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What changed in ClearPoint Neuro, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ClearPoint Neuro, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+274 added−261 removedSource: 10-K (2025-02-26) vs 10-K (2024-03-12)

Top changes in ClearPoint Neuro, Inc.'s 2024 10-K

274 paragraphs added · 261 removed · 233 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

81 edited+10 added−6 removed146 unchanged
Biggest changeThe head fixation frame immobilizes the patient’s head during the procedure, and it is designed to optimize the placement of an imaging head coil in proximity to the patient’s head. When performed in the MRI suite, the ClearPoint system software is installed on a computer workstation networked with an MRI scanner, for which we use a commercially available laptop computer.
Biggest changeWhen performed in the MRI suite, the ClearPoint system software is installed 3 Table of Contents on a computer workstation networked with an MRI scanner, for which we use a commercially available laptop computer. The in-room monitor allows the physician to view the display of our ClearPoint system workstation from the scanner room while performing the procedure. ClearPoint Disposables .
Non-clinical safety assessment studies used to support the submission for approval of pharmaceutical products must comply with national statutory or regulatory requirements for Good Laboratory Practice ("GLP"). GLP regulations describe a quality system for the scientific, operational and quality process and the conditions under which non-clinical studies are planned, performed, monitored, recorded, reported and archived.
Non-clinical safety assessment studies used to support the submission for approval of pharmaceutical products must comply with national statutory or regulatory requirements for Good Laboratory Practice (“GLP”). GLP regulations describe a quality system for the scientific, operational and quality process and the conditions under which non-clinical studies are planned, performed, monitored, recorded, reported and archived.
The Medical Devices Regulation went into effect as of May 26, 2021, which: • Strengthen the rules on placing devices on the market and reinforce surveillance once they are available; • Establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • Improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • Set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and • Strengthen rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they are placed on the market.
The Medical Devices Regulation went into effect in May 2021, which: • Strengthen the rules on placing devices on the market and reinforce surveillance once they are available; • Establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • Improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • Set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and • Strengthen rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they are placed on the market.
HIPAA Fraud and Other Regulations The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") created a class of federal crimes known as the “federal healthcare offenses,” including healthcare fraud and false statements relating to healthcare matters.
HIPAA Fraud and Other Regulations The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created a class of federal crimes known as the “federal healthcare offenses,” including healthcare fraud and false statements relating to healthcare matters.
Software License Arrangements In connection with the development of our software products, which includes ClearPoint Software, ClearPoint Array Software, and ClearPoint Maestro Brain Model Software, we entered into several agreements with third party software providers under which we receive worldwide, non-exclusive licenses to software code related to certain functional elements of these software products, and for which we are committed to pay royalties for each copy of software product sold, or in certain cases, loaned by us to end-users.
Software License Arrangements In connection with the development of our software products, which includes ClearPoint Software, ClearPoint Array Software, and ClearPoint Maestro Brain Model Software, we entered into several agreements with third party software providers under which we received worldwide, non-exclusive licenses to software code related to certain functional elements of these software products, and for which we are committed to pay royalties for each copy of software product sold, or in certain cases, loaned by us to end-users.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or implantable devices, or devices that are not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA unless they can be reclassified into Class I or II via the de novo classification process. 510(k) Clearance Pathway When a 510(k) clearance is required, we will be required to submit a 510(k) premarket notification demonstrating that our proposed device is substantially equivalent to a legally marketed device, referred to as the “predicate device.” A predicate device may be a previously 510(k) cleared device or a Class III device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for PMA applications, or a product previously placed in Class II or Class I through the de novo classification process.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or implantable devices, or devices that are not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA unless they can be reclassified into Class I or II via the de novo classification process. 9 Table of Contents 510(k) Clearance Pathway When a 510(k) clearance is required, we will be required to submit a 510(k) premarket notification demonstrating that our proposed device is substantially equivalent to a legally marketed device, referred to as the “predicate device.” A predicate device may be a previously 510(k) cleared device or a Class III device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for PMA applications, or a product previously placed in Class II or Class I through the de novo classification process.
Because the Anti-Kickback Statute is broadly written and encompasses many harmless or efficient arrangements, Congress authorized the Office of Inspector General of the United States Department of Health and Human Services ("OIG"), to issue a series of regulations, known as “safe harbors.” For example, there are regulatory safe harbors for payments to bona fide employees, properly reported discounts, and payments for certain investment interests.
Because the Anti-Kickback Statute is broadly written and encompasses many harmless or efficient arrangements, Congress authorized the Office of Inspector General of the United States Department of Health and Human Services (“OIG”), to issue a series of regulations, known as “safe harbors.” For example, there are regulatory safe harbors for payments to bona fide employees, properly reported discounts, and payments for certain investment interests.
Since 2021, a growing part of the revenue from our business is derived from preclinical development services, which include protocol consultation and solutions for preclinical study design and execution.
Since 2021, a growing and significant part of the revenue from our business is derived from preclinical development services, which include protocol consultation and solutions for preclinical study design and execution.
Additional regulatory requirements include: • product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action; • QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design, manufacturing, and distribution process; • labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; • clearance, authorization, or approval of product modifications; • post-approval restrictions or conditions, including post-approval study commitments; 12 Table of Contents • post-market surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectiveness data for the device; • the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations; • regulations pertaining to voluntary recalls; and • notices of corrections or removals.
Additional regulatory requirements include: • product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action; • QMSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design, manufacturing, and distribution process; 11 Table of Contents • labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; • clearance, authorization, or approval of product modifications; • post-approval restrictions or conditions, including post-approval study commitments; • post-market surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectiveness data for the device; • the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations; • regulations pertaining to voluntary recalls; and • notices of corrections or removals.
Since the enactment of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together, the "Affordable Care Act"), there have been a number of legal challenges as well as other legislative and regulatory changes to the healthcare system that could limit the acceptance and availability of our products, which would have an adverse effect on our financial results and business.
Since the enactment of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together, the “Affordable Care Act”), there have been a number of legal challenges as well as other legislative and regulatory changes to the healthcare system that could limit the acceptance and availability of our products, which would have an adverse effect on our financial results and business.
FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device we wish to commercially distribute in the U.S. will require either premarket notification, or 510(k) clearance, authorization through the de novo classification process, or approval of a premarket approval application ("PMA") from the FDA. The FDA classifies medical devices into one of three classes.
FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device we wish to commercially distribute in the U.S. will require either premarket notification, or 510(k) clearance, authorization through the de novo classification process, or approval of a premarket approval application (“PMA”) from the FDA. The FDA classifies medical devices into one of three classes.
In September 2022, our development partner CLS received 510(k) clearance for its MRI guided laser interstitial thermal therapy system for neuro applications, and we 5 Table of Contents commenced commercialization of this laser system, marketed as the ClearPoint Prism Neuro Laser Therapy System, in the U.S. • Brain tumor biopsy – For smaller, harder to reach brain tumors or those near critical structures (the brain stem or large blood vessels), navigating the surgical field so that the biopsy needle reaches the brain tumor and accurately acquires a representative sample of the tumor is paramount.
In September 2022, our development partner CLS received 510(k) clearance for its MRI guided laser interstitial thermal therapy system for neuro applications, and we commenced commercialization of this laser system, marketed as the ClearPoint Prism Neuro Laser Therapy System, in the U.S. • Brain tumor biopsy – For smaller, harder to reach brain tumors or those near critical structures (the brain stem or large blood vessels), navigating the surgical field so that the biopsy needle reaches the brain tumor and accurately acquires a representative sample of the tumor is paramount.
In addition, the FDA will generally conduct a pre-approval inspection of our or our third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. Once a PMA is approved, the FDA may require that certain conditions of approval be met, such as conducting a post market clinical trial.
In addition, the FDA will generally conduct a pre-approval inspection of our or our third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QMSR. Once a PMA is approved, the FDA may require that certain conditions of approval be met, such as conducting a post market clinical trial.
The laser system can be used in conjunction with the ClearPoint navigation platform to refine the desired trajectory for the laser therapy catheter and to confirm accurate laser catheter placement. The laser system consists of a mobile laser unit, Thermoguide software to monitor changes in tissue temperature during therapy, and disposable laser applicator and magnetic resonance ("MR") introducer components.
The laser system can be used in conjunction with the ClearPoint navigation platform to refine the desired trajectory for the laser therapy catheter and to confirm accurate laser catheter placement. The laser system consists of a mobile laser unit, Thermoguide software to monitor changes in tissue temperature during therapy, and disposable laser applicator and magnetic resonance (“MR”) introducer components.
Similarly, in Europe, the clinical study must be approved by a local ethics committee and in some cases, including studies with high-risk devices, by the ministry of health in the applicable country. Although the QSR does not fully apply to investigational devices, the requirement for controls on design and development does apply.
Similarly, in Europe, the clinical study must be approved by a local ethics committee and in some cases, including studies with high-risk devices, by the ministry of health in the applicable country. Although the QMSR does not fully apply to investigational devices, the requirement for controls on design and development does apply.
Moreover, HITECH requires covered entities to report any unauthorized use or disclosure of patient identifiable health information that compromises the security or privacy of the information, known as a breach, to the affected individuals, the United States Department of Health and Human Services ("HHS"), and depending on the size of any such breach, the media for the affected market.
Moreover, HITECH requires covered entities to report any unauthorized use or disclosure of patient identifiable health information that compromises the security or privacy of the information, known as a breach, to the affected individuals, the United States Department of Health and Human Services (“HHS”), and depending on the size of any such breach, the media for the affected market.
Class I devices, considered to have the lowest risk, are those for which safety and effectiveness can be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’s QSR, facility registration and product listing, medical device reporting (which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur), reports of corrections and removals (which require manufacturers to report recalls or removals and field corrections to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA) and appropriate, truthful and non-misleading labeling ("General Controls").
Class I devices, considered to have the lowest risk, are those for which safety and effectiveness can be assured by adherence to the FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA’s QMSR, facility registration and product listing, medical device reporting (which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur), reports of corrections and removals (which require manufacturers to report recalls or removals and field corrections to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA) and appropriate, truthful and non-misleading labeling (“General Controls”).
On November 20, 2020, we entered into an Addendum to the PTC Supply Agreement pursuant to which PTC agreed to purchase products in exchange for a minimum quarterly payment in consideration for our commitment to supply such products and provide services consisting of training, preclinical and clinical case support and regulatory support.
In November 2020, we entered into an Addendum to the PTC Supply Agreement pursuant to which PTC agreed to purchase products in exchange for a minimum quarterly payment in consideration for our commitment to supply such products and provide services consisting of training, preclinical and clinical case support and regulatory support.
Therefore, the compliance of the physicians, hospitals or other providers or entities with which we collaborate affects our company. Regulations Related to Our Preclinical Development Services The Animal Welfare Act ("AWA") governs the care and use of certain species of animals used for research in the U.S.
Therefore, the compliance of the physicians, hospitals or other providers or entities with which we collaborate affects our company. Regulations Related to Our Preclinical Development Services The Animal Welfare Act (“AWA”) governs the care and use of certain species of animals used for research in the U.S.
We have exclusive global rights to commercialize the system for neuro applications. Biologics and Drug Delivery The second part of our business is focused on partnerships in the biologics and drug delivery space, supporting our customers from the earliest stages of their research through their clinical study and commercialization process.
We have exclusive global rights to commercialize the system for neuro applications. Biologics and Drug Delivery The second component of our business is focused on partnerships in the biologics and drug delivery space, supporting our customers from the earliest stages of their research through their clinical study and commercialization process.
As a medical device manufacturer, we are subject to announced and unannounced inspections by the FDA to determine our compliance with FDA’s QSR and other regulations. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with the QSR and other regulations.
As a medical device manufacturer, we are subject to announced and unannounced inspections by the FDA to determine our compliance with FDA’s QMSR and other regulations. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with the QMSR and other regulations.
In 2021, our efforts expanded beyond the MRI suite to encompass development and commercialization of neurosurgical device products for the operating room setting, as well as consulting services for pharmaceutical companies. Our products have been installed or used at over 75 centers globally.
In 2021, our efforts expanded beyond the MRI suite to encompass development and commercialization of neurosurgical device products for the operating room setting, as well as consulting services for pharmaceutical companies. Our products have been installed or used at over 90 centers globally.
SmartFrame OR is intended to provide stereotactic guidance for the placement and operation of instruments or devices during planning and operation of neurological procedures performed in conjunction with the use of a compatible optical stereotaxic navigation system using preoperative MRI and/or Computed Tomography ("CT") imaging.
SmartFrame OR is intended to provide stereotactic guidance for the placement and operation of instruments or devices during planning and operation of neurological procedures performed in conjunction with the use of a compatible optical stereotaxic navigation system using preoperative MRI and/or Computed Tomography (“CT”) imaging.
