Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

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Stockholders' Equity
 12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
Stockholders' Equity Stockholders’ Equity
2021 Public Offering
On February 23, 2021, the Company completed a public offering of 2,127,660 shares of its common stock, composed of 1,850,140 shares of common stock initially offered at a public offering price of $23.50 per share and an additional 277,520 shares of common stock sold pursuant to the exercise of the underwriters’ option to purchase additional shares at the price of $22.09 per share.
Net proceeds from the offering totaled approximately $46.8 million after deducting underwriting discounts and commissions, and other offering expenses paid by the Company.
The underwriting agreement contains representations, warranties, agreements and indemnification obligations by the Company that are customary for this type of transaction.
Issuance of Common Stock in Lieu of Cash Payments
Under the terms of the Amended and Restated Non-Employee Director Compensation Plan, each compensated non-employee member of the Company’s Board of Directors may elect to receive all or part of his or her director fees in shares of the Company’s common stock. Effective from June 25, 2021, director fees, whether paid in cash or in shares of common stock, are payable quarterly on the first business day following the end of the quarter. The number of shares of common stock issued to directors is determined by dividing the product of: (i) (a) the fees otherwise payable to each director in cash, times (b) the percentage of fees the director elected to receive in shares of common stock, by (ii) the volume weighted average price per share of common stock over the last five trading days of the quarter. During the years ended December 31, 2021 and 2020, 6,386 shares and 28,039 shares, respectively, were issued to directors as payment for director fees, amounting to $0.1 million in each of 2021 and 2020 in lieu of cash.
Equity Compensation Plans
The Company has various share-based compensation plans and share-based compensatory contracts (collectively, the “Plans”) under which it has granted share-based awards, such as stock grants, and incentive and non-qualified stock options, to employees, directors, consultants, and advisors. Awards may be subject to a vesting schedule as set forth in individual award agreements.
From October 2017 until June 2020, the Company granted share-based awards under the Company’s Second Amended and Restated 2013 Incentive Compensation Plan (the “Second Amended Plan”). On June 2, 2020, the Company’s stockholders approved the Company’s Third Amended and Restated 2013 Incentive Compensation Plan
(the “Third Amended Plan” and, together with the Second Amended Plan, the “2013 Plan”), under which 1.0 million shares of the Company’s common stock were made available for future issuances under the 2013 Plan, resulting in a total of 2,956,250 shares of the Company’s common stock being reserved for issuance under the 2013 Plan. Of this amount, 1,180,932 shares were outstanding as of December 31, 2021 and 718,384 shares remained available for grants under the 2013 Plan as of that date.
Stock Option Activity
Stock option activity under all of the Company’s Plans as of and for the year ended December 31, 2021 is summarized below:
Stock Options Weighted-average
Exercise price
per share		 Weighted-average Remaining Contractual Life (in years)
Intrinsic
Value
(in thousands) 
Outstanding at December 31, 2020 1,806,092  $ 7.12 
Granted
 128,399  $ 18.09 
Exercised
 (563,476) $ 2.68 
Forfeited or expired (20,542) $ 19.01 
Outstanding at December 31, 2021 1,350,473  $ 10.10  6.43 $ 8,350 
Exercisable at December 31, 2021 1,059,253  $ 10.05  5.76 $ 7,201 
Vested and expected to vest at December 31, 2021 1,350,473 $ 10.10  6.43 $ 8,350 
A summary of the status of the Company’s non-vested stock options for the year ended December 31, 2021 is presented below:
Non-vested Stock Options Weighted - Average
Grant
Date Fair Value
Nonvested, December 31, 2020 294,154  $ 2.09 
Granted 128,399  $ 9.48 
Vested (129,291) $ 2.01 
Forfeited or expired (2,042) $ 5.85 
Nonvested, December 31, 2021 291,220  $ 5.38 
The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2021 and 2020 was $9.48 and $2.22, respectively.
The total intrinsic value of stock options exercised during the years ended December 31, 2021 and 2020 was $11.4 million and $0.3 million, respectively, and represents the difference between the exercise price of the option and the fair value of the common stock on the dates exercised. The total grant-date fair value of stock options vested during the years ended December 31, 2021 and 2020 was $0.3 million and $0.4 million, respectively.
Restricted Stock Award Activity
Restricted Stock Award ("RSA") activity as of and for the year ended December 31, 2021 is summarized below:
Restricted Stock Award Weighted - Average
Grant
Date Fair Value
Outstanding, December 31, 2020 347,106  $ 3.66 
Granted 185,932  $ 18.12 
Vested (143,983) $ 4.40 
Forfeited or expired (8,950) $ 5.36 
Outstanding, December 31, 2021 380,105  $ 10.41 
The RSAs vest in annual installments over a two to three-year period, contingent on the holder's continued employment with the Company. Annual grants of RSAs to the Board of Directors typically vest in one year.
The estimated fair value of the RSAs is based on the closing market value of the Company's common stock on the date of grant. The total fair value of RSAs vested during the years ended December 31, 2021 and 2020 was $0.6 million and $0.5 million, respectively.
There was no common stock held in treasury as of December 31, 2021 and 2020.
