ClearPoint Neuro(CLPT) - 2020 Q1 - Quarterly Report

Financial Performance - Total revenues for the three months ended March 31, 2020, were $3,115,593, an increase of 25.9% compared to $2,472,517 for the same period in 2019[23] - Product revenues decreased to $2,103,384 from $2,163,953, while service and other revenues increased significantly to $1,012,209 from $308,564[23] - The net loss for the three months ended March 31, 2020, was $2,054,825, compared to a net loss of $1,220,725 for the same period in 2019, representing a 68% increase in losses[23] - Operating loss for the three months ended March 31, 2020, was $(1,208,374), compared to $(972,249) for the same period in 2019, reflecting a 24.3% increase in operating losses[23] - Total product revenue for the three months ended March 31, 2020 was $2,103,384, a decrease from $2,163,953 in 2019, representing a decline of approximately 2.8%[77] - Total service revenue increased significantly to $1,012,209 for the three months ended March 31, 2020, compared to $308,564 in 2019, marking an increase of approximately 227%[77] Assets and Liabilities - Cash and cash equivalents increased to $16,976,329 as of March 31, 2020, from $5,695,722 as of December 31, 2019, indicating improved liquidity[20] - Total current assets rose to $21,799,906 as of March 31, 2020, compared to $10,383,084 as of December 31, 2019, reflecting a 109.5% increase[20] - Total liabilities increased significantly to $20,825,467 as of March 31, 2020, from $7,339,720 as of December 31, 2019, marking a 184.5% rise[20] - As of March 31, 2020, ClearPoint held approximately $7.8 million in bank balances exceeding insured limits, indicating potential credit risk[72] Research and Development - Research and development costs for the three months ended March 31, 2020, were $829,528, up from $584,540 in the same period of 2019, indicating a 41.9% increase[23] Financing Activities - The company issued 271,841 shares of common stock during the three months ended March 31, 2020, increasing total shares outstanding to 15,507,149[26] - The company incurred financing costs of $132,129 related to the issuance of the 2020 Secured Notes, which are included in accounts payable as of March 31, 2020[33] - In January 2020, ClearPoint issued $17.5 million in floating rate secured convertible notes, netting approximately $16.8 million after costs[45] - The company received $896,000 from a loan under the Payroll Protection Program as part of the CARES Act in April 2020[46] - The company completed a financing transaction on January 29, 2020, issuing $17,500,000 in 2020 Secured Notes, which mature on the fifth anniversary of the closing date[91] - The company received $896,000 in proceeds from a loan under the Payroll Protection Program, with a two-year term and a 1% interest rate, payable in monthly installments of $50,424.18 starting November 2020[114] Customer and Revenue Recognition - Approximately 80% of surgical procedures using the ClearPoint system were elective, which were significantly impacted by COVID-19[40] - ClearPoint's revenue recognition includes product sales from functional neurosurgery, biologics, and drug delivery systems, with capital equipment sales recognized upon receipt of an executed purchase agreement[54][56] - The company has entered into license agreements for product development in functional neurosurgery, paying $591,341 for access to underlying technologies[52] - ClearPoint operates primarily in the U.S. market, with all sales directed to U.S.-based customers[66] - The company provides a one-year warranty on its products, with payment terms generally ranging from 30-60 days post-invoice[69] - As of March 31, 2020, accounts receivable from Customer 1 comprised 14% of total accounts receivable, up from 12% as of December 31, 2019[75] - Customer 1 accounted for 28% of total sales for the three months ended March 31, 2020, compared to 15% in the same period of 2019[75] Inventory and Performance Obligations - Inventory as of March 31, 2020 totaled $4,139,582, an increase from $3,744,618 as of December 31, 2019, representing a rise of approximately 10.6%[90] - The company recognized approximately $121,000 in capital equipment-related service revenue during the three months ended March 31, 2020, which was previously included in deferred revenue[82] - The company has approximately $992,000 in remaining performance obligations related to capital equipment-related service agreements expected to be recognized within the next three years[87] Stock Options and Compensation - As of March 31, 2020, the company had 1,633,612 stock options outstanding as of March 31, 2020, with a weighted average exercise price of $9.90, down from 1,639,167 options at the beginning of the year[111] - Unrecognized compensation expense related to outstanding stock options was approximately $428,000 as of March 31, 2020, expected to be recognized over a weighted average period of 1.7 years[112] - As of March 31, 2020, the company had 5,104,610 warrants outstanding with a weighted average exercise price of $4.15, down from 5,532,267 at the beginning of the year[113] - As of March 31, 2020, the company issued 9,731 shares of common stock to directors as payment for fees, compared to 8,898 shares in the same period of 2019, reflecting an increase of approximately 9.4%[107] - Under the 2013 Incentive Compensation Plan, a total of 1,956,250 shares are reserved for issuance, with 414,663 shares awarded and 1,080,679 shares outstanding as of March 31, 2020, leaving 460,908 shares available for future grants[108] Risk Management - The company has limited exposure to interest rate risk, primarily from short-term bank deposits and institutional money market funds, with no material market risk exposure anticipated[165] - The company has recorded no product sales in currencies other than U.S. dollars and does not currently engage in hedging to reduce foreign currency risks, which are not material at this time[166]