The assembly process is performed in a controlled environment as required by applicable regulation for medical device assembly. Our operations are subject to extensive regulation by the FDA’s Quality System Regulation ("QSR"), which requires that manufacturers have a quality management system for the design and production of medical devices.
The assembly process is performed in a controlled environment as required by applicable regulation for medical device assembly. Our operations are subject to extensive regulation by the FDA’s Quality Management System Regulation (“QMSR”), which requires that manufacturers have a quality management system for the design and production of medical devices.
From our inception in 1998, we have deployed significant resources to fund our efforts to develop the foundational capabilities for enabling magnetic resonance imaging ("MRI") guided interventions, building an intellectual property portfolio, and identifying and building out commercial applications for the technologies we develop.
From our inception in 1998, we have deployed significant resources to fund our efforts to develop the foundational capabilities for enabling magnetic resonance imaging (“MRI”) guided interventions, building an intellectual property portfolio, and identifying and building out commercial applications for the technologies we develop.
On May 7, 2019, we entered into a supply agreement with PTC (the “PTC Supply Agreement”) pursuant to which we supply certain products and engage in performance of certain services under the terms of mutually agreed upon Statements of Work.
In May 2019, we entered into a supply agreement with PTC (the “PTC Supply Agreement”) pursuant to which we supply certain products and engage in performance of certain services under the terms of mutually agreed upon Statements of Work.
Any modification to a 510(k)-cleared device that would constitute a major change in its intended use, or any change that could significantly affect the safety or effectiveness of the device, requires a new 510(k) clearance and may 10 Table of Contents even, in some circumstances, require a de novo authorization or PMA, if the change raises complex or novel scientific issues or the product has a new intended use.
Any modification to a 510(k)-cleared device that would constitute a major change in its intended use, or any change that could significantly affect the safety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a de novo authorization or PMA, if the change raises complex or novel scientific issues or the product has a new intended use.
We could seek to add new indications for use of our existing products that require the approval of a PMA, although we do not have any current plans to do so. 11 Table of Contents Clinical Trials Clinical trials are generally required to support a PMA application and also may be required for 510(k) clearance and de novo authorization.
We could seek to add new indications for use of our existing products that require the approval of a PMA, although we do not have any current plans to do so. Clinical Trials Clinical trials are generally required to support a PMA application and also may be required for 510(k) clearance and de novo authorization.
Most notably, all of our products sold in the U.S. are subject to regulation as medical devices under the federal Food, Drug, and Cosmetic Act ("FDCA"), as implemented and enforced by the FDA.
Most notably, all of our products sold in the U.S. are subject to regulation as medical devices under the federal Food, Drug, and Cosmetic Act (“FDCA”), as implemented and enforced by the FDA.
Our facilities, and the facilities of the third-party manufacturers and suppliers we use, are subject to periodic inspections by regulatory authorities, including the FDA and other governmental agencies. Customers Medical Devices for Neurosurgical Application A small number of our hospital customers account for a substantial portion of our revenues from sales of ClearPoint products.
Our facilities, and the facilities of the third-party manufacturers and suppliers we use, are subject to periodic inspections by regulatory authorities, including the FDA and other governmental agencies. 6 Table of Contents Customers Medical Devices for Neurosurgical Application A small number of our hospital customers account for a substantial portion of our revenues from sales of ClearPoint products.
Such payment reform efforts and increased coordination among hospitals and physicians may lead to voluntary reductions in the array of choices currently available to physicians with respect to diagnostic services, medical supplies and equipment, which could result in hospitals reducing the overall number 15 Table of Contents of vendors from which they purchase supplies, equipment and products.
Such payment reform efforts and increased coordination among hospitals and physicians may lead to voluntary reductions in the array of choices currently available to physicians with respect to diagnostic services, medical supplies and equipment, which could result in hospitals reducing the overall number of vendors from which they purchase supplies, equipment and products.
Under PPS, the prospective payment for a patient’s stay in an acute care hospital is determined by the patient’s condition and other patient data and procedures performed during the inpatient stay using a classification system known as Medicare Severity Diagnosis Related Groups, or MS-DRGs.
This method of payment is known as the prospective payment system, or PPS. Under PPS, the prospective payment for a patient’s stay in an acute care hospital is determined by the patient’s condition and other patient data and procedures performed during the inpatient stay using a classification system known as Medicare Severity Diagnosis Related Groups, or MS-DRGs.
The Affordable Care Act increased the investigatory authority of the OIG, clarified that Anti-Kickback Statute claims can be brought under the federal civil False Claims Act, and provided for enhanced civil monetary penalties and expanded permissible exclusion authority. 16 Table of Contents Many states have laws that implicate anti-kickback restrictions similar to the federal Anti-Kickback Statute.
The Affordable Care Act increased the investigatory authority of the OIG, clarified that Anti-Kickback Statute claims can be brought under the federal civil False Claims Act, and provided for enhanced civil monetary penalties and expanded permissible exclusion authority. Many states have laws that implicate anti-kickback restrictions similar to the federal Anti-Kickback Statute.
In 2024, we commenced limited market release of the SmartFrame OR Stereotactic System, which allows for complete procedures to be performed in the operating room. In 2022, we commenced commercialization of the ClearPoint Prism Neuro Laser Therapy System, a laser ablation system. The ClearPoint Prism Neuro Laser Therapy System was developed and is manufactured for us by CLS.
In 2024, we introduced the SmartFrame OR Stereotactic System to the market, which allows for complete procedures to be performed in the operating room. In 2022, we commenced commercialization of the ClearPoint Prism Neuro Laser Therapy System, a laser ablation system. The ClearPoint Prism Neuro Laser Therapy System was developed and is manufactured for us by CLS.
Business associates are similarly required to notify covered entities of a breach. HITECH has increased civil penalty amounts for violations of HIPAA by either covered entities or business associates up to an annual maximum of $1.5 million for each uncorrected violation based on willful neglect.
Business associates are similarly required to notify covered entities of a breach. 16 Table of Contents HITECH has increased civil penalty amounts for violations of HIPAA by either covered entities or business associates up to an annual maximum of $1.5 million for each uncorrected violation based on willful neglect.
The Health Information Technology for Economic and Clinical Health Act ("HITECH"), was enacted to strengthen and expand the HIPAA Privacy and Security Rules and the restrictions on use and disclosure of patient identifiable health information.
The Health Information Technology for Economic and Clinical Health Act (“HITECH”), was enacted to strengthen and expand the HIPAA Privacy and Security Rules and the restrictions on use and disclosure of patient identifiable health information.
Class II devices are subject to the FDA’s General Controls, and any other special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device ("Special Controls").
Class II devices are subject to the FDA’s General Controls, and any other special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device (“Special Controls”).
Our business model for our ClearPoint services includes providing preclinical studies, clinical trial support, regulatory consultation, surgical workflow guidance, and over-arching translation services to aid in the progression of our pharmaceutical customers’ drug delivery process.
Our business model for our ClearPoint services includes providing preclinical studies, clinical trial support, regulatory consultation, device development services, surgical workflow guidance, and over-arching translation services to aid in the progression of our pharmaceutical customers’ drug development process.
Accordingly, acute care hospitals generally do not receive direct Medicare reimbursement under PPS for the specific costs incurred in purchasing medical devices. Rather, reimbursement for these costs is deemed to be included within the MS-DRG-based payments made to hospitals for the services furnished to Medicare-eligible inpatients in which the devices are utilized.
Accordingly, acute care hospitals generally do not receive direct Medicare reimbursement under PPS for the specific costs incurred in purchasing medical devices. Rather, reimbursement for these costs is deemed to be included 13 Table of Contents within the MS-DRG-based payments made to hospitals for the services furnished to Medicare-eligible inpatients in which the devices are utilized.
ITEM 1. BUSINESS Overview We are a commercial-stage medical device company, incorporated in 1998 as a Delaware corporation, that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain.
ITEM 1. BU SINESS Overview We are a commercial-stage medical device company, incorporated in 1998 as a Delaware corporation, that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain.
Other companies, such as Brainlab and Renishaw plc, also offer systems such as navigational platforms and cannulas useful for drug delivery under MRI. These offerings are competitive with ClearPoint’s products. These companies have substantially 9 Table of Contents greater marketing, manufacturing, technical, and financial resources than we have.
Other companies, such as Brainlab and Renishaw plc, also offer systems such as navigational platforms and cannulas useful for drug delivery under MRI. These offerings are competitive with ClearPoint’s products. These companies have substantially greater marketing, manufacturing, technical, and financial resources than we have.
Since 2020, we have evolved to become a company comprised of two parts: (i) a business providing medical devices for neurosurgical applications, and (ii) a business focused on partnerships in the biologics and drug delivery space. Medical Devices for Neurosurgical Application The first foundational part of our business is focused on providing medical devices for neurosurgical applications.
Since 2020, we have evolved to become a company comprised of two components: (i) a business providing medical devices for neurosurgical applications, and (ii) a business focused on partnerships in the biologics and drug delivery space. Medical Devices for Neurosurgical Application The first foundational component of our business is focused on providing medical devices for neurosurgical applications.
To the extent we conduct such operations outside the U.S., we would be subject to international regulatory requirements. Our facilities are FDA-registered, and we believe they are compliant with the FDA’s QSR. We are also certified to ISO 13485 and the Medical Device Single Audit Program ("MDSAP").
To the extent we conduct such operations outside the U.S., we would be subject to international regulatory requirements. Our facilities are FDA-registered, and we believe they are compliant with the FDA’s QMSR. We are also certified to ISO 13485 and the Medical Device Single Audit Program (“MDSAP”).
For these regulated species, the AWA and the associated regulations promulgated thereunder require those working with regulated species to provide veterinary care and to follow specific husbandry practices such as cage size, shipping conditions, sanitation and environmental enrichment to ensure the welfare of these animals. Licensing and registration 18 Table of Contents requirement standards set by the U.S.
For these regulated species, the AWA and the associated regulations promulgated thereunder require those working with regulated species to provide veterinary care and to follow specific husbandry practices such as cage size, shipping conditions, sanitation and environmental enrichment to ensure the welfare of these animals. Licensing and registration requirement standards set by the U.S. Department of Agriculture, the U.S.
In January 2023, the Addendum to Supply Agreement was further amended and restated to allow for the Company to provide regulatory support to PTC in additional agreed geographies. 7 Table of Contents We also entered into a Second Source Manufacturing Agreement in connection with the PTC Supply Agreement (the “Second Source Manufacturing Agreement”).
In January 2023, the Addendum to Supply Agreement was further amended and restated to allow for the Company to provide regulatory support to PTC in additional agreed geographies. We also entered into a Second Source Manufacturing Agreement in connection with the PTC Supply Agreement (the “Second Source Manufacturing Agreement”).
We believe that we are in compliance with QSR and other regulations. Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the United States Federal Trade Commission ("FTC"), and by state regulatory and enforcement authorities.
We believe that we are in compliance with QMSR and other regulations. Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the United States Federal Trade Commission (“FTC”), and by state regulatory and enforcement authorities.
We also require our employees and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement which relate to our business. Patents We have a significant patent portfolio in the field of neurosurgical and MRI-guided interventions. As of March 5, 2024, we own or license over 100 issued patents.
We also require our employees and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement which relate to our business. Patents We have a significant patent portfolio in the field of neurosurgical and MRI-guided interventions. As of February 18, 2025, we own or license over 100 issued patents.
Market Discussion Medical Devices for Neurosurgical Application We believe there are more than 140,000 potential neurosurgical procedures per year in the U.S. in which our ClearPoint products could be used as a navigational platform for functional stereotactic neurosurgery in indications currently approved by the FDA or as a therapy device for performance of laser interstitial thermal therapy ("LITT"): • Electrode Placement – The current standard of care for the placement of the DBS or responsive neurostimulation ("RNS") electrodes in the operating room requires the patient to be awake during surgery in order to verify proper placement.
SmartFrame OR is a disposable device intended for single patient use only. 4 Table of Contents Market Discussion Medical Devices for Neurosurgical Application We believe there are more than 140,000 potential neurosurgical procedures per year in the U.S. in which our ClearPoint products could be used as a navigational platform for functional stereotactic neurosurgery in indications currently approved by the FDA or as a therapy device for performance of laser interstitial thermal therapy (“LITT”): • Electrode Placement – The current standard of care for the placement of the DBS or responsive neurostimulation (“RNS”) electrodes in the operating room requires the patient to be awake during surgery in order to verify proper placement.
GLP compliance is required by such regulatory agencies as the FDA, European Medicines Agency and similar monitoring authorities in other countries where we operate. Human Capital Resources As of March 5, 2024, we had 107 full time employees. None of our employees are covered by a collective bargaining agreement.
GLP compliance is required by such regulatory agencies as the FDA, European Medicines Agency and similar monitoring authorities in other countries where we operate. Human Capital Resources As of February 18, 2025, we had 115 full-time employees. None of our employees are covered by a collective bargaining agreement.