Employee Stock Purchase Plan Activity
On June 3, 2021, the Company's stockholders adopted and approved the ClearPoint Neuro, Inc. Employee Stock Purchase Plan (the "Purchase Plan"). A total of 400,000 shares of the Company’s common stock are available for issuance pursuant to the terms of the Purchase Plan. The Purchase Plan provides eligible employees the opportunity to purchase shares of common stock at the lower of 85% of the fair market value on either the first day or the last day of the applicable offering period, by having withheld from their salary an amount up to 15% of their compensation. No employee may purchase more than $25,000 worth of common stock (calculated at the time the purchase right is granted) in any calendar year, nor may any employee purchase more than 3,500 shares in any six-month purchase period.
The Purchase Plan is deemed to be compensatory, and therefore, Purchase Plan expense has been included in share-based compensation expenses in the consolidated statement of operations for the year ended December 31, 2021.
The initial six-month purchase period commenced in July 2021. During the year ended December 31, 2021, 22,918 shares were purchased at an average per share price of $9.78. On December 31, 2021, 377,082 shares of common stock were available for issuance under the Purchase Plan.
Warrants
Warrants to purchase shares of the Company's common stock were issued in connection with financing transactions in 2015, 2016, and 2017, and are generally for terms of five years. These warrants contain net exercise provisions giving the holder the option of acquiring a number of shares having a value equal to the difference between the exercise price
and the current stock price, in lieu of paying the exercise price to acquire the full number of stated shares. All of the warrants outstanding at December 31, 2021 will terminate in 2022 or 2023.
Common stock warrant activity for the year ended December 31, 2021 is as follows:
Shares Weighted - Average
Exercise
Price
Outstanding at January 1, 2020 5,532,267  $ 4.00 
Exercised (2,163,042) 2.36 
Terminated (286,238) 18.31 
Outstanding at December 31, 2020 3,082,987  3.82 
Exercised (2,023,190) 3.31 
Terminated (390,890) 7.78 
Outstanding at December 31, 2021 668,907  $ 2.97 
Information regarding outstanding warrants at December 31, 2021 is as follows (contractual life expressed in years):
Exercise
Price		 Number
Outstanding		 Weighted-Average
Remaining
Contractual Life
Intrinsic Value
(in thousands)(1)
$2.20 632,353  0.41 $ 5,704 
$16.23 36,554  1.46 — 
668,907  0.47 $ 5,704 
(1)    Intrinsic value is calculated as the estimated fair value of the Company’s stock at December 31, 2021 less the warrant exercise price of in-the-money warrants.
Fair Value Assumptions
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following weighted average assumptions for options granted during the year ended December 31, 2021 and the following ranges for 2020:
Years Ended December 31,
2021 2020
Risk-free interest rate 0.95%
0.34% - 0.49%
Expected life (in years) 5.86
5.5 to 6.0
Estimated volatility 57.20%
56.05% - 57.00%
Expected dividends None None
Weighted-average grant date fair value $9.48 $2.22
The risk-free interest rate for periods within the contractual life of the stock option is based on the implied yield available on U.S. Treasury constant maturity securities with the same or substantially equivalent remaining terms at the time of grant.
The expected option terms are calculated based on the simplified method for “plain vanilla” options due to the Company's limited exercise information. The simplified method calculates the expected term as the average of the vesting term and the original contractual term of the options.
The estimated volatility was calculated using the average of the historical volatility of the Company's common stock and comparable companies using daily closing prices over a period generally commensurate with the expected term of the options. No periods were excluded due to discrete historical events. The historical volatility of similar companies was utilized due to the limited trading history of the Company's common stock.
A zero value of the expected dividend value factor is utilized since the Company has not declared any dividends in the past and does not anticipate declaring dividends in the foreseeable future.
The first offering period under the Purchase Plan commenced in July 2021. The fair value of the first purchase option under the Purchase Plan is estimated at the beginning of the purchase period using the Black-Scholes model utilizing the following assumptions:
2021
Risk-free interest rate 0.05%
Expected life (in years) 0.5
Estimated volatility 57.82%
Expected dividends None
Fair value of purchase right $5.78
The computation of the expected volatility assumption used in the Black-Scholes model for purchase rights is based on the trading history of the Company's common stock and comparable companies. The expected life assumption is based on the six-month term of each offering period. The risk-free interest rate is based on the U.S. Treasury constant maturity securities with the same or substantially equivalent remaining term in effect at the beginning of the offering period. A zero value for the expected dividend value factor is utilized since the Company has not declared dividends in the past and does not anticipate declaring dividends in the foreseeable future.
Share-Based Compensation Expense
The Company records share-based compensation expense on a straight-line basis over the related vesting period and recognizes forfeitures as they occur. The following table sets forth share-based compensation expense included in selling, general and administrative expense in the consolidated statements of operations:
Years Ended December 31,
(in thousands)
2021 2020
$2,078 $1,090
In the year ended December 31, 2021, the Company recognized $0.1 million of share-based compensation related to the Purchase Plan.
As of December 31, 2021, there was $1.2 million and $3.1 million of total unrecognized compensation expense related to stock options and RSAs, respectively, which is expected to be recognized over a weighted-average period of 1.9 years and 2.2 years, respectively.