Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.22.4
Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
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, 2022 and 2021, 15,059 shares and 6,386 shares, respectively, were issued to directors as payment for director fees, amounting to $0.2 million and $0.1 million in 2022 and 2021, respectively, in lieu of cash.
Equity Compensation Plans
The Company grants stock options, restricted stock awards, and restricted stock units under the Third Amended and Restated 2013 Incentive Compensation Plan (the "Third Amended Plan"). In May 2022, the Company's stockholders approved the Fourth Amended and Restated 2013 Incentive Compensation Plan (the "Fourth Amended Plan" and, together with the Third Amended Plan, the "2013 Plan"), which increased the number of shares of common stock available for awards under the plan by 1.2 million shares. The total shares of the Company’s common stock being reserved for issuance under the 2013 Plan is 4,156,250, of which 1,582,821 shares were outstanding as of December 31, 2022 and 1,286,967 shares remained available for grants under the 2013 Plan as of that date.
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 the consolidated statements of operations:
Years Ended December 31,
(in thousands)
2022 2021
Cost of revenue $ 63  $ 30 
Research and development 1,060  464 
Sales and marketing 809  351 
General and administrative 2,194  1,233 
  Share-based compensation expense $ 4,126  $ 2,078 
Share-based compensation expense by type of share-based award:
Years Ended December 31,
(in thousands)
2022 2021
Stock options $ 1,076  $ 686 
RSAs and RSUs 2,828  1,314 
ESPP 222  78 
  $ 4,126  $ 2,078 
Total unrecognized compensation expense by type of award and the weighted-average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):
December 31, 2022
Unrecognized Expense Remaining Weighted-Average Recognition Period (in years)
Stock options 1,306  1.87
RSAs and RSUs 5,649  2.13
Stock Option Activity
Options granted under the 2013 Plan must have an exercise price equal to at least 100% of fair market value of the Company's common stock on the date of grant. The options generally have a maximum contractual term of ten years and vest in accordance with the individual award agreements.
Stock option activity under all of the Company’s Plans as of and for the year ended December 31, 2022 is summarized below:
Stock Options Weighted-average
Exercise price
per share		 Weighted-average Remaining Contractual Life (in years)
Intrinsic Value
(in thousands)(1)
Outstanding at December 31, 2021 1,350,473  $ 10.10 
Granted 147,723  $ 10.91 
Exercised (30,000) $ 2.45 
Forfeited or expired (69,910) $ 43.27 
Outstanding at December 31, 2022 1,398,286  $ 8.69  6.11 $ 5,328 
Exercisable at December 31, 2022 1,133,621  $ 8.12  5.47 $ 5,113 
Vested and expected to vest at December 31, 2022 1,398,286 $ 8.69  6.11 $ 5,328 
(1)    Intrinsic value is calculated as the estimated fair value of the Company’s stock at December 31, 2022 less the option exercise price of in-the-money options.
A summary of the status of the Company’s non-vested stock options for the year ended December 31, 2022 is presented below:
Non-vested Stock Options Weighted - Average
Grant
Date Fair Value
Nonvested, December 31, 2021 291,220  $ 5.38 
Granted 147,723  $ 8.21 
Vested (169,987) $ 5.16 
Forfeited or expired (4,291) $ 10.33 
Nonvested, December 31, 2022 264,665  $ 7.19 
The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2022 and 2021 was $8.21 per share and $9.48 per share, respectively.
The total intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was $0.3 million and $11.4 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, 2022 and 2021 was $0.9 million and $0.3 million, respectively.
The exercise price of stock options granted is equal to the closing price of the common stock on the date of grant. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model utilizing the following weighted average assumptions for options granted during the years ended December 31, 2022 and 2021:
Years Ended December 31,
2022 2021
Risk-free interest rate 3.07% 0.95%
Expected life (in years) 5.93 5.86
Estimated volatility 90.02% 57.20%
Expected dividends None None
Weighted-average grant date fair value $8.21 $9.48
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 is calculated using the historical volatility of the Company's common stock in 2022 and an average of the historical volatility of the Company's common stock and comparable companies in prior years 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 in prior years due to the limited trading history of the Company's common stock. In 2022, the Company refined this methodology given that trading volumes have increased and the Company believes that its historical data is representative of future expected volatility.
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.
Restricted Stock Activity
The Company issues Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs"). RSAs are grants that entitle the holder to acquire shares of the Company's common stock at zero cost. The shares covered by a RSA cannot be sold, transferred, pledged, assigned or otherwise disposed of until the award vests. A RSU is a promise by the Company to issue a share of its common stock upon vesting of the unit. Both RSAs and RSUs vest in annual installments over a two to three-year period, contingent on the holder's continued employment with the Company. Annual grants of restricted stock to the Board of Directors typically vest in one year.
RSA and RSU activity as of and for the year ended December 31, 2022 is summarized below:
Restricted Stock Award Weighted - Average
Grant
Date Fair Value
Outstanding, December 31, 2021 380,105  $ 10.41 
Granted 527,726  $ 10.97 
Vested (180,505) $ 13.09 
Forfeited or expired (29,791) $ 14.22 
Outstanding, December 31, 2022 697,535  $ 11.11 
The estimated fair value of the restricted stock is based on the closing market value of the Company's common stock on the date of grant. The total fair value of RSAs and RSUs vested during the years ended December 31, 2022 and 2021 was $1.6 million and $0.6 million, respectively.
Employee Stock Purchase Plan
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 initial six-month purchase period commenced in July 2021.
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, 2022 and 2021.
During the year ended December 31, 2022, 56,561 shares were purchased at an average per share price of $8.44. On December 31, 2022, 320,521 shares of common stock were available for issuance under the Purchase Plan.
The fair value of the purchase options under the Purchase Plan are estimated at the beginning of the purchase period using the Black-Scholes valuation model utilizing the following assumptions:
2022 2021
Risk-free interest rate
0.22% - 2.52%
 0.05%
Expected life (in years) 0.5 0.5
Estimated volatility
61.29% - 78.23%
 57.82%
Expected dividends None None
Fair value of purchase right $4.14 $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 in 2022, and on the trading history of the Company's common stock and comparable companies in 2021. 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.
Warrants
Warrants to purchase shares of the Company's common stock were issued in connection with financing transactions in 2015 and 2017. 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 the warrants issued in the 2017 financing either were
exercised or expired in 2022. All of the remaining warrants which are outstanding at December 31, 2022 will terminate in 2023.
Common stock warrant activity for the year ended December 31, 2022 is as follows:
Shares Weighted - Average
Exercise
Price
Outstanding at December 31, 2021 668,907  $ 2.97 
Exercised (462,353) $ 2.20 
Terminated (170,000) $ 2.20 
Outstanding at December 31, 2022 36,554  $ 16.23 
Information regarding outstanding warrants at December 31, 2022 is as follows (contractual life expressed in years):
Exercise
Price		 Number
Outstanding		 Weighted-Average
Remaining
Contractual Life
Intrinsic Value
(in thousands)(1)
$16.23 36,554  0.46 — 
(1)    Intrinsic value is calculated as the estimated fair value of the Company’s stock at December 31, 2022 less the warrant exercise price of in-the-money warrants.