Anti-Kickback Laws In the U.S., there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business.
Our business is subject to compliance with these laws. Anti-Kickback Laws In the U.S., there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business.
One of these companies, PTC Therapeutics, Inc. and its affiliates ("PTC"), a related party who is a significant stockholder with a Board representative, accounted for approximately 21% of our biologics and drug delivery revenues in 2023.
One of these companies, PTC Therapeutics, Inc. and its affiliates (“PTC”), a related party who is a significant stockholder and former noteholder with a Board representative, accounted for approximately 17% of our biologics and drug delivery revenues in 2024.
On April 5, 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the previous EU medical devices directive.
In 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the previous EU medical devices directive.
Our SmartFrame device is an adjustable trajectory guide that attaches to the patient’s skull and holds the targeting cannula. The hand controller attaches to our SmartFrame device, and it is used by the physician to adjust the roll, pitch, and X and Y orientation of the targeting cannula while the patient is in the MRI scanner.
The hand controller attaches to our SmartFrame device, and it is used by the physician to adjust the roll, pitch, and X and Y orientation of the targeting cannula while the patient is in the MRI scanner.
Certain License and Royalty Arrangements Philips During 2020, we entered into a worldwide license and research agreement with Philips, under which Philips has licensed to us the use of the technology underlying its Philips Brain Model in our ClearPoint Maestro Brain Model (“Maestro”), the first generation of which received 510(k) clearance in 2022.
Trademarks We have registered trademarks in the United States, the European Union, the United Kingdom, and China. 7 Table of Contents Certain License and Royalty Arrangements Philips During 2020, we entered into a worldwide license and research agreement with Philips, under which Philips has licensed to us the use of the technology underlying its Philips Brain Model in our ClearPoint Maestro Brain Model (“Maestro”), the first generation of which received 510(k) clearance in 2022.
Our five largest hospital customers accounted for approximately 27% of our functional neurosurgery navigation disposable product revenues in 2023. Biologics and Drug Delivery At March 5, 2024, we had commercial relationships with over 50 pharma/biotech, academic, and contract research organization partners who have either evaluated or used our SmartFlow cannula or our consulting services.
Our five largest hospital customers accounted for approximately 31% of our neurosurgery navigation disposable product revenues in 2024. Biologics and Drug Delivery As of February 18, 2025, we had commercial relationships with over 60 pharma/biotech, academic, and contract research organization partners who have either evaluated or used our SmartFlow cannula or our consulting services.
Certain fees under the agreement will be paid to us as success-based milestones. 8 Table of Contents CLS In October 2018, and as amended in August 2020, we entered into a license and collaboration agreement and a distribution agreement with CLS that provides us the exclusive global rights to commercialize and sell CLS’s portfolio of products and to collaborate with CLS on the development and commercialization of new products in the neurosurgical field.
CLS In October 2018, and as amended in August 2020, we entered into a license and collaboration agreement and a distribution agreement with CLS that provides us the exclusive global rights to commercialize and sell CLS’s portfolio of products and to collaborate with CLS on the development and commercialization of new products in the neurosurgical field.
Department of Agriculture, the U.S. Fish and Wildlife Service ("USFWS"), and similar applicable international agencies also apply to the care, handling and oversight of regulated species.
Fish and Wildlife Service (“USFWS”), and similar applicable international agencies also apply to the care, handling and oversight of regulated species.
Because of the predominance of government sponsored healthcare systems around the world, we expect that many of our customer relationships outside of the U.S. will be with governmental entities and therefore subject to such anti-bribery laws. 17 Table of Contents HIPAA and Other Privacy & Security Laws As a part of HIPAA, Congress enacted the Administrative Simplification provisions, which are designed to require the establishment of uniform standards governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of individually identifiable health information maintained or transmitted by healthcare providers, health plans and healthcare clearinghouses, which are referred to as “covered entities.” Several regulations have been promulgated under HIPAA, including: the Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, which restricts the use and disclosure of certain individually identifiable health information; the Standards for Electronic Transactions, which establishes standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; and the Security Standards for the Protection of Electronic Protected Health Information, or the Security Rule, which requires covered entities to implement and maintain certain security measures to safeguard certain electronic health information.
HIPAA and Other Privacy & Security Laws As a part of HIPAA, Congress enacted the Administrative Simplification provisions, which are designed to require the establishment of uniform standards governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of individually identifiable health information maintained or transmitted by healthcare providers, health plans and healthcare clearinghouses, which are referred to as “covered entities.” Several regulations have been promulgated under HIPAA, including: the Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, which restricts the use and disclosure of certain individually identifiable health information; the Standards for Electronic Transactions, which establishes standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; and the Security Standards for the Protection of Electronic Protected Health Information, or the Security Rule, which requires covered entities to implement and maintain certain security measures to safeguard certain electronic health information.
Competition Medical Devices for Neurosurgical Application The medical device industry is highly competitive, subject to rapid technological change and significantly affected by new product introductions and market activities of other participants. Therefore, our currently marketed products are, and future products we commercialize will be, subject to competition.
Competition Medical Devices for Neurosurgical Application The medical device industry is highly competitive, subject to rapid technological change and significantly affected by new product introductions and market activities of other participants.
Sales and Marketing Medical Devices for Neurosurgical Application Commercializing our ClearPoint products and services for neurosurgery applications, primarily involves marketing and selling directly to: • physicians who care for patients suffering from neurological disorders, including stereotactic or functional neurosurgeons, who perform the neurosurgical procedures, and neurologists, who interact with patients prior to and following surgery and who refer patients for surgery; and • hospitals involved in the treatment of neurological disorders, including the opinion leaders at these hospitals.
In 2024, the SmartFlow cannula was granted De Novo marketing authorization for intraputaminal administration of eladocagene exuparvovec-tneq for the treatment of adult and pediatric patients with AADC deficiency. 5 Table of Contents Sales and Marketing Medical Devices for Neurosurgical Application Commercializing our ClearPoint products and services for neurosurgery applications, primarily involves marketing and selling directly to: • physicians who care for patients suffering from neurological disorders, including stereotactic or functional neurosurgeons, who perform the neurosurgical procedures, and neurologists, who interact with patients prior to and following surgery and who refer patients for surgery; and • hospitals involved in the treatment of neurological disorders, including the opinion leaders at these hospitals.
If our ClearPoint system and SmartFlow cannula are approved for these drug delivery treatments and become the standard approach to local drug delivery in the brain, we believe the impact on our financial performance could be significant. However, these treatments are subject to FDA-mandated clinical trial requirements, which are expensive and time consuming for our partners to conduct.
If our ClearPoint system and SmartFlow cannula are approved for these drug delivery treatments and become the standard approach to local drug delivery in the brain, we believe the impact on our financial performance could be significant.
Under the terms of the license agreement, UCB will utilize our technology and services in connection with the development and commercialization of UCB's gene therapy products.
Under the terms of the license agreement, UCB will utilize our technology and services in connection with the development and commercialization of UCB's gene therapy products. Certain fees under the agreement will be paid to us as success-based milestones.
This is the same general indication for use that applies to other devices that have traditionally been used in the performance of stereotactic neurosurgical procedures. In the EU, UK, Israel, and Brazil our approval carries a similar indication for use. Our SmartFlow cannula has received 510(k) clearance for injection of Cytarabine or for removal of cerebrospinal fluid from the ventricles.
This is the same general indication for use that applies to other devices that have traditionally been used in the performance of stereotactic neurosurgical procedures. In the EU, UK, Israel, Taiwan, Turkey, and Brazil, our approval carries a similar indication for use.
Currently, we are aware of two companies, Monteris Medical, Inc. and Medtronic, which offer devices for laser ablation under direct MRI guidance.
Therefore, our currently marketed products are, and future products we commercialize will be, subject to competition. 8 Table of Contents Currently, we are aware of two companies, Monteris Medical, Inc. and Medtronic, which offer devices for laser ablation under direct MRI guidance.
In 2021, we expanded our expertise to include in vivo biology services in large and small research models to assist our customers with establishing drug safety prior to and in support of human clinical trials. 4 Table of Contents Regulatory Status Our ClearPoint system 510(k) clearance from the FDA permits us to market and promote our ClearPoint system in the U.S. for use in general neurosurgical procedures, which includes procedures such as biopsies, laser catheter insertions, and deep brain stimulation lead and electrode insertions.
Regulatory Status Our ClearPoint system 510(k) clearance from the FDA permits us to market and promote our ClearPoint system in the U.S. for use in general neurosurgical procedures, which includes procedures such as biopsies, laser catheter insertions, and deep brain stimulation lead and electrode insertions.
In early 2023, we further expanded our collaboration with Philips further to include additional technology regarding subnuclei segmentation to the Maestro MRI and CT functionality. UCB In March 2023, we entered into a multi-year license agreement with UCB to partner on drug delivery platforms for UCB's gene therapy portfolio.
In 2024, we amended our collaboration to include further new software features to be developed by Philips. UCB In March 2023, we entered into a multi-year license agreement with UCB to partner on drug delivery platforms for UCB's gene therapy portfolio.
Currently, we have more than 50 pharma/biotech, academic, and contract research organization partners who are evaluating or using our products and services in trials to inject gene and cell therapies directly into the brain.
Currently, we have more than 60 pharma/biotech, academic, and contract research organization partners who are evaluating or using our products and services in trials to inject gene and cell therapies directly into the brain. These partnerships involve drug development programs that are at various stages of development ranging from preclinical research to late-stage regulatory trials for multiple distinct disease states.
If the FDA’s evaluation of the PMA application is favorable, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the manufacturer.
Therefore, the total review time could be up to 360 days or more, if the submission does not require advisory committee input, or 500 days or more if the submission does require advisory committee input. 10 Table of Contents If the FDA’s evaluation of the PMA application is favorable, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the manufacturer.
The Affordable Care Act may increase the number of cases asserting civil False Claims Act violations since it removes a significant defense to such claims and clarifies that a violation of the Anti-Kickback Statute and the retention of a federal healthcare program overpayment are both actionable under the civil False Claims Act.
Our activities relating to the manner in which we sell our products and document our prices such as the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products, may be subject to scrutiny under these laws. 15 Table of Contents The Affordable Care Act may increase the number of cases asserting civil False Claims Act violations since it removes a significant defense to such claims and clarifies that a violation of the Anti-Kickback Statute and the retention of a federal healthcare program overpayment are both actionable under the civil False Claims Act.
These procedures include biopsies, catheter placement and electrode introduction, including the placement of deep brain stimulation ("DBS") leads. SmartFrame OR is a disposable device intended for single patient use only.
These procedures include biopsies, catheter placement and electrode introduction, including the placement of deep brain stimulation (“DBS”) leads.
Nonetheless, several of our biologics and drug delivery customers are pursuing preclinical and clinical trials for which we generate revenue through sale of products including our SmartFlow cannula, as well as a growing list of preclinical development services that we began offering in 2021. The first gene therapy submission was approved by regulatory authorities in Europe in 2022.
Nonetheless, several of our biologics and drug delivery customers are pursuing preclinical and clinical trials for which we generate revenue through the sale of products, including our SmartFlow cannula, preclinical, development and consulting services, and other partnership arrangements.
Fraud and Abuse Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce a number of laws whose purpose is to eliminate fraud and abuse in federal healthcare programs. Our business is subject to compliance with these laws.
Additionally, some private payors do not follow the Medicare guidelines, and those payors may reimburse only a portion of the costs associated with the use of our products, or none at all. 14 Table of Contents Fraud and Abuse Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce a number of laws whose purpose is to eliminate fraud and abuse in federal healthcare programs.
An assessment by a Notified Body in one country with the EU is required in order for a manufacturer to commercially distribute the device 13 Table of Contents throughout the EU. In addition, compliance with ISO 13485 issued by the International Organization for Standardization, among other standards, establishes the presumption of conformity with the essential requirements for CE marking.
In addition, compliance with ISO 13485 issued by the International Organization for Standardization, among other standards, establishes the presumption of conformity with the essential requirements or general safety 12 Table of Contents and performance requirements for CE marking.
The Medicaid program is a federal-state partnership under which states receive matching federal payments to fund healthcare services for the poor.
The Medicaid program is a federal-state partnership under which states receive matching federal payments to fund healthcare services for the poor. Because some private commercial health insurers and some state Medicaid programs may follow the coverage and payment policies for Medicare, Medicare’s coverage and payment policies are significant to our business.
Under Medicare Part A, Medicare reimburses acute care hospitals a prospectively determined payment amount for beneficiaries receiving covered inpatient services in an acute care hospital. This method of payment is known as the prospective payment system, or PPS.
Medicare coverage for the procedures in which our ClearPoint products are used currently exists in the hospital inpatient setting, which falls under Part A of the Medicare program. Under Medicare Part A, Medicare reimburses acute care hospitals a prospectively determined payment amount for beneficiaries receiving covered inpatient services in an acute care hospital.
If CMS or other agencies decrease or limit reimbursement payments for hospitals and physicians, this may affect coverage and reimbursement determinations by many private payors. Additionally, some private payors do not follow the Medicare guidelines, and those payors may reimburse only a portion of the costs associated with the use of our products, or none at all.
If CMS or other agencies decrease or limit reimbursement payments for hospitals and physicians, this may affect coverage and reimbursement determinations by many private payors.
In September 2023, we completed the transition from our Irvine, California facility to fully operating in our Carlsbad, California facility. We use third parties to manufacture certain components to utilize their individual expertise, minimize our capital investment and help control costs.
Manufacturing and Assembly Our ClearPoint system and SmartFlow cannula include off-the-shelf components and custom-made components that are produced to our proprietary specifications by various third parties that we assemble in our Carlsbad, California facility. We use third parties to manufacture certain components to utilize their individual expertise, minimize our capital investment and help control costs.
The in-room monitor allows the physician to view the display of our ClearPoint system workstation from the scanner room while performing the procedure. ClearPoint Disposables . The disposable components of our ClearPoint system consist primarily of our SmartFrame trajectory device, a hand controller and related accessories, and our SmartFlow Cannula.
The disposable components of our ClearPoint system consist primarily of our SmartFrame trajectory device, a hand controller and related accessories, and our SmartFlow cannula. Our SmartFrame device is an adjustable trajectory guide that attaches to the patient’s skull and holds the targeting cannula.
Our owned and issued patents expire at various dates beginning in 2023. Some of our patents and patent applications are subject to licensing and cross-licensing arrangements in place with third parties. Trademarks We have over 25 registered trademarks in the United States, the European Union, the United Kingdom, and China.
Some of our patents and patent applications are subject to licensing and cross-licensing arrangements in place with third parties.
In consideration for the license, we paid a fee upon execution of the agreement and are committed to pay royalties based on (a) sales of systems, and (b) procedures in which the licensed technology is used. In early 2022, we expanded our collaboration with Philips to include additional technology to allow use of the Philips Brain Model with CT imaging.
In consideration for the license, we paid a fee upon execution of the agreement and are committed to pay (a) royalties based on sales of systems, and (b) an annual fee based on a calculation accounting for the number of systems in use for a calendar year and a correction factor for increases or decreases in net revenue from the sales of systems.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Affordable Care Act may continue to be periodically subject to legal challenges or a continuing political effort to limit its scope.
Biggest changeThe Affordable Care Act may continue to be periodically subject to legal challenges or a continuing political effort to limit its scope, and the Affordable Care Act may change in the future in ways that could have a material adverse effect on our business or results of operations. 31 Table of Contents The Medicare Access and CHIP Reauthorization Act, or the Medicare Access Act, removed the sustainable growth rate or SGR, methodology applicable to fees for physician services.
A liability claim, regardless of its merit or eventual outcome, could result in: • decreased demand for our products; • injury to our reputation; • diversion of management’s attention; • significant costs of related litigation; • payment of substantial monetary awards by us; • product recalls or market withdrawals; • a change in the design, manufacturing process or the indications for which our marketed products may be used; • loss of revenue; and • an inability to commercialize product candidates.
A liability claim, regardless of its merit or eventual outcome, could result in: • decreased demand for our products; • injury to our reputation; • diversion of management’s attention; • significant costs of related litigation; • payment of substantial monetary settlements or awards by us; • product recalls or market withdrawals; • a change in the design, manufacturing process or the indications for which our marketed products may be used; • loss of revenue; and • an inability to commercialize product candidates.
It has also been CE marked for use in the EU for the delivery of approved fluids into the brain or aspiration of CSF. The SmartFlow Cannula is being utilized in approved combination product clinical and preclinical studies by pharmaceutical companies and academic research customers for various research and clinical trials in connection with delivery of therapeutic agents.
The SmartFlow cannula has also been CE marked for use in the EU for the delivery of approved fluids into the brain or aspiration of CSF. The SmartFlow cannula is being utilized in approved combination product clinical and preclinical studies by pharmaceutical companies and academic research customers for various research and clinical trials in connection with delivery of therapeutic agents.
The Inflation Reduction Act ("IRA"), aimed at curbing inflationary pressures, may have direct and indirect consequences for pharmaceutical and biotech companies in the context of their research and development expenditures. In particular, the IRA measures to control inflation have implications for future drug pricing. Our pharmaceutical and biotech customers rely on predictable pricing to fund research and development efforts.
The Inflation Reduction Act (“IRA”), aimed at curbing inflationary pressures, may have direct and indirect consequences for pharmaceutical and biotech companies in the context of their research and development expenditures. In particular, the IRA measures to control inflation have implications for future drug pricing. Our pharmaceutical and biotech customers rely on predictable pricing to fund research and development efforts.
If we fail to obtain the necessary clearances, certifications or approvals for our new products, our ability to grow our business globally could be harmed. Our business growth is dependent upon our ability to market and sell new products, including new therapy devices and devices to allow us to expand our business into the operating room.
If we fail to obtain the necessary clearances, certifications or approvals for our new products, our ability to grow our business globally could be harmed. Our business growth is dependent upon our ability to market and sell new products, including new therapy delivery devices, therapy devices and devices to allow us to expand our business into the operating room.
If we fail to remain in compliance with applicable European laws and directives and national member states laws, we would be unable to continue to affix the CE mark to our products, which would prevent us from selling them within the EU.
If we fail to remain in compliance with applicable European regulations, directives, and national member states laws, we would be unable to continue to affix the CE mark to our products, which would prevent us from selling them within the EU.
We are subject to ongoing regulatory requirements, including: required submissions of safety and other post-market information; manufacturing facility registration and device listing requirements; compliance with medical device current Good Manufacturing Practice regulations, as codified in the QSR; requirements regarding field corrections and removals of our marketed products; reporting of adverse events and certain product malfunctions to regulatory bodies; and numerous recordkeeping requirements.
We are subject to ongoing regulatory requirements, including: required submissions of safety and other post-market information; manufacturing facility registration and device listing requirements; compliance with medical device current Good Manufacturing Practice regulations, as codified in the QMSR; requirements regarding field corrections and removals of our marketed products; reporting of adverse events and certain product malfunctions to regulatory bodies; and numerous recordkeeping requirements.
Product liability claims are expensive to defend and could divert our management’s attention and result in substantial damage awards against us. If we or our third-party suppliers fail to comply with the FDA’s QSR or any applicable state equivalent, our manufacturing operations could be interrupted, and our potential product sales and operating results could suffer.
Product liability claims are expensive to defend and could divert our management’s attention and result in substantial damage awards against us. If we or our third-party suppliers fail to comply with the FDA’s QMSR or any applicable state equivalent, our manufacturing operations could be interrupted, and our potential product sales and operating results could suffer.
Government regulations and foreign requirements specific to medical devices are wide ranging and govern, among other things: • design, development and manufacturing; • preclinical and clinical testing; 33 Table of Contents • testing, labeling and storage; • product safety; • marketing, sales and distribution; • premarket clearance, authorization, or approval; • recordkeeping procedures; • advertising and promotions; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; and • product export.
Government regulations and foreign requirements specific to medical devices are wide ranging and govern, among other things: • design, development and manufacturing; • preclinical and clinical testing; • testing, labeling and storage; • product safety; • marketing, sales and distribution; • premarket clearance, authorization, or approval; • recordkeeping procedures; • advertising and promotions; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; and • product export.
If we cannot maintain our current relationships, or enter into new relationships, with drug delivery customers, our revenue prospects could be reduced. We collaborate with pharma/biotech, academic, and contract research organization customers (collectively “drug delivery customers”) to provide products and services in connection with preclinical and clinical studies.
If we cannot maintain our current relationships or programs, or enter into new relationships or programs, with drug delivery customers, our revenue prospects could be meaningfully reduced. We collaborate with pharma/biotech, academic, and contract research organization customers (collectively “drug delivery customers”) to provide products and services in connection with preclinical and clinical studies.
ITEM 1A. RISK FACTORS Any investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and all information contained in this Annual Report before you decide whether to purchase our common stock.
ITEM 1A. RIS K FACTORS Any investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and all information contained in this Annual Report before you decide whether to purchase our common stock.
The revenue attributable to our drug delivery customers may fluctuate in the future, which could have a material adverse effect on our financial condition and results of operations. In addition, the termination of these relationships could result in a temporary or permanent loss of revenue.
The revenue attributable to our drug delivery customers may fluctuate in the future, which could have a material adverse effect on our financial condition and results of operations. In addition, the termination of these relationships or certain programs of our drug delivery customers could result in a temporary or permanent loss of revenue.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any broad range of business combinations with any stockholder who owns, or at any time in the last three years owned, 15% or more of our outstanding voting stock, for a period of three years following 40 Table of Contents the date on which the stockholder became an interested stockholder.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any broad range of business combinations with any stockholder who owns, or at any time in the last three years owned, 15% or more of our outstanding voting stock, for a period of three years following the date on which the stockholder became an interested stockholder.
We and some of our third-party suppliers are required to comply with the FDA’s QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products and product candidates.
We and some of our third-party suppliers are required to comply with the FDA’s QMSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products and product candidates.
If we fail to comply with the FDA’s QSR or any applicable state equivalent, we would be required to incur the costs and take the actions necessary to bring our operations into compliance, which may have a negative impact on our future sales and our ability to generate a profit. 36 Table of Contents We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to fully comply with such laws.
If we fail to comply with the FDA’s QMSR or any applicable state equivalent, we would be required to incur the costs and take the actions necessary to bring our operations into compliance, which may have a negative impact on our future sales and our ability to generate a profit. 33 Table of Contents We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to fully comply with such laws.
We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement.
We may not identify, secure, or complete any such transactions 20 Table of Contents or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement.
Any of these events could materially and adversely affect our business, financial condition and results of operations. Risks Related to Legal and Regulatory Compliance We operate in a highly-regulated industry and any failure to comply with the extensive government regulations may subject us to fines, injunctions and other penalties that could harm our business.
Any of these events could materially and adversely affect our business, financial condition and results of operations. 30 Table of Contents Risks Related to Legal and Regulatory Compliance We operate in a highly-regulated industry and any failure to comply with the extensive government regulations may subject us to fines, injunctions and other penalties that could harm our business.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the essential requirements of the EU Medical Devices Directive, a conformity assessment procedure requires the intervention of an organization accredited or licensed by a member state of the EU to conduct conformity assessments, or a Notified Body.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the requirements of the EU Medical Devices Directive or the EU Medical Device Regulation, a conformity assessment procedure requires the intervention of an organization accredited or licensed by a member state of the EU to conduct conformity assessments, or a Notified Body.
We may also be subject to professional liability for errors in the clinical support that we provide to clinicians in connection with our products or for a misunderstanding of, or inappropriate reliance upon, the information we provide. The medical device industry has historically been subject to extensive litigation over product liability and professional liability claims.
We may also be subject to professional liability for errors in the clinical support that we provide to clinicians in connection with our products or for a misunderstanding of, or inappropriate reliance upon, the information we provide. 38 Table of Contents The medical device industry has historically been subject to extensive litigation over product liability and professional liability claims.
Moreover, the results of early clinical trials are not necessarily 24 Table of Contents predictive of future results, and any product candidate we advance into clinical trials may not have favorable results in later clinical trials. Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify and recruit.
Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product candidate we advance into clinical trials may not have favorable results in later clinical trials. Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify and recruit.
We may acquire other businesses, form joint ventures, or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense. As part of our business strategy, we may pursue acquisitions or investments in other companies or technologies.
We may acquire other businesses, form joint ventures, or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense. 25 Table of Contents As part of our business strategy, we may pursue acquisitions or investments in other companies or technologies.
Our business strategy includes plans for expansion in countries where we currently operate as well as the introduction of our products to other international markets. Doing 26 Table of Contents business outside of the U.S. exposes us to risks distinct from those we face in our domestic operations.
Our business strategy includes plans for expansion in countries where we currently operate as well as the introduction of our products to other international markets. Doing business outside of the U.S. exposes us to risks distinct from those we face in our domestic operations.
Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following: • Failure to successfully develop our products; • Changes in laws or regulations applicable to future products; • Inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices; • Adverse regulatory decisions; • Introduction of new products, services or technologies by our competitors; • Failure to meet or exceed financial projections we may provide to the public; • Inability to obtain additional funding; • Failure to meet or exceed the financial projections of the investment community; • Disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • Additions or departures of key personnel; • Significant lawsuits, including patent or stockholder litigation; • Changes in the market valuations of similar companies; • Purchases and sales of our common stock resulting from, related to or arising out of (i) recent stock run-ups or recent divergences in valuations relative to those seen during traditional markets, (ii) high short interest or reported short squeezes, or (iii) reports of strong and atypical retail investor interest (whether on social media or otherwise); • Sales of our common stock by us or our stockholders in the future; and 39 Table of Contents • Trading volume of our common stock.
Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following: • Failure to successfully develop our products; • Changes in laws or regulations applicable to future products; • Inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices; • Adverse regulatory decisions; • Introduction of new products, services or technologies by our competitors; • Failure to meet or exceed financial projections we may provide to the public; • Inability to obtain additional funding; • Failure to meet or exceed the financial projections of the investment community; • Disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • Additions or departures of key personnel; • Significant lawsuits, including patent or stockholder litigation; • Changes in the market valuations of similar companies; • Purchases and sales of our common stock resulting from, related to or arising out of (i) recent stock run-ups or recent divergences in valuations relative to those seen during traditional markets, (ii) high short interest or reported short squeezes, or (iii) reports of strong and atypical retail investor interest (whether on social media or otherwise); • Sales of our common stock by us or our stockholders in the future; and • Trading volume of our common stock. 36 Table of Contents Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial 42 Table of Contents condition. The Dodd-Frank Act requires the SEC to adopt certain rules and regulations relating to our public disclosures, corporate governance and executive compensation, among other things, and such rules and regulations require significant attention from management.
The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Dodd-Frank Act requires the SEC to adopt certain rules and regulations relating to our public disclosures, corporate governance and executive compensation, among other things, and such rules and regulations require significant attention from management.
To the extent that our pharmaceutical partners are not successful in obtaining regulatory approval, or if we are unable to expand the cleared indications for use of our SmartFlow Cannula, we may not be able to grow our business.
To the extent that our pharmaceutical partners are not successful in obtaining 22 Table of Contents regulatory approval, or if we are unable to expand the cleared indications for use of our SmartFlow cannula, we may not be able to grow our business.
We sell our products outside of the U.S., and we are subject to various economic, political, regulatory, and other risks relating to international operations, which could harm our revenue and profitability. We sell our products in several countries outside of the U.S.
We sell our products outside of the U.S., and we are subject to various economic, political, regulatory, and other risks relating to international operations, which could harm our revenue and profitability. 24 Table of Contents We sell our products in several countries outside of the U.S.
We may not prevail in any lawsuits that we initiate, and the damages or other 32 Table of Contents remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
With or without 23 Table of Contents insurance, damage to our facility or our other property due to a natural disaster or casualty event could have a material adverse effect on our business, financial condition and results of operations.
With or without insurance, damage to our facility or our other property due to a natural disaster or casualty event could have a material adverse effect on our business, financial condition and results of operations.
Thus, any patents that we 30 Table of Contents own or license may provide limited or no protection against competitors. In addition, our pending patent applications and those we may file in the future may not result in patents being issued or may have claims that do not cover our products or product candidates.
Thus, any patents that we own or license may provide limited or no protection against competitors. In addition, our pending patent applications and those we may file in the future may not result in patents being issued or may have claims that do not cover our products or product candidates.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation ("FDIC"), and the loss of such assets could have a negative effect on our operations and liquidity. In early 2023, multiple banks were closed by regulatory agencies and swept into receivership.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), and the loss of such assets could have a negative effect on our operations and liquidity. 27 Table of Contents In early 2023, multiple banks were closed by regulatory agencies and swept into receivership.
Depending on the relevant conformity assessment procedure, the Notified Body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
Depending on the relevant conformity assessment procedure, the Notified Body would typically audit 23 Table of Contents and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
Additionally, third parties may be able to design around 31 Table of Contents our patents. Furthermore, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the U.S.
Additionally, third parties may be able to design around our patents. Furthermore, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the U.S.
Moreover, even if physicians and hospitals understand the benefits of our ClearPoint system, they still may elect not to use our ClearPoint system for a variety of reasons, such as: • the shift in location of the procedure from the operating room to the MRI suite; • demand for the MRI suite within the hospital, which may result in limited or no MRI scanner availability for procedures in which our ClearPoint system would be used; 20 Table of Contents • the familiarity of the established physician with other devices and surgical approaches; • lack of exposure to the ClearPoint system in the fellowship training period where preferences for surgical methods are formed; • the physician’s perception that there are insufficient benefits of our ClearPoint system relative to those other devices and surgical approaches; • budgetary constraints with respect to the purchase of our ClearPoint system hardware and software; • hospital infection control procedures; • the price of our ClearPoint system disposable products, which may be higher than devices used with other surgical approaches; and • the physician’s perception that there is a lack of clinical data on the use of our ClearPoint system.
Moreover, even if physicians and hospitals understand the benefits of our ClearPoint system, they still may elect not to use our ClearPoint system for a variety of reasons, such as: • demand for the MRI suite within the hospital, which may result in limited or no MRI scanner availability for certain MRI-based procedures in which our ClearPoint system would be used; • the familiarity of the established physician with other devices and surgical approaches; • lack of exposure to the ClearPoint system in the fellowship training period where preferences for surgical methods are formed; • the physician’s perception that there are insufficient benefits of our ClearPoint system relative to those other devices and surgical approaches; • budgetary constraints with respect to the purchase of our ClearPoint system hardware and software; • hospital infection control procedures; • the price of our ClearPoint system disposable products, which may be higher than devices used with other surgical approaches; and • the physician’s perception that there is a lack of clinical data on the use of our ClearPoint system.
At December 31, 2023, we had cash and cash equivalent balances aggregating $23.1 million, resulting primarily from a 2021 public offering and note issuances pursuant to the 2020 Financing Transaction as discussed in Note 7 to the consolidated financial statements included elsewhere in this Annual Report.
At December 31, 2024, we had cash and cash equivalent balances aggregating $20.1 million, resulting primarily from a 2024 public offering and note issuances pursuant to the 2020 Financing Transaction as discussed in Note 7 to the consolidated financial statements included elsewhere in this Annual Report.
In 2023, one pharmaceutical customer, a related party as described in Note 2 to the consolidated financial statements included elsewhere in this Annual Report, for whom we provide clinical services in support of the customer’s clinical trials and earn a quarterly fee, accounted for 12% of our total revenues, and 21% of our biologics and drug delivery revenue.
In 2024, one pharmaceutical customer, a related party as described in Note 2 to the consolidated financial statements included elsewhere in this Annual Report, for whom we provide clinical services in support of the customer’s clinical trials and earn a quarterly fee, accounted for 9% of our total revenues, and 17% of our biologics and drug delivery revenue.
If we are unable to obtain insurance at an 27 Table of Contents acceptable cost or on acceptable terms or otherwise protect against such information risks and breach claims, we could be exposed to significant liabilities.
If we are unable to obtain insurance at an acceptable cost or on acceptable terms or otherwise protect against such information risks and breach claims, we could be exposed to significant liabilities.
Our five largest hospital customers account for approximately 27% of our functional neurosurgery navigation revenues. Revenues from almost all our customers are not based on long-term, committed volume purchase contracts, and we may not continue to generate a similar level of revenues from our largest customers, or any other customer.
Our five largest hospital customers account for approximately 31% of our neurosurgery navigation revenues. Revenues from almost all our customers are not based on long-term, committed volume purchase contracts, and 21 Table of Contents we may not continue to generate a similar level of revenues from our largest customers, or any other customer.
We and our suppliers will also be subject to the regulations of foreign jurisdictions regarding the manufacturing process to the extent we market our products in these jurisdictions. The FDA enforces the QSR through periodic and unannounced inspections of manufacturing facilities. Our facilities were last subject to an ISO 13485 surveillance audit and MDSAP surveillance audit in April 2023.
We and our suppliers will also be subject to the regulations of foreign jurisdictions regarding the manufacturing process to the extent we market our products in these jurisdictions. The FDA enforces the QMSR through periodic and unannounced inspections of manufacturing facilities. Our facilities were last subject to an ISO 13485 surveillance audit and MDSAP surveillance audit in October 2024.
We started selling our ClearPoint system in August 2010, and to date, sales of the ClearPoint system have been primarily focused on its use for neurosurgical procedures in the MRI suite. In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, and in 2024, we commenced limited market release of the SmartFrame OR Stereotactic System.
We started selling our ClearPoint system in 2010, and to date, sales of the ClearPoint system have been primarily focused on its use for neurosurgical procedures in the MRI suite. In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, and in 2024, we commercialized the SmartFrame OR Stereotactic System.
We expect to need additional funding for our business, and we may not be able to raise capital when needed or on terms that are acceptable to us, which could force us to delay, reduce or eliminate our commercialization efforts or our product development programs. The cumulative net loss from our inception through December 31, 2023 was approximately $172 million.
We expect to need additional funding for our business, and we may not be able to raise capital when needed or on terms that are acceptable to us, which could force us to delay, reduce or eliminate our commercialization efforts or our product development programs. 26 Table of Contents The cumulative net loss from our inception through December 31, 2024 was approximately $191.4 million.
We may from time to time have agreements with physicians that could be scrutinized or could be subject to reporting requirements in the future, including consulting contracts in which we compensate physicians for various services, which could include: • providing training and other similar services on the proper use of our products; • advising us with respect to the commercialization of products in their respective fields; • keeping us informed of new developments in their respective fields of practice; • advising us on our research and development projects related to their respective fields; • advising us on improvements to methods, processes and devices related to their respective fields (such as advice on the development of prototype devices); and 37 Table of Contents • assisting us with the technical evaluation of our methods, processes and devices related to their respective fields.
We may from time to time have agreements with physicians that could be scrutinized or could be subject to reporting requirements in the future, including consulting contracts in which we compensate physicians for various services, which could include: • providing training and other similar services on the proper use of our products; • advising us with respect to the commercialization of products in their respective fields; • keeping us informed of new developments in their respective fields of practice; • advising us on our research and development projects related to their respective fields; • advising us on improvements to methods, processes and devices related to their respective fields (such as advice on the development of prototype devices); and • assisting us with the technical evaluation of our methods, processes and devices related to their respective fields. 34 Table of Contents The Affordable Care Act mandates increased transparency of arrangements between physicians and medical device companies.
The funding requirements for our business will depend on many factors, including: • the timing of broader market acceptance and adoption of our ClearPoint platform products and services; • the scope, rate of progress and cost of our ongoing product development activities relating to our ClearPoint system; • the cost and timing of expanding our sales, clinical support, marketing and distribution capabilities and other corporate infrastructure; • the cost and timing of establishing inventories at levels sufficient to support our sales; • the scope, rate of progress and cost of our research and development activities relating to new products; • the effect of competing technological and market developments; • the costs, terms and timing of any future investments or acquisitions, or collaborative, licensing or other arrangements that we may establish; • the cost and timing of any clinical trials; • the cost and timing of regulatory filings, clearances and approvals; and • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. 29 Table of Contents Raising additional funds may cause dilution to existing stockholders, restrict our operations, or require us to relinquish proprietary rights.
The funding requirements for our business will depend on many factors, including: • the timing of broader market acceptance and adoption of our ClearPoint platform products and services; • the scope, rate of progress and cost of our ongoing product development activities relating to our ClearPoint system; • the cost and timing of expanding our sales, clinical support, marketing and distribution capabilities and other corporate infrastructure; • the cost and timing of establishing inventories at levels sufficient to support our sales; • the scope, rate of progress and cost of our research and development activities relating to new products; • the effect of competing technological and market developments; • the costs, terms and timing of any future investments or acquisitions, or collaborative, licensing or other arrangements that we may establish; • the cost and timing of any clinical trials; • the cost and timing of regulatory filings, clearances and approvals; and • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
If third parties in any patent action are successful, our patent portfolio may be damaged, we may have to pay substantial damages and we may be required to stop selling our products or obtain a license which, if available at all, may require us to pay substantial royalties.
If third parties in any patent action are successful, our patent portfolio may be damaged, we may have to pay substantial damages and we may be required to stop selling certain products, refrain from entering certain lines of business or obtain a license which, if available at all, may require us to pay substantial royalties.
Net cash used in operations was $13.7 million for the year ended December 31, 2023. Since our inception, we have financed our operations principally from the sale of equity securities and the issuance of notes payable.
Net cash used in operations was $9.0 million for the year ended December 31, 2024. Since our inception, we have financed our operations principally from the sale of equity securities and the issuance of notes payable.
The Affordable Care Act mandates increased transparency of arrangements between physicians and medical device companies. We believe that this increased transparency may also result in a heightened level of government scrutiny of the relationships between physicians and medical device companies.
We believe that this increased transparency may also result in a heightened level of government scrutiny of the relationships between physicians and medical device companies.
Additionally, our customers could experience financial and operational pressures as a result of macroeconomic conditions, such as labor shortages, supply chain disruptions, and increased inflation, any of which could impact their ability to access capital markets and other funding sources, increase cost of funding, cause cash flow problems, or impede their ability to comply with debt covenants, which in turn could impede their ability to provide patient care, conduct further research and development, marketing and commercialization efforts, or impact their profitability.
