ClearPoint Neuro(CLPT) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Financial Statements The financial statements for June 30, 2021, reflect increased assets and revenue, driven by a public offering, despite widening net losses from higher operating expenses Condensed Consolidated Balance Sheets The balance sheet shows a substantial increase in total assets and cash, primarily from a public offering, leading to a significant improvement in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,524 | $20,099 | | Total current assets | $68,509 | $25,462 | | Total assets | $72,326 | $29,518 | | Liabilities & Equity | | | | Total liabilities | $24,360 | $27,141 | | Total stockholders' equity | $47,966 | $2,377 | | Total liabilities and stockholders' equity | $72,326 | $29,518 | Condensed Consolidated Statements of Operations Revenue increased for both three and six-month periods, but net losses widened significantly due to higher operating expenses, particularly in R&D Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $3,413 | $2,478 | $7,443 | $5,593 | | Gross profit | $2,290 | $1,676 | $4,904 | $3,860 | | Operating loss | $(3,407) | $(1,475) | $(5,588) | $(2,684) | | Net loss | $(3,743) | $(1,661) | $(6,281) | $(3,716) | | Net loss per share | $(0.17) | $(0.11) | $(0.31) | $(0.24) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity significantly increased due to net proceeds from a public offering and convertible note conversion, despite a net loss - A public offering of common stock in the first half of 2021 raised approximately $46.8 million[24] - A $7.5 million principal amount of the 2020 senior secured convertible note was converted into approximately 1.26 million shares of common stock[24][30] Condensed Consolidated Statements of Cash Flows Net cash increased significantly due to substantial financing activities, primarily a public stock offering, offsetting cash used in operations Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $(5,849) | $(4,039) | | Net cash from investing activities | $(5) | $(441) | | Net cash from financing activities | $47,279 | $14,816 | | Net change in cash | $41,425 | $10,336 | | Cash, beginning of period | $20,099 | $5,696 | | Cash, end of period | $61,524 | $16,032 | Notes to Condensed Consolidated Financial Statements Notes detail business operations, COVID-19 impact, improved liquidity from financing, and key accounting policies for revenue, inventory, and debt Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses revenue growth from surgical recovery and partner activity, widening losses due to R&D investments, and strengthened liquidity from a public offering Overview ClearPoint Neuro, a medical device company, focuses on MRI-guided brain surgeries and has incurred significant accumulated deficits from R&D investments - The company's principal product is the ClearPoint system, which enables minimally invasive surgical procedures in the brain under direct MRI guidance[123] - As of June 30, 2021, the company had an accumulated deficit of approximately $126 million[124] Factors Which May Influence Future Results of Operations Future results are primarily influenced by the unpredictable impact of the COVID-19 pandemic, particularly on elective surgical procedures - The COVID-19 pandemic led to the postponement or cancellation of elective surgical procedures, which historically represent about 80% of procedures using the ClearPoint system[126] - The impact of new COVID-19 variants, like the Delta variant, is unpredictable and could result in the reinstatement of business restrictions, adversely affecting the company[126] Key Performance Indicators Key performance indicators show significant increases in functional neurosurgery case volume and biologics partners, reflecting pandemic recovery Key Performance Indicator Changes | Indicator | Q2 2021 vs Q2 2020 | H1 2021 vs H1 2020 | | :--- | :--- | :--- | | Case Volume | +96% (249 vs 127) | +50% (463 vs 308) | - The number of biologics and drug delivery partners increased from approximately 20 as of June 30, 2020, to approximately 35 as of June 30, 2021[130] - The number of Active Surgery Centers was over 60 as of June 30, 2021, comparable to the prior year, with the lack of growth attributed to the COVID-19 pandemic[129] Results of Operations Revenue increased due to surgical recovery and partner growth, but rising operating expenses, especially R&D, led to wider net losses Comparison of Three Months Ended June 30, 2021 and 2020 Q2 2021 revenue increased due to resumed surgeries, but operating expenses, particularly R&D, surged, resulting in a significantly wider net loss Q2 2021 vs Q2 2020 Financial Results (in thousands) | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $3,413 | $2,478 | 38% | | Gross profit | $2,290 | $1,676 | 37% | | Research and development costs | $2,123 | $812 | 161% | | Net loss | $(3,743) | $(1,661) | 125% | - The increase in revenue was primarily due to a 74% increase in functional neurosurgery navigation and therapy revenue, reflecting the resumption of elective surgical procedures that were postponed in 2020 due to COVID-19[145] Comparison of Six Months Ended June 30, 2021 and 2020 H1 2021 revenue increased from neurosurgery and biologics, but surging R&D expenses led to a significantly wider net loss H1 2021 vs H1 2020 Financial Results (in thousands) | Metric | H1 2021 | H1 2020 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $7,443 | $5,593 | 33% | | Gross profit | $4,904 | $3,860 | 27% | | Research and development costs | $3,687 | $1,631 | 126% | | Net loss | $(6,281) | $(3,716) | 69% | - Biologics and drug delivery revenue increased 39% to $3.0 million for the six-month period, driven by higher product and service sales related to customer-sponsored clinical trials[159] Liquidity and Capital Resources Despite historical losses, liquidity significantly improved with a public offering, providing sufficient capital for at least the next twelve months - On February 23, 2021, the company completed a public offering of common stock, raising net proceeds of approximately $46.8 million[171] - Management believes that cash and cash equivalent balances at June 30, 2021, are sufficient to support operations and meet obligations for at least the next twelve months[172] Quantitative and Qualitative Disclosures About Market Risk Market risk is primarily interest rate sensitivity on investments and variable-rate debt, with foreign currency risk currently not material - The company's primary market risk is interest rate sensitivity on its investments and variable-rate debt[185] - The $10.0 million First Closing Note has a LIBOR floor of 2.00%, mitigating risk from rising interest rates while LIBOR is below that level[187] - Foreign currency risk is not currently material as sales are predominantly in U.S. dollars[188] Controls and Procedures Management concluded that disclosure controls and procedures were effective, 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 June 30, 2021[189] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, internal controls[190] PART II – OTHER INFORMATION Part II covers legal proceedings, risk factors, equity sales, and exhibits, providing additional context beyond the financial statements Legal Proceedings No legal proceedings were reported during the period - None[193] Risk Factors No material changes to previously disclosed risk factors were reported - There have been no material changes to the risk factors disclosed in the 2020 Form 10-K[195] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None[197] Exhibits The report includes various exhibits, such as the 2021 Employee Stock Purchase Plan and CEO/CFO certifications - Exhibits filed with the report include the company's 2021 Employee Stock Purchase Plan and certifications from the CEO and CFO[205]