ClearPoint Neuro(CLPT) - 2020 Q4 - Annual Report

Part I Business ClearPoint Neuro develops MRI-guided neuro-navigation platforms for minimally invasive brain surgeries, emphasizing recurring revenue from high-margin disposable products - The company's core business is the ClearPoint system, a neuro-navigation platform for minimally invasive brain surgeries performed under MRI guidance, primarily for deep brain stimulation (DBS) electrode placement and laser catheter insertion[35][36][39] - A key growth area is the biologics and drug delivery segment, where its SmartFlow cannula is used by approximately 25 pharmaceutical partners in clinical trials to deliver therapies directly to the brain, bypassing the blood-brain barrier[37][45][74] - The business model focuses on generating recurring revenue from high-margin disposable components, with reusable hardware sold at lower margins or placed under evaluation programs to drive adoption and use of disposables[66] - As of March 18, 2021, the company had 67 full-time employees, with 22 in R&D, 27 in sales/clinical support, 13 in manufacturing/QA, and 5 in administration[144] - The company holds a significant intellectual property portfolio with 65 U.S. patents and over 30 U.S. patent applications, either wholly-owned, co-owned, or licensed[78] - Customer concentration is notable, with the five largest hospital customers accounting for 35% of functional neurosurgery disposable revenue in 2020, and one biologics/drug delivery partner accounting for 60% of that segment's revenue[73][74] Risk Factors The company faces significant risks including COVID-19 impacts, market acceptance, supply chain reliance, customer concentration, historical losses, competition, and regulatory hurdles - The COVID-19 pandemic poses a significant risk by causing the postponement or cancellation of elective surgical procedures, which historically represent approximately 80% of the procedures using the ClearPoint system[147] - The company faces market acceptance risk, as physicians and hospitals may be slow to adopt the ClearPoint system due to the procedural shift from the operating room to the MRI suite, cost considerations, and existing practice patterns[150] - Significant customer concentration exists, with one pharmaceutical customer accounting for 28% of total revenues in 2020, and the five largest hospital customers representing approximately 36% of functional neurosurgery navigation revenues[162] - The company has a history of incurring losses since its inception in 1998, with a cumulative net loss of approximately $120 million through December 31, 2020, and may require additional funding to sustain operations[188][191] - Reliance on single-source suppliers for many components of the ClearPoint system creates risks related to pricing, availability, quality, and potential production disruptions[166][167] - The medical device market is highly competitive, with competition from large, well-established companies like Medtronic, Brainlab, and Zimmer Biomet that have substantially greater financial and marketing resources[90][181] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - Not applicable[282] Properties The company's principal executive office and operations are located in a leased facility of approximately 7,400 square feet in Irvine, California, with the lease expiring in September 2023 - The company leases approximately 7,400 square feet of space in Irvine, California, for its principal executive office and operations, with the lease expiring in September 2023[283] Legal Proceedings The company states that it is not aware of any material pending legal proceedings to which it is a party - The company is not aware of any material pending legal proceedings[284] Mine Safety Disclosures This item is not applicable to the company - Not applicable[285] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ClearPoint Neuro's common stock trades on Nasdaq under "CLPT", with 20.7 million shares outstanding, and no plans for future cash dividends - The company's common stock is traded on the Nasdaq Capital Market under the symbol "CLPT"[289] - As of March 18, 2021, there were 20,672,779 shares of common stock outstanding[289] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[290] Selected Financial Data This item is not applicable as per the report - Not applicable[292] Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenues increased 14% to $12.8 million in 2020, driven by service revenue growth, leading to a $6.8 million net loss, with liquidity significantly improved by financing Comparison of Financial Results (Years Ended Dec 31) | Metric (in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $12,829 | $11,217 | 14% | | Product Revenues | $8,789 | $9,796 | (10)% | | Service Revenues | $4,040 | $1,421 | 184% | | Gross Margin | 71% | 65% | - | | R&D Costs | $4,686 | $2,810 | 67% | | Net Loss | $(6,782) | $(5,540) | 22% | - The decrease in product revenue was primarily due to the COVID-19 pandemic, which caused postponement of elective surgeries that historically represent about 80% of ClearPoint system case volume[298][327] - Biologics and drug delivery revenues grew 109% to $5.0 million, driven by a 302% increase in service revenue from a related-party customer supporting their clinical trials[328] - The company's cash position increased significantly to $20.1 million at year-end 2020 from $5.7 million in 2019, primarily due to net proceeds of $24.3 million from the issuance of secured convertible notes[338][354] - Net cash used in operating activities increased to $7.8 million in 2020 from $2.8 million in 2019[348] - Subsequent to year-end, in February 2021, the company completed a public offering with net proceeds of approximately $46.8 million, further strengthening its capital resources[345] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as per the report - Not applicable[359] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2020 and 2019, noting a significant $46.8 million public offering in February 2021 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,099 | $5,696 | | Total Assets | $29,518 | $11,927 | | Total Liabilities | $27,141 | $7,341 | | Total Stockholders' Equity | $2,377 | $4,586 | Consolidated Statement of Operations Highlights (in thousands) | Account | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Total Revenues | $12,829 | $11,217 | | Operating Loss | $(6,220) | $(4,594) | | Net Loss | $(6,782) | $(5,540) | | Net Loss Per Share | $(0.43) | $(0.42) | - A significant subsequent event occurred on February 23, 2021, when the company completed a public offering of common stock, raising net proceeds of approximately $46.8 million[569][570] - In January and December 2020, the company issued secured convertible notes for aggregate proceeds of approximately $24.3 million, net of costs[341][453][454] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[361] Controls and Procedures As of December 31, 2020, management concluded the company's disclosure controls and internal control over financial reporting were effective, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[363] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[365] - No material changes in internal control over financial reporting were identified during the year ended December 31, 2020[367] Other Information The company reports no other information for this item - None[369] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 annual meeting proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed for the 2021 annual meeting of stockholders[372] Executive Compensation Executive compensation information is incorporated by reference from the 2021 annual meeting proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed for the 2021 annual meeting of stockholders[375] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details for beneficial owners and management are incorporated by reference from the 2021 annual meeting proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed for the 2021 annual meeting of stockholders[376] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2021 annual meeting proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed for the 2021 annual meeting of stockholders[377] Principal Accounting Fees and Services Principal accounting fees and services information is incorporated by reference from the 2021 annual meeting proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed for the 2021 annual meeting of stockholders[378] Part IV Exhibits, Financial Statement Schedules This section provides a comprehensive list of financial statements, schedules, and exhibits filed with the Form 10-K report - This item lists the financial statements filed under Item 8 and provides a detailed index of all exhibits filed with the annual report[381][383]