Additionally, our hospital and pharmaceutical customers could experience financial and operational pressures as a result of macroeconomic conditions which could impact their ability to access capital markets and other funding sources, increase cost of funding, cause cash flow problems, or impede their ability to comply with debt covenants, which in turn could impede their ability to provide patient care, conduct further research and development, marketing and commercialization efforts, or impact their profitability.
The FDA may also change its clearance and authorization policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay authorization or clearance of our products. Similar restrictions exist outside of the U.S.
The FDA may also change its clearance and authorization policies, adopt additional regulations or revise existing regulations, or take or become subject to other actions, such as staffing changes, which may prevent or delay authorization or clearance of our products. Similar restrictions exist outside of the U.S.
If we do not pay dividends, a return on our stockholders’ investment will only occur if our stock price appreciates. Anti-takeover provisions in our certificate of incorporation, bylaws and Delaware law could prevent or delay a change in control. We have 90,000,000 shares of common stock authorized, and 26,976,289 shares outstanding as of March 5, 2024.
If we do not pay dividends, a return on our stockholders’ investment will only occur if our stock price appreciates. Anti-takeover provisions in our certificate of incorporation, bylaws and Delaware law could prevent or delay a change in control. We have 90,000,000 shares of common stock authorized, and 27,632,332 shares outstanding as of February 18, 2025.
Third parties may attempt to commercialize competitive products in foreign countries where we do not have any patents or patent applications and/or where legal recourse may be limited. This may have a significant commercial impact on our foreign business operations.
Third parties may attempt to commercialize competitive products in foreign countries where we do not have any patents or patent applications and/or where legal recourse may be limited.
To the extent we raise additional capital through the sale of equity or convertible debt securities, existing ownership interests will be diluted, and the terms may include liquidation or other preferences that adversely affect such existing stockholders’ rights.
Raising additional funds may cause dilution to existing stockholders, restrict our operations, or require us to relinquish proprietary rights. To the extent we raise additional capital through the sale of equity or convertible debt securities, existing ownership interests will be diluted, and the terms may include liquidation or other preferences that adversely affect such existing stockholders’ rights.
Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
This may have a significant commercial impact on our foreign business operations. 29 Table of Contents Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
The global economy has been, and may continue to be, negatively impacted by the ongoing conflict resulting from Russia’s invasion of Ukraine in 2022, uncertainty in the Middle East region, or the increasing tensions between China and Taiwan.
The global economy has been, and may continue to be, negatively impacted by the ongoing conflict resulting from Russia’s invasion of Ukraine in 2022, uncertainty in the Middle East region, or the increasing tensions between China and Taiwan. These geopolitical developments may interfere with our supply chain, production costs, and customer relationships.
Cancellation or renegotiation of a large agreement could adversely affect our business and, therefore, may adversely affect our operating results. In addition, we may enter into agreements with customers to provide services on a fixed fee basis.
Cancellation or renegotiation of a large agreement could adversely affect our business and, therefore, may adversely affect our operating results. In addition, we may enter into agreements with customers to provide services on a fixed fee basis. We may also enter into agreements with customers for which we are paid a lump sum conditioned upon the achievement of development milestones.
If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to Medical Device Reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. 35 Table of Contents Under the FDA’s Medical Device Reporting regulations, we are required to report to the FDA any incident in which our products may have caused or contributed to a death or serious injury or in which our products malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.
Under the FDA’s Medical Device Reporting regulations, we are required to report to the FDA any incident in which our products may have caused or contributed to a death or serious injury or in which our products malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.
There may be U.S. and foreign patents issued to third parties that relate to our business. Some of these patents may be broad enough to cover one or more aspects of our present technologies and/or may cover aspects of our future technologies.
There may be U.S. and foreign patents issued to third parties that relate to our business. Some of these patents may be broad enough to cover one or more aspects of our present technologies and/or may cover aspects of our future technologies. We do not know whether any of these patents, if asserted, would be held valid, enforceable and infringed.
It is important that we anticipate changes in technology and market demand, as well as customer preferences and practices, to successfully commercialize new technologies to meet our prospective customers’ needs on a timely and cost-effective basis. 21 Table of Contents We might be unable to successfully commercialize our marketed products or services or obtain authorization to market new products.
New technologies, techniques or products could emerge from competitors that might offer better combinations of price and performance than our products and services. It is important that we anticipate changes in technology and market demand, as well as customer preferences and practices, to successfully commercialize new technologies to meet our prospective customers’ needs on a timely and cost-effective basis.
Our failure to comply with these regulations and guidance could have a material adverse effect on our business. Federal legislation and other payment and policy changes may have a material adverse effect on our business.
Federal legislation and other payment and policy changes may have a material adverse effect on our business.
Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, and which could adversely affect our operations and operating results.
Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside 37 Table of Contents of our control, and which could adversely affect our operations and operating results.
Any negative attention, threats, acts of vandalism or legal action directed against our preclinical service activities, or our third-party service providers could harm our reputation and impair our ability to operate our business efficiently. 41 Table of Contents We could become subject to product liability or professional liability claims that could be expensive, divert management’s attention and harm our business.
Any negative attention, threats, acts of vandalism or legal action directed against our preclinical service activities, or our third-party service providers could harm our reputation and impair our ability to operate our business efficiently.
Our Fourth Amended and Restated Bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the U.S. will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
A determination that we have violated privacy or data protection laws could result in significant damage awards, fines and other penalties that could, individually or in the aggregate, materially harm our business and reputation. 35 Table of Contents Our Fourth Amended and Restated Bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the U.S. will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
A portion of our future business growth is dependent upon marketing and selling our ClearPoint system, and other new products, in the operating room, and if we are unable to expand, manage and maintain our marketing and sales capabilities in this environment, we may be unable to generate significant growth in our product revenues.
Any failure of the ClearPoint system to achieve meaningful market acceptance and penetration will harm our future prospects and have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents A portion of our future business growth is dependent upon marketing and selling our ClearPoint system, and other new products, in the operating room, and if we are unable to expand, manage and maintain our marketing and sales capabilities in this environment, we may be unable to generate significant growth in our product revenues.
The Notified Body issues a certificate of conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements.
The Notified Body issues a certificate of conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the requirements. This certificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.
If the combination of patents, trade secrets and contractual provisions that we rely on to protect our intellectual property is inadequate, our ability to successfully commercialize our marketed products and product candidates will be harmed, and we may not be able to operate our business profitably.
In addition, any public announcements related to litigation or administrative proceedings initiated by us, or initiated or threatened against us, could negatively impact our business. 28 Table of Contents If the combination of patents, trade secrets and contractual provisions that we rely on to protect our intellectual property is inadequate, our ability to successfully commercialize our marketed products and product candidates will be harmed, and we may not be able to operate our business profitably.
This certificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity. 25 Table of Contents As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements or general safety and performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
We do not know whether any of these patents, if they exist and if asserted, would be held valid, enforceable and infringed. We cannot provide any assurance that a court or administrative body would agree with any arguments or defenses we may have concerning invalidity, unenforceability or non-infringement of any third-party patent.
We cannot provide any assurance that a court or administrative body would agree with any arguments or defenses we may have concerning invalidity, unenforceability or non-infringement of any third-party patent.
We have incurred losses in each year since our inception in 1998 that have resulted principally from costs incurred in connection with our sales and marketing activities, research and development efforts, manufacturing activities and other general and administrative expenses associated with our operations, and we may continue to incur losses as we continue to invest capital in the sales and marketing of our ClearPoint platform products and services, and growth of our business generally. 28 Table of Contents As a result of the numerous risks and uncertainties associated with developing medical devices and with our biologic and drug delivery customers’ development of safe and effective drugs, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
We have incurred losses in each year since our inception in 1998 that have resulted principally from costs incurred in connection with our sales and marketing activities, research and development efforts, manufacturing activities and other general and administrative expenses associated with our operations, and we may continue to incur losses as we continue to invest capital in the sales and marketing of our ClearPoint platform products and services, and growth of our business generally.
Such events could have an adverse effect on our business, results of operations, financial condition and cash flows. 22 Table of Contents If coverage and reimbursement from third-party payors for procedures utilizing our products are inadequate, adoption of our products will be adversely affected and our revenues and prospects for profitability will suffer.
If coverage and reimbursement from third-party payors for procedures utilizing our products are inadequate, adoption of our products will be adversely affected and our revenues and prospects for profitability will suffer.
The Medicare Access and CHIP Reauthorization Act, or the Medicare Access Act, removed the sustainable growth rate or SGR, methodology applicable to fees for physician services. The Medicare Access Act also replaced the previous fee-for-service payment system with a more value-based system. As a result, reimbursements from the Medicare 34 Table of Contents program may be reduced.
The Medicare Access Act also replaced the previous fee-for-service payment system with a more value-based system. As a result, reimbursements from the Medicare program may be reduced.
If any of the following risks or uncertainties actually occurs, our business, financial condition, results of operations and prospects would likely suffer, possibly materially. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
If any of the following risks or uncertainties actually occurs, our business, financial condition, results of operations and prospects would likely suffer, possibly materially.
To demonstrate compliance with the essential requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
Compliance with these requirements is a prerequisite to be able to affix the CE mark to our products, without which they cannot be sold or marketed in the EU. To demonstrate compliance with these requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
In addition, our biologics and drug delivery business may be subject to regulations and guidance concerning the procurement and use of research animals for research purposes. Such regulations and guidance are evolving and continues to be developed for other areas that impact the biomedical research community on both a national and international basis.
Such regulations and guidance are evolving and continues to be developed for other areas that impact the biomedical research community on both a national and international basis. Our failure to comply with these regulations and guidance could have a material adverse effect on our business.
For example, during the peak of the COVID-19 outbreak, the FDA experienced delays in the review of applications and concentrated their focus on products which addressed the COVID-19 outbreak. Such delays or refusals, regardless of the cause, could have a material adverse effect on our business, financial condition, and results of operations.
Such delays or refusals, regardless of the cause, could have a material adverse effect on our business, financial condition, and results of operations.
Additionally, we may be unable to maintain our existing liability insurance in the future at satisfactory rates or in adequate amounts.
Although we maintain liability insurance that we believe is appropriate, this insurance coverage is subject to deductibles and coverage limitations, and may not be adequate to protect us against any future liability claims. Additionally, we may be unable to maintain our existing liability insurance in the future at satisfactory rates or in adequate amounts.
We cannot predict what healthcare initiatives will be implemented at the federal or state level, or the effect any recently promulgated or future legislation or regulation will have on us. However, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business, possibly materially.
However, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business, possibly materially.
We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation, administrative, or executive action, either in the U.S. or abroad. For example, the Biden administration has taken and will continue to take executive actions, some of which could impact us and our business.
We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation, administrative, or executive action, either in the U.S. or abroad. The implementation of new policies and priorities by future administrations are unknown and could materially impact the regulation of our products.
Risks Related to Our Business and Industry Our business, financial condition, and results of operations may be adversely affected by general economic and financial market conditions and current and future social and geopolitical instability.
In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment. 17 Table of Contents Risks Related to Our Business and Industry Our business, financial condition, and results of operations may be adversely affected by general economic and financial market conditions and current and future social and geopolitical instability.
If pricing flexibility is constrained, these companies may limit spending on their pipeline, which may adversely affect the future revenue of our biologics and drug delivery business. Various healthcare reform proposals have also emerged at the state level.
If pricing flexibility is constrained, these companies may limit spending on their pipeline, which may adversely affect the future revenue of our biologics and drug delivery business. It is unknown what form any future changes or any law would take and how or whether it may affect our business in the future.
Impacts from inflationary pressures, such an increasing costs for research and development of our products, administrative and other costs of doing business, could adversely affect our business, financial condition and results of operations.
Impacts from inflationary pressures, could increase our costs for research and development of our products, and administrative and other costs of doing business, which could in turn increase the costs for producing and distributing our products and services.
Our business exposes us to potential product liability risks that are inherent in the manufacturing, marketing and sale of medical devices. We may be held liable if our products cause injury or death or are found otherwise unsuitable or defective during usage.
We may be held liable if our products cause injury or death or are found otherwise unsuitable or defective during usage.
Privacy and data protection laws may be interpreted and applied inconsistently from country to country and impose inconsistent or conflicting requirements.
Privacy and data protection laws may be interpreted and applied inconsistently from country to country and impose inconsistent or conflicting requirements. Varying jurisdictional requirements could increase the costs and complexity of compliance or require us to change our business practices in a manner adverse to our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity program includes: • Penetration testing of internal information technology systems and review of program maturity based on the National Institute of Standards and Technology ("NIST") cybersecurity framework; • Phishing, social engineering, and cyber hygiene training; • Continuous security event monitoring, management, and incident response plans; • Continuous enhancements to security capabilities based on evolving threats; 43 Table of Contents • Information security policies and procedures; • Privacy controls and compliance with applicable legislative and regulatory requirements; • Assessment of applicable third-party vendors’ cybersecurity and information security practices; and • A cross-functional approach to addressing cybersecurity risk with participation from representatives across the business and functions.
Biggest changeOur cybersecurity program includes: • Penetration testing of internal information technology systems and review of program maturity based on the National Institute of Standards and Technology (“NIST”) cybersecurity framework; • Phishing, social engineering, and cyber hygiene training; • Continuous security event monitoring, management, and incident response plans; • Continuous enhancements to security capabilities based on evolving threats; • Information security policies and procedures; • Privacy controls and compliance with applicable legislative and regulatory requirements; • Assessment of applicable third-party vendors’ cybersecurity and information security practices; and • A cross-functional approach to addressing cybersecurity risk with participation from representatives across the business and functions.
ITEM 1C. CYBERSECURITY. Our Company places a high priority on cybersecurity, information security, and securing confidential business information and personal information that we receive and store related to our customers and employees. Our Company’s Audit Committee oversees the cybersecurity risks faced by the Company.
ITEM 1C. CY BERSECURITY. Our Company places a high priority on cybersecurity, information security, and securing confidential business information and personal information that we receive and store related to our customers and employees. Our Company’s Audit Committee oversees the cybersecurity risks faced by the Company.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that these facilities are sufficient to meet our current and near-term needs.
Biggest changeWe believe that these facilities are sufficient to meet our current purposes, and that additional space can be obtained on commercially reasonable terms as needed.
ITEM 2. PROPERTIES. We lease approximately 7,500 square feet of space in Solana Beach, California, which serves as our corporate headquarters and houses certain management and research and development personnel. We also lease an approximately 20,000 square foot industrial building in Carlsbad, California to use as an office and manufacturing facility.
ITEM 2. PR OPERTIES. We lease approximately 7,500 square feet of space in Solana Beach, California, which serves as our corporate headquarters and houses certain management and research-and-development personnel. We also lease an approximately 20,000 square-foot industrial building in Carlsbad, California to use as an office and manufacturing facility.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. In the ordinary course of our business, we may be subject to various claims, pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business.
Biggest changeITEM 3. LE GAL PROCEEDINGS. In the ordinary course of our business, we may be subject to various claims, pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business.
Removed
We are not aware of any material pending legal proceedings to which we are a party or of which any of our properties is the subject.
Added
See Note 8 to the consolidated financial statements included elsewhere in this Annual Report for further disclosure.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 5, 2024, we had approximately 220 stockholders of record. In addition, as of March 5, 2024, options to purchase 1,467,907 shares of common stock and 752,436 shares of unvested restricted stock units were outstanding. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Biggest changeAs of February 18, 2025, we had approximately 206 stockholders of record. In addition, as of February 18, 2025, options to purchase 1,363,865 shares of common stock and restricted stock units representing 1,636,611 shares of common stock were outstanding. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Securities Authorized for Issuance Under Equity Compensation Plans Information relating to our equity compensation plans as of December 31, 2023, under which our equity securities were authorized for issuance, is included in Item 12 of Part III of this Annual Report and such information is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans Information relating to our equity compensation plans as of December 31, 2024, under which our equity securities were authorized for issuance, is included in Item 12 of Part III of this Annual Report and such information is incorporated herein by reference.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the Nasdaq Capital Market under the symbol “CLPT.” Holders As of March 5, 2024, we had 26,976,289 shares of common stock outstanding and no shares of preferred stock outstanding.
ITEM 5. MA RKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the Nasdaq Capital Market under the symbol “CLPT.” Holders As of February 18, 2025, we had 27,632,332 shares of common stock outstanding and no shares of preferred stock outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+9 added−11 removed31 unchanged
Biggest changeTotal revenue was approximately $24.0 million and $20.6 million for the years ended December 31, 2023 and 2022, respectively. 49 Table of Contents Years Ended December 31, Percentage (Dollars in thousands) 2023 2022 Change Biologics and drug delivery Disposable products $ 2,154 $ 3,690 (42) % Services and license fees 11,448 5,430 111 % Subtotal – Biologics and drug delivery revenue 13,602 9,120 49 % Functional neurosurgery navigation and therapy Disposable products 7,589 7,587 — % Services 931 1,537 (39) % Subtotal – Functional neurosurgery navigation and therapy revenue 8,520 9,124 (7) % Capital equipment and software Systems and software products 860 1,512 (43) % Services 973 795 22 % Subtotal – Capital equipment and software revenue 1,833 2,307 (21) % Total revenue $ 23,955 $ 20,551 17 % Biologics and drug delivery revenue, which include sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products, increased 49% to $13.6 million for the year ended December 31, 2023, from $9.1 million for the same period in 2022.
Biggest changeYears Ended December 31, Percentage (Dollars in thousands) 2024 2023 Change Biologics and drug delivery Disposable products $ 5,606 $ 2,154 160 % Services and license fees 11,704 11,448 2 % Subtotal – Biologics and drug delivery revenue 17,310 13,602 27 % Neurosurgery navigation and therapy Disposable products 10,285 7,589 36 % Services - 931 (100 )% Subtotal – Neurosurgery navigation and therapy revenue 10,285 8,520 21 % Capital equipment and software Systems and software products 2,735 860 218 % Services 1,060 973 9 % Subtotal – Capital equipment and software revenue 3,795 1,833 107 % Total revenue $ 31,390 $ 23,955 31 % Biologics and drug delivery revenue, which include sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products, increased 27% to $17.3 million for the year ended December 31, 2024, from $13.6 million for the same period in 2023.
A revenue reversal is possible if it is determined that achievement of a milestone which was previously deemed probable, will not occur. Inventory . Inventory is carried at the lower of cost (first-in, first-out method) or net realizable value. Items in inventory relate predominantly to our functional neurosurgical products, drug delivery and biologic products, therapy products and ClearPoint capital equipment.
A revenue reversal is possible if it is determined that achievement of a milestone which was previously deemed probable, will not occur. Inventory . Inventory is carried at the lower of cost (first-in, first-out method) or net realizable value. Items in inventory relate predominantly to our neurosurgical products, drug delivery and biologic products, therapy products and ClearPoint capital equipment.
Cost of Revenue Cost of revenue includes the direct costs associated with the assembly and purchase of components for functional neurosurgery navigation products, biologics and drug delivery products, non-neurosurgery therapy products, and ClearPoint capital equipment that we have sold, and for which we have recognized revenue in accordance with our revenue recognition policy, as well as labor hours for the cost of providing preclinical, consulting, and service revenue.
Cost of Revenue Cost of revenue includes the direct costs associated with the assembly and purchase of components for neurosurgery navigation products, biologics and drug delivery products, non-neurosurgery therapy products, and ClearPoint capital equipment that we have sold, and for which we have recognized revenue in accordance with our revenue recognition policy, as well as labor hours for the cost of providing preclinical, consulting, and service revenue.
We may, in the future, offer and sell additional equity or issue additional notes payable to raise funds for working capital, capital expenditures, or other general corporate purposes. Our primary uses of cash and operating expenses relate to paying employees and consultants, marketing our products, and supporting our research and development of future product offerings.
We may offer and sell additional equity or issue additional notes payable to raise funds for working capital, capital expenditures, or other general corporate purposes. Our primary uses of cash and operating expenses relate to paying employees and consultants, marketing our products, and supporting our research and development of future product offerings.
In 2022, we commercialized the ClearPoint Prism Neuro Laser Therapy System as our first therapy product offering. We have exclusive global commercialization rights to the ClearPoint Prism Neuro Laser Therapy System through our Swedish partner, CLS. The second part of our business is focused on partnerships in the biologics drug and delivery space.
In 2022, we commercialized the ClearPoint Prism Neuro Laser Therapy System as our first therapy product offering. We have exclusive global commercialization rights to the ClearPoint Prism Neuro Laser Therapy System through our Swedish partner, CLS. The second component of our business is focused on partnerships in the biologics drug and delivery space.
Our services include protocol consultation and solutions for preclinical study design and execution. Currently, we have more than 50 biologics and drug delivery customers who are evaluating using our products and services in trials to inject gene and cell therapies directly into the brain.
Our services include protocol consultation and solutions for preclinical study design and execution. Currently, we have more than 60 biologics and drug delivery customers who are evaluating using our products and services in trials to inject gene and cell therapies directly into the brain.
The increase was due primarily to increases in personnel costs, including share-based compensation expense, of $1.2 million due to growth in headcount, partially offset by a decrease of $0.6 million in research costs as a result of reprioritization of certain initiatives. Sales and Marketing Expenses.
The increase was due primarily to increases in personnel costs, including share-based compensation expense, of $1.2 million due to growth in headcount, partially offset by a decrease of $0.5 million in research costs as a result of reprioritization of certain initiatives. Sales and Marketing Expenses.
The first foundational part of our business is a medical device company providing medical devices for neurosurgery applications. Our primary medical device product, the ClearPoint system, is an integrated system comprised of hardware components, disposable components, and intuitive, menu-driven software, which is in commercial use globally.
The first foundational component of our business is a medical device company providing medical devices for neurosurgery applications. Our primary medical device product, the ClearPoint system, is an integrated system comprised of hardware components, disposable components, and intuitive, menu-driven software, which is in commercial use globally.
In management’s opinion, based on our current forecasts for revenue, expense and cash flows, our existing cash and cash equivalent balances at December 31, 2023, are sufficient to support our operations and meet our obligations for at least the next twelve months.
In management’s opinion, based on our current forecasts for revenue, expense and cash flows, our existing cash and cash equivalent balances at December 31, 2024, are sufficient to support our operations and meet our obligations for at least the next twelve months.
Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP").
Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
See Note 8 to the consolidated financial statements included elsewhere in this Annual Report. • We typically enter into short-term agreements with vendors and suppliers of goods and services in the normal course of business through purchase orders, which are settled in cash upon delivery of such goods or services.
See Note 8 to the consolidated financial statements included elsewhere in this Annual Report. • We typically enter into short-term agreements with vendors and suppliers of goods and services in the normal course of business through purchase orders, which are settled in cash upon our receipt of such goods or services.
We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Under certain agreements, we are entitled to receive event-based payments subject to our customer's achievement of specified development and regulatory milestones.
We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. 44 Table of Contents Under certain agreements, we are entitled to receive event-based payments subject to our customer's achievement of specified development and regulatory milestones.
We anticipate that, over time, our research and development costs may increase as we: (i) develop devices and services for delivery of therapeutics into 47 Table of Contents the central nervous system, (ii) expand products into the OR and therapeutics space, and (iii) expand the application of our technological platforms internationally.
We anticipate that, over time, our research and development costs may increase as we: (i) develop devices and services for delivery of therapeutics into the central nervous system, (ii) expand products into the OR and therapeutics space, and (iii) expand the application of our technological platforms internationally.
Cost of revenue also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our ClearPoint placement program, as well as provisions for obsolete, impaired, or excess inventory. Research and Development Costs Our research and development costs consist primarily of costs associated with the conceptualization, design, testing, and prototyping of our ClearPoint system products and enhancements.
Cost of revenue also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our ClearPoint placement program, as well as provisions for obsolete, impaired, or excess inventory. 43 Table of Contents Research and Development Costs Our research and development costs consist primarily of costs associated with the conceptualization, design, testing, and prototyping of our ClearPoint system products, cannulas, and enhancements.
Variable consideration is included in the transaction price if, in our 48 Table of Contents judgment, it is probable that these milestones will be achieved and a significant future reversal of cumulative revenue under the contract will not occur.
Variable consideration is included in the transaction price if, in our judgment, it is probable that these milestones will be achieved and a significant future reversal of cumulative revenue under the contract will not occur.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.
ITEM 7. MA NAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.
In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, which allows for operating room placement of the ClearPoint system, and in 2024, we commenced limited market release of the SmartFrame OR Stereotactic System, which allows for complete procedures to be performed 45 Table of Contents in the operating room.
In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, which allows for operating room placement of the ClearPoint system, and in 2024, we launched limited market release of the SmartFrame OR Stereotactic System, which allows for complete procedures to be performed in the operating room.
Our service revenue was approximately $13.4 million and $7.8 million for the years ended December 31, 2023 and 2022, respectively, of which 86% and 70%, respectively, related to the biologics and drug delivery service line. Our revenue recognition policies are more fully described in Note 2 to the consolidated financial statements elsewhere in this Annual Report.
Our service revenue was approximately $12.8 million and $13.4 million for the years ended December 31, 2024 and 2023, respectively, of which 92% and 86%, respectively, related to the biologics and drug delivery service line. Our revenue recognition policies are more fully described in Note 2 to the consolidated financial statements elsewhere in this Annual Report.
Net cash flows provided by investing activities in 2023 were $8.9 million and consisted of proceeds from the maturities of short-term investments, partially offset by equipment acquisitions related to our new manufacturing site in Carlsbad, California, and acquisition of licensing rights.
Net cash flows provided by investing activities in 2024 were $0.3 million and related to equipment acquisitions. 47 Table of Contents Net cash flows provided by investing activities in 2023 were $8.9 million and consisted of proceeds from the maturities of short-term investments, partially offset by equipment acquisitions related to our new manufacturing site in Carlsbad, California, and acquisition of licensing rights.
To the extent our Partners achieve commercial success, our expectation is that we will share in such success through our Partners’ use of our products and services in their delivery of therapies. At December 31, 2023, we had more than 50 Partners, which is similar to the number of Partners as of the same date in 2022.
To the extent our Partners achieve commercial success, our expectation is that we will share in such success through our Partners’ use of our products and services in their delivery of therapies. At December 31, 2024, we had more than 60 Partners, as compared to over 50 Partners as of the same date in 2023.
Our product revenue was approximately $10.6 million and $12.8 million for the years ended December 31, 2023 and 2022, respectively, and was almost entirely related to our ClearPoint system.
Our product revenue was approximately $18.6 million and $10.6 million for the years ended December 31, 2024 and 2023, respectively, and was almost entirely related to our ClearPoint system.
Our future capital requirements will depend on many factors, including, but not limited to, the following: • the ultimate duration and impact of macroeconomic trends, including inflationary pressures, supply chain disruptions, geopolitical instability (including military conflicts), and instability of financial institutions; • the timing of broader market acceptance and adoption of our products; • the scope, rate of progress and cost of our ongoing product development activities relating to our products; • the ability of our Partners to achieve commercial success, including their use of our products and services in their preclinical studies, clinical trials and delivery of therapies; • the cost and timing of expanding our sales, clinical support, marketing and distribution capabilities, and other corporate infrastructure; • the cost and timing of establishing inventories at levels sufficient to support our sales; • the effect of competing technological and market developments; 52 Table of Contents • the cost of pursuing additional applications of our technology platforms under current collaborative arrangements, and the terms and timing of any future collaborative, licensing or other arrangements that we may establish; • the cost and timing of any clinical trials; • the cost and timing of regulatory filings, clearances and approvals; and • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Our future capital requirements will depend on many factors, including, but not limited to, the following: • the ultimate duration and impact of macroeconomic trends, including inflationary pressures, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, global or local recession, and geopolitical instability; • the timing of broader market acceptance and adoption of our products; • the scope, rate of progress and cost of our ongoing product development activities relating to our products; • the ability of our Partners to achieve commercial success, including their use of our products and services in their preclinical studies, clinical trials and delivery of therapies; • the cost and timing of expanding our sales, clinical support, marketing and distribution capabilities, and other corporate infrastructure; • the cost and timing of establishing inventories at levels sufficient to support our sales; • the effect of competing technological and market developments; • the cost of pursuing additional applications of our technology platforms under current collaborative arrangements, and the terms and timing of any future collaborative, licensing or other arrangements that we may establish; • the cost and timing of any clinical trials; • the cost and timing of regulatory filings, clearances and approvals; and • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Additional information with respect to the 2020 Secured Notes is in Note 7 to the consolidated financial statements included elsewhere in this Annual Report. As a result of these transactions and our business operations, our cash and cash equivalents totaled $23.1 million at December 31, 2023.
Additional information with respect to the public offerings and 2020 secured convertible notes is in Note 9 and 7, respectively, to the consolidated financial statements included elsewhere in this Annual Report. As a result of these transactions and our business operations, our cash and cash equivalents totaled $20.1 million at December 31, 2024.
Net cash provided by financing activities in 2023 consisted of proceeds of $0.5 million from the issuance of common stock under the employee stock purchase plan, partially offset by payments of $0.2 million for taxes related to shares withheld in connection with vesting of restricted stock awards.
Net cash provided by financing activities in 2023 consisted of proceeds of $0.5 million from the issuance of common stock under the employee stock purchase plan, partially offset by payments of $0.2 million for taxes related to shares withheld in connection with vesting of restricted stock awards. Operating Capital and Capital Expenditure Requirements To date, we have not achieved profitability.
General and administrative expenses were $11.8 million for the year ended December 31, 2023, compared to $9.6 million for the same period in 2022, an increase of $2.1 million, or 22%.
General and administrative expenses were $12.0 million for the year ended December 31, 2024, compared to $11.8 million for the same period in 2023, an increase of $0.2 million, or 2%.
Functional neurosurgery navigation and therapy revenue, which primarily consists of disposable product commercial sales related to cases utilizing the ClearPoint system, decreased 7% to $8.5 million during the year ended December 31, 2023, from $9.1 million for the same period in 2022.
Neurosurgery navigation and therapy revenue, which primarily consists of disposable product commercial sales related to cases utilizing the ClearPoint system, increased 21% to $10.3 million during the year ended December 31, 2024, from $8.5 million for the same period in 2023.
Net cash flows used in operating activities for the year ended December 31, 2023 were $13.7 million, a decrease of $2.4 million from the year ended December 31, 2022.
Net cash flows used in operating activities for the year ended December 31, 2024 were $9.0 million, a decrease of $4.8 million from the year ended December 31, 2023.
Cost of revenue was $10.3 million, resulting in gross profit of $13.6 million and gross margin of 57%, for the year ended December 31, 2023, compared to $7.0 million, resulting in gross profit of $13.5 million and gross margin of 66% for the year ended December 31, 2022.
Cost of Revenue and Gross Profit. Cost of revenue was $12.3 million, resulting in gross profit of $19.1 million and gross margin of 61%, for the year ended December 31, 2024, compared to $10.3 million, resulting in gross profit of $13.6 million and gross margin of 57% for the year ended December 31, 2023.
Sales and marketing expenses were $12.6 million for the year ended December 31, 2023, compared to $9.4 million for the same period in 2022, an increase of $3.2 million, or 35%.
Sales and marketing expenses were $14.5 million for the year ended December 31, 2024, compared to $12.6 million for the same period in 2023, an increase of $1.9 million, or 15%.
The change in the non-cash items results primarily from increases in share-based compensation and allowance for credit losses. Net Cash Flows from Investing Activities.
The change in the non-cash items results primarily from recoveries in the allowance for credit losses, partially offset by higher share-based compensation expense. Net Cash Flows from Investing Activities.
Additionally, these trends could adversely affect our customers, which could impact their willingness to spend on our products and services, or their ability to make payments, which could harm our collection of accounts receivable and financial results.
Such changes in domestic and global macroeconomic conditions may lead to increased costs for our business. Additionally, these macroeconomic trends could adversely affect our customers, which could impact their willingness to spend on our products and services, or their ability to make payments, which could harm our collection of accounts receivable and financial results.
This increase was primarily due to increases in personnel costs, including share-based compensation expense, of $3.0 million resulting from increases in headcount in our clinical and marketing teams, and increases in travel expense of $0.2 million. General and Administrative Expenses .
This increase was primarily due to higher personnel costs, including share-based compensation expense, of $1.6 million resulting from increases in headcount in our clinical team, increases in travel expense of $0.4 million, partially offset by $0.1 million in other marketing activities. General and Administrative Expenses .
Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and related services, decreased 21% to $1.8 million for the year ended December 31, 2023, from $2.3 million for the same period in 2022, due primarily to a decrease in the placements of ClearPoint capital and software. Cost of Revenue and Gross Profit.
Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and related services, increased 107% to $3.8 million for the year ended December 31, 2024, from $1.8 million for the same period in 2023, due to an increase in the placements of ClearPoint navigation capital equipment and software and Prism laser units.
The rapid development and fluidity of these situations precludes any prediction as to the ultimate impact they will have on our business, financial condition, results of operation and cash flows, which will depend largely on future developments . 46 Table of Contents Revenues In 2010, we received 510(k) clearance from the FDA to market our ClearPoint system in the U.S. for general neurosurgical procedures; in February 2011 and May 2018, we also obtained CE marking for our ClearPoint system and SmartFlow cannula, respectively; and in June 2020 we obtained CE marking for version 2.0 of our ClearPoint software and our Inflexion head fixation frame.
Revenues In 2010, we received 510(k) clearance from the FDA to market our ClearPoint system in the U.S. for general neurosurgical procedures; in February 2011 and May 2018, we also obtained CE marking for our ClearPoint system and SmartFlow cannula, respectively; and in June 2020 we obtained CE marking for version 2.0 of our ClearPoint software and our Inflexion head fixation frame.
These estimates could vary from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made. Share-Based Compensation. We account for compensation for all arrangements under which employees and others receive shares of stock or other equity instruments (including options) based on fair value.
These estimates could vary from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made. Share-Based Compensation.
This increase is attributable to a $6.0 million increase in service revenue related to new preclinical studies and services entered into with our partners for the year ended December 31, 2023, compared to the same period in 2022, partially offset by a $1.5 million decrease in product revenue.
This increase is attributable to a $3.5 million increase in product revenue resulting from higher demand for disposables as multiple partners progress in their trials, and a $0.3 million increase in service and other revenue related to new preclinical trials and service agreements entered into with our partners for the year ended December 31, 2024, compared to the same period in 2023.
Results of Operations Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Year Ended December 31, Percentage (Dollars in thousands) 2023 2022 Change Product revenue $ 10,603 $ 12,789 (17) % Service and other revenue 13,352 7,762 72 % Total revenue 23,955 20,551 17 % Cost of revenue 10,341 7,020 47 % Gross profit 13,614 13,531 1 % Research and development costs 11,709 10,894 7 % Sales and marketing expenses 12,595 9,358 35 % General and administrative expenses 11,756 9,611 22 % Other income (expense): Other expense, net (29) (22) NM% Interest income (expense), net 386 (81) 577 % Net loss $ (22,089) $ (16,435) 34 % NM - The percentage change is not meaningful.
Results of Operations Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023 Year Ended December 31, Percentage (Dollars in thousands) 2024 2023 Change Product revenue $ 18,626 $ 10,603 76 % Service and other revenue 12,764 13,352 (4 )% Total revenue 31,390 23,955 31 % Cost of revenue 12,268 10,341 19 % Gross profit 19,122 13,614 40 % Research and development costs 12,392 11,709 6 % Sales and marketing expenses 14,478 12,595 15 % General and administrative expenses 11,998 11,756 2 % Other income (expense): Other expense, net (40 ) (29 ) NM Interest income, net 872 386 126 % Net loss $ (18,914 ) $ (22,089 ) (14 )% NM - The percentage change is not meaningful. 45 Table of Contents Revenue.
We do not believe there is a reasonable likelihood that there will be a material change in estimates or assumptions used to determine share-based compensation expense.
We have not paid, and do not anticipate paying, cash dividends on shares of our common stock; therefore, the expected dividend yield is assumed to be zero. We do not believe there is a reasonable likelihood that there will be a material change in estimates or assumptions used to determine share-based compensation expense.
Increased costs related to the transition to the new manufacturing facility also contributed to the decrease in gross margin compared to the prior year. Research and Development Costs. Research and development costs were $11.7 million for the year ended December 31, 2023, compared to $10.9 million for the same period in 2022, an increase of $0.8 million, or 7%.
Research and development costs were $12.4 million for the year ended December 31, 2024, compared to $11.7 million for the same period in 2023, an increase of $0.7 million, or 6%.
Operating Capital and Capital Expenditure Requirements To date, we have not achieved profitability. We could continue to incur net losses as we continue our efforts to expand the commercialization of our products and services and pursue additional applications for our technology platforms.
We could continue to incur net losses as we continue our efforts to expand the commercialization of our products and services and pursue additional applications for our technology platforms. Our cash balances are primarily held in a variety of demand accounts with a view to liquidity and capital preservation.
The total amount as of December 31, 2023 for unfulfilled purchase orders and long-term purchase commitments is $3.0 million, of which approximately 40% is expected to be paid in 2024. 51 Table of Contents Cash Flows Cash activity for the years ended December 31, 2023 and 2022 is summarized as follows: Years Ended December 31, (in thousands) 2023 2022 Cash used in operating activities $ (13,720) $ (16,167) Cash provided by (used in) investing activities 8,949 (10,736) Cash provided by financing activities 296 409 Net change in cash and cash equivalents $ (4,475) $ (26,494) Net Cash Flows from Operating Activities.
Cash Flows Cash activity for the years ended December 31, 2024 and 2023 is summarized as follows: Years Ended December 31, (in thousands) 2024 2023 Cash used in operating activities $ (8,950 ) $ (13,720 ) Cash (used in) provided by investing activities (275 ) 8,949 Cash provided by financing activities 6,189 296 Net change in cash and cash equivalents $ (3,036 ) $ (4,475 ) Net Cash Flows from Operating Activities.
We believe that all factors listed within SAB 107 as prerequisites for utilizing the simplified method apply to us and to our share-based compensation arrangements. We intend to utilize the simplified method for