ClearPoint Neuro, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Revenue Recognition

Revenue Recognition

12 Months Ended

Dec. 31, 2018

3.	Revenue Recognition

Revenue by Service Line

	Years Ended December 31,
	2018		2017
Products:
Disposable products:
Functional neurosurgery	$	5,313,041	$	5,233,092
Biologics and drug delivery		951,940		675,809
Capital equipment		420,039		1,115,109
Total product revenue		6,685,020		7,024,010
Services:
Functional neurosurgery		100,000		—
Biologics and drug delivery		175,223		—
Capital equipment and other		393,023		355,515
Total service revenue		668,246		355,515
Total revenue	$	7,353,266	$	7,379,525

Contract Balances

	●	Contract assets – Substantially all the Company’s contracts with customers are based on customer-issued purchase orders for distinct products or services. Customers are billed upon delivery of such products or services, and the related contract assets comprise the accounts receivable balances included in the accompanying condensed consolidated balance sheets.

	●	Contract liabilities – The Company generally bills and collects capital equipment-related service fees at the inception of the service agreements, which have terms ranging from one to three years. The unearned portion of such service fees are classified as deferred revenue.

		During the year ended December 31, 2018, the Company recognized capital equipment-related service revenue of $142,605 which was previously included in deferred revenue in the accompanying consolidated balance sheet at December 31, 2017.

In connection with one customer contracts, the Company bills the customer for certain product the customer ordered and is committed to purchase, but which is shipped at a future date. At December 31, 2018, such billings amounted to $8,000, which amount is included in each of accounts receivable and deferred revenue in the accompanying condensed consolidated balance sheet. There were no such billings at December 31, 2017.

Remaining Performance Obligations

The Company’s contracts with customers, other than capital equipment-related service agreements discussed below, are predominantly of terms less than one year. Accordingly, the transaction price of remaining performance obligations related to such contracts at December 31, 2018 are not material.

Revenue with respect to remaining performance obligations related to capital equipment-related service agreements with original terms in excess of one year amounted to $303,912 at December 31, 2018. The Company expects to recognize this revenue within the next three years.

One contract with a customer has a stated term of three years. However, the customer has the right to terminate the contract for convenience upon a 30-day notice, in which event the customer would be obligated to compensate the Company for up to three months of previously forecast purchases. Based on the foregoing, the Company uses the practical expedient available under Topic 606 pursuant to which such contracts are considered to have a term of less than one year and for which disclosure of the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue is not required. Accordingly, the Company has not included such disclosure for this contract.