ClearPoint Neuro(CLPT) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (unaudited) ClearPoint Neuro reported a 25% revenue increase to $5.03 million, but net loss widened to $4.0 million due to increased operating expenses Condensed Consolidated Balance Sheets Total assets decreased to $61.8 million by March 31, 2022, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $49,658 | $54,109 | | Inventory, net | $5,732 | $4,938 | | Total current assets | $58,013 | $61,892 | | Total assets | $61,768 | $65,581 | | Liabilities & Equity | | | | Total current liabilities | $3,973 | $4,753 | | Total liabilities | $16,038 | $16,794 | | Total stockholders' equity | $45,730 | $48,787 | | Total liabilities and stockholders' equity | $61,768 | $65,581 | Condensed Consolidated Statements of Operations Total revenue increased 25% to $5.0 million, but operating and net losses widened significantly due to increased expenses Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total revenue | $5,031 | $4,030 | | Gross profit | $3,246 | $2,614 | | Research and development costs | $2,533 | $1,563 | | Sales and marketing expenses | $1,845 | $1,575 | | General and administrative expenses | $2,732 | $1,657 | | Operating loss | $(3,864) | $(2,181) | | Net loss | $(3,959) | $(2,538) | | Net loss per share (Basic and diluted) | $(0.17) | $(0.13) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $4.3 million, leading to a $4.5 million net decrease in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash flows from operating activities | $(4,269) | $(2,131) | | Net cash flows from investing activities | $(185) | $(40) | | Net cash flows from financing activities | $3 | $46,930 | | Net change in cash and cash equivalents | $(4,451) | $44,759 | Notes to Condensed Consolidated Financial Statements Notes detail the company's expanded business, liquidity position, revenue recognition, and outstanding convertible notes * The company's business has expanded beyond MRI-guided interventions to include neurosurgical devices for the operating room and consulting services for pharmaceutical companies[32] * Management believes cash and cash equivalents of $49.7 million at March 31, 2022, are sufficient to fund operations for at least the next twelve months[42] Revenue by Service Line (in thousands) | Service Line | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Functional neurosurgery navigation and therapy | $2,238 | $1,917 | | Biologics and drug delivery | $2,154 | $1,660 | | Capital equipment and software | $639 | $453 | | Total revenue | $5,031 | $4,030 | * As of March 31, 2022, $10 million of 2020 Secured Convertible Notes remained outstanding, convertible at $6.00 per share[86] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's dual focus, key performance indicators, revenue growth drivers, increased net loss from higher expenses, and sufficient liquidity * The company has evolved into two parts: a medical device company for neurosurgery and a collaborator with pharmaceutical companies for biologics and drug delivery[118] * The number of Biologics and Drug Delivery 'Partners' grew from approximately 25 as of March 31, 2021, to approximately 45 as of March 31, 2022[125] * The number of 'Active Surgery Centers' was approximately 60 as of March 31, 2022, comparable to the same date in 2021[124] * Management believes cash and cash equivalents at March 31, 2022, are sufficient to support operations for at least the next twelve months[152] Results of Operations Total revenue increased 25% to $5.0 million, driven by growth across all segments, but significant increases in R&D and G&A expenses widened the net loss Revenue Growth by Segment (Q1 2022 vs Q1 2021, in millions) | Revenue Segment | Growth Rate | Q1 2022 Revenue (in millions) | Q1 2021 Revenue (in millions) | | :--- | :--- | :--- | :--- | | Functional neurosurgery navigation and therapy | 17% | $2.2M | $1.9M | | Biologics and drug delivery | 30% | $2.2M | $1.7M | | Capital equipment and software | 41% | $0.6M | $0.5M | | Total Revenue | 25% | $5.0M | $4.0M | * Gross margin was 65% in Q1 2022, consistent with Q1 2021, despite an increase in the excess and obsolete inventory reserve[141][143] * R&D costs increased 62% to $2.5 million, primarily due to a $0.7 million increase in product development and a $0.3 million increase in personnel costs[144] * General and administrative expenses rose 65% to $2.7 million, driven by a $0.6 million increase in share-based compensation and a $0.3 million increase in personnel costs[146] Liquidity and Capital Resources The company has a cumulative deficit of $137.9 million, financing operations through equity and debt, and maintains sufficient liquidity despite increased cash burn * The company has incurred net losses since inception, with a cumulative deficit of $137.9 million as of March 31, 2022[148] * In February 2021, the company completed a public offering of common stock, raising net proceeds of approximately $46.8 million[151] * Cash used in operations was $4.3 million for the three months ended March 31, 2022[148] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily limited to interest rate sensitivity on investments and variable-rate debt, with immaterial foreign currency exposure * The company's market risk is primarily limited to interest rate sensitivity on its cash investments and variable-rate debt[160] * The $10 million outstanding First Closing Note is subject to a 2.00% LIBOR floor, mitigating the impact of rising interest rates from current levels[162] * Foreign currency risk is not material as the company has limited business transactions in foreign currencies[163] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting * The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[164] * No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[165] PART II – OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period * None[168] Risk Factors A new material risk factor highlights the potential adverse impacts of the Russia-Ukraine conflict on global economy and company operations * A new risk factor addresses the potential adverse effects of the military conflict between Russia and Ukraine on the company's business and financial results[170] * Potential negative impacts include reduced consumer demand, supply chain disruptions, increased cybersecurity risks, and higher costs for transportation, energy, and raw materials[171] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period * None[173] Exhibits This section lists the exhibits filed with the quarterly report, including agreements, officer certifications, and XBRL data files * The report includes exhibits such as agreements, officer certifications (31.1, 31.2, 32), and XBRL data files[181]