Description of the Business and Financial Condition |
12 Months Ended |
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Dec. 31, 2021 | |
| Description Of Business And Liquidity | |
| Description of the Business and Financial Condition |
1. Description of the Business and Financial Condition
ClearPoint Neuro, Inc. (the “Company”) is a medical device company focused on the development and commercialization of technology for performing minimally invasive surgical procedures in the brain. The Company was incorporated in the state of Delaware in March 1998, and has headquarters located in Solana Beach, California. The Company established ClearPoint Neuro (Canada) Inc., a wholly owned subsidiary incorporated in Canada, in August 2013, primarily for the purpose of performing software development, and established ClearPoint Neuro U.K. Ltd, a wholly owned subsidiary incorporated in the United Kingdom, in October 2020, primarily for the purpose of employing the Company’s clinical services representatives serving the Company’s customers in the United Kingdom and the EU. The activities of both subsidiaries are reflected in these consolidated financial statements.
The Company’s initial product offering, the ClearPoint system, is an integrated system comprised of capital equipment and disposable products, designed to allow minimally invasive procedures in the brain to be performed in an MRI suite. The ClearPoint Array Neuro Navigation System, introduced in 2021, also can be used in an MRI suite, and the principal disposable component of the Array system can be deployed in an operating room setting. Both systems provide guidance for the placement and operation of instruments or devices during the planning and operation of neurosurgical procedures. The Company received 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2010 to market the ClearPoint system in the United States for general neurosurgical interventional procedures; in February 2011, the Company also obtained CE marking approval for its ClearPoint system.
COVID-19
In March 2020, the World Health Organization characterized the spread of a novel strain of coronavirus (“COVID-19”) as a global pandemic, and the President of the United States later proclaimed that the COVID-19 outbreak in the United States constituted a national emergency. Extraordinary actions were taken by federal, state and local governmental authorities to combat the spread of COVID-19, including issuances of “stay-at-home” directives and similar mandates that substantially restricted daily activities and for many businesses curtailed or ceased normal operations. These measures led to reduced economic activity, including the postponement or cancellation of elective surgical procedures, which historically have represented approximately 80% of the number of surgical procedures using the Company's ClearPoint system. Although economic activity is returning to normalized levels, new variants of COVID-19, such as Delta and Omicron, continue to spread in the United States and across the globe. The ultimate impact of the COVID-19 pandemic cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population, the effectiveness of vaccines against different variants and the response by governmental bodies and regulators. Management is unable to determine the timing and extent to which the vaccination process will affect the progression of the virus; the timing, adoption or viability of periodic resumption, if any, of elective procedures; and the resulting length of time that the COVID-19 pandemic will adversely affect our product revenues.
Furthermore, the recessionary conditions on the global economy caused by the COVID-19 pandemic could have a material adverse effect on the Company's business. Although most segments of the United States economy have reopened, the effects of the COVID-19 pandemic remain intense in many areas of the country, and many public health experts continue to anticipate future surges of COVID-19 due to new variants. Accordingly, reinstatement of directives and mandates requiring businesses to again curtail or cease normal operations, including the postponement or cancellation of elective surgeries, remains a possibility. Additionally, global economic and supply chain disruptions, labor shortages, which may affect the Company's ability to retain and attract new talent, and inflationary conditions caused by the COVID-19 pandemic could have a material adverse effect on the Company’s business. The rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on the Company's business, financial condition, results of operation and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 outbreak in the United States.
Liquidity
The Company has incurred net losses since its inception which has resulted in a cumulative deficit at December 31, 2021 of approximately $134 million. In addition, the Company’s use of cash from operations amounted to $12.7 million for the year ended December 31, 2021. Since inception, the Company has financed its operations principally from the sale of equity securities and the issuance of notes payable.
In January 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with two investors (each, a “2020 Convertible Noteholder,” and together, the "2020 Convertible Noteholders") under which the Company issued an aggregate principal amount of $17.5 million of floating rate secured convertible notes with a year term (the “First Closing Notes”), resulting in proceeds, net of financing costs, and a commitment fee paid to one of the 2020 Convertible Noteholders, of approximately $16.8 million. In the first quarter of 2020, the Company used $3.7 million from the net proceeds received from the issuance of the First Closing Notes to repay and retire the 2010 Junior Secured Notes Payable (the “2010 Secured Notes”) that otherwise would have matured in October and November 2020.
The SPA also gave the Company the right, but not the obligation, to request one of the 2020 Convertible Noteholders to purchase an additional $5.0 million in principal amount of a note (the “Second Closing Note”, and, together with the First Closing Note, the “2020 Secured Notes”). On December 29, 2020, under the terms of an amendment to the SPA (the "Amendment") which, among other provisions, increased the principal amount of the Second Closing Note, the Company issued the Second Closing Note to the 2020 Convertible Noteholder in the principal amounts of $7.5 million.
Additional information with respect to the 2020 Secured Notes is found in Note 6.
As discussed in Note 8, on February 23, 2021, the Company completed a public offering of 2,127,660 shares of its common stock. Net proceeds from the offering were approximately $46.8 million after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company.
Based on the foregoing, in management’s opinion, cash and cash equivalent balances at December 31, 2021, are sufficient to support the Company’s operations and meet its obligations for at least the next twelve months.
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