480
14
%
Capital equipment and software
Systems and software products
2,394
432
454
%
Services
787
702
12
%
Subtotal – Capital equipment and software revenue
3,181
1,134
180
%
Total revenue
$
23,619
$
17,145
38
%
23
Biologics and drug delivery revenue, which includes sales of services and disposable products related to customer-sponsored preclinical and clinical trials utilizing our products, increased 37% to $13.1 million for the nine months ended September 30, 2024, from $9.5 million for the same period in 2023. Our overall revenue growth is attributable to a $2.9 million increase in product revenue resulting from higher demand for disposables as multiple partners progress in their trials, and a $0.6 million increase in service and other revenue related to new preclinical trials and service agreements entered into with our Partners during the nine months ended September 30, 2024, as compared to the same period in 2023.
Neurosurgery navigation and therapy revenue, which primarily consists of disposable product commercial sales related to cases utilizing the ClearPoint system, increased 14% to $7.4 millionfor the nine months ended September 30, 2024, from $6.5 millionfor the same period in 2023. Product revenue increased 33%, or $1.8 million, resulting from newly activated accounts, increased case count, and new product offerings, including the SmartFrame OR and Prism Laser Therapy, during the nine months ended September 30, 2024, compared to the same period in 2023. This was partially offset by a decrease in service and other revenue of $0.9 million primarily as a result of pausing a co-development program with one of our Brain Computer Interface partners.
Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and related services, increased 180% to $3.2 million for the nine months ended September 30, 2024, from $1.1 million for the same period in 2023 due to an increase in the placements of ClearPoint navigation capital equipment and software and Prism laser units.
Cost of Revenue and Gross Profit. Cost of revenue was $9.3 million, resulting in gross profit of $14.4 million and gross margin of 61%, for the nine months ended September 30, 2024, and was $7.5 million, resulting in gross profit of $9.6 million and gross margin of 56% for the nine months ended September 30, 2023. The increase in gross margin was primarily due to lower costs for the nine months ended September 30, 2024 due to the transition to the new manufacturing facility, occurring in 2023, and higher volumes for the nine months ended September 30, 2024.
Research and Development Costs. Research and development costs were relatively flat at $9.1 million for the nine months ended September 30, 2024 and 2023. Personnel costs, including share-based compensation, were higher for the nine months ended September 30, 2024 by $0.7 million as compared to the same period in 2023. This was offset by lower product and software development costs of $0.7 million as a result of reprioritization of certain research and development initiatives.
Sales and Marketing Expenses. Sales and marketing expenses were $10.7 million for the nine months ended September 30, 2024, compared to $9.2 million for the same period in 2023, an increase of $1.4 million, or 15%. This increase was due primarily to higher personnel costs, including share-based compensation, of $1.1 million resulting from increases in headcount, and increased travel costs of $0.3 million.
General and Administrative Expenses. General and administrative expenses were $8.8 million for the nine months ended September 30, 2024, compared to $9.0 million for the same period in 2023, a decrease of $0.3 million, or 3%. This decrease was due primarily to lower bad debt expense of $1.4 million mainly as a result of subsequent recoveries, partially offset by higher personnel costs and share-based compensation of $0.8 million and higher occupancy costs of $0.3 million.
Interest Income (Expense). Net interest income was $0.6 million for the nine months ended September 30, 2024, compared to $0.3 million for the same period in 2023, as a result of increased investment in U.S. Government debt securities stemming from the capital raise in March 2024 as well as lower interest expense due to the early repayment of the First Closing Note.
Liquidity and Capital Resources
We have incurred net losses since our inception, which has resulted in a cumulative deficit at September 30, 2024 of $186.0 million. In addition, our use of cash from operations amounted to $7.7 million for the nine months ended September 30, 2024, and $13.7 million for the year ended December 31, 2023.
Since inception, we have financed our operations principally from the sale of equity securities and the issuance of notes payable. As discussed in Note 8, in March 2024, we completed a public offering of 2,653,848 shares of our common stock from which the net proceeds totaled approximately $16.2 million after deducting our payment of underwriting discounts and commissions and other offering expenses.
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In August 2024, we repaid in full the remaining $10 million outstanding under the SPA entered into in 2020, pursuant to which we issued secured convertible notes to two investors raising gross proceeds of $25 million, of which $15 million had been previously converted to common stock. See Note 6 to the Condensed Consolidated Financial Statements included above in Part I, Item 1 in this Quarterly Report for additional information with respect to the secured convertible notes.
As a result of these transactions and our business operations, our cash and cash equivalents totaled $21.6 million at September 30, 2024. In management’s opinion, based on our current forecasts for revenue, expense and cash flows, our existing cash and cash equivalent balances at September 30, 2024, are sufficient to support our operations and meet our obligations for at least the next twelve months.
Cash Flows
Cash activity for the nine months ended September 30, 2024 and 2023 is summarized as follows:
Nine months ended
September 30,
(in thousands)
2024
2023
Cash used in operating activities
$
(7,707)
$
(12,551)
Cash (used in) provided by investing activities
(12)
9,137
Cash provided by financing activities
6,152
141
Net change in cash and cash equivalents
$
(1,567)
$
(3,273)
Net Cash Flows from Operating Activities. Net cash flows used in operating activities for the nine months ended September 30, 2024, were $7.7 million, a decrease of $4.8 million from the nine months ended September 30, 2023. This decrease was due to a lower net loss of $3.9 million, and a net decrease in operating assets and liabilities of $1.1 million, partially offset by a net decrease in non-cash items of $0.2 million. The change in operating assets and liabilities is primarily due to higher accounts payable and accrued liabilities, partially offset by lower deferred revenue. The change in the non-cash items results primarily from recoveries in the allowance for credit losses, partially offset by higher share-based compensation expense.
Net Cash Flows from Investing Activities. Net cash flows used in investing activities for the nine months ended September 30, 2024, were nominal and related to equipment acquisitions.
Net cash flows provided by investing activities for the nine months ended September 30, 2023, were $9.1 million and consisted of proceeds from the maturities of short-term investments, partially offset primarily by equipment acquisitions related to our new manufacturing site in Carlsbad, California.
Net Cash Flows from Financing Activities. Net cash flows provided by financing activities for the nine months ended September 30, 2024, consisted of proceeds, net of offering costs, of $16.2 million received from the public offering of our common stock and $0.3 million in proceeds from the issuance of common stock under the employee stock purchase plan. This is partially offset by the repayment of the 2020 secured convertible note of $10.0 million and payments of $0.3 million for taxes related to shares withheld in connection with the vesting of restricted stock awards.
Net cash flows provided by financing activities for the nine months ended September 30, 2023, consisted of proceeds from the issuance of common stock under the employee stock purchase plan, partially offset by payments for taxes related to shares withheld in connection with the vesting of restricted stock awards.
Operating Capital and Capital Expenditure Requirements
To date, we have not achieved profitability. We could continue to incur net losses as we continue our efforts to expand the commercialization of our products and services and pursue additional applications for our technology platforms. Our cash balances are primarily held in a variety of demand accounts 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
25
successfully commercialize our products and pursue additional applications for our technology platforms. Our future capital requirements will depend on many factors, including, but not limited to, the following:
•the ability of our Partners to achieve commercial success, including their use of our products and services in their preclinical studies, clinical trials and delivery of therapies;
•the ultimate duration and impact of macroeconomic trends, including inflationary pressures, supply chain disruptions, geopolitical instability (including military conflicts), and legislative and political developments;
•the ability to maintain our existing relationships with our Partners and to enter into new relationships;
•the timing of broader market acceptance and adoption of our products;
•the scope, rate of progress and cost of our ongoing product development activities relating to our products;
•the cost and timing of expanding our sales, clinical support, marketing and distribution capabilities, and other corporate infrastructure;
•the cost and timing of establishing inventories at levels sufficient to support our sales;
•the effect of competing technological and market developments;
•the cost of pursuing additional applications of our technology platforms under current collaborative arrangements, and the terms and timing of any future collaborative, licensing or other arrangements that we may establish;
•the cost and timing of any clinical trials;
•the cost and timing of regulatory filings, clearances and approvals; and
•the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk
Our exposure to market risk is limited primarily to interest income and expense sensitivity, which is affected by changes in the general level of U.S. interest rates.
Our investments are in short-term bank deposits, short-term U.S. Government debt securities, and institutional money market funds. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. In the event we invest in short-term investments, due to the nature of our short-term investments and the Company's intent to hold such debt securities to maturity, we believe that we are not subject to any material market risk exposure.
Foreign Currency Risk
To date, we have not recorded a significant amount of sales in currencies other than U.S. dollars, and have only limited business transactions in foreign currencies. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks, which at present, are not material. We do not believe we have material exposure to risk from changes in foreign currency exchange rates at this time. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (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 September 30, 2024 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 this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2024, there were no 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.
27
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are involved from time-to-time with various legal matters arising in the ordinary course of business. These claims and legal proceedings are of a nature we believe are normal and incidental to a medical device company, and may include product liability, intellectual property, employment matters, and other general claims.
We make provisions for liabilities when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are assessed at least quarterly and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. We are currently not aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse effect on our consolidated results of operations, cash flows, or financial condition.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors as disclosed in the 2023 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
Not applicable. Without limiting the generality of the foregoing, during the quarter ended September 30, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements, as defined in Item 408(a) of Regulation S-K.
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ITEM 6. EXHIBITS.
The exhibits listed below are filed, furnished, or incorporated by reference as part of this Quarterly Report.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
+ This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
29
SIGNATURES
Pursuant to the requirements 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.
Date: November 7, 2024
CLEARPOINT NEURO, INC.
By:
/s/ Joseph M. Burnett
Joseph M. Burnett
Chief Executive Officer
(Principal Executive Officer)
By:
/s/ Danilo D’Alessandro
Danilo D’Alessandro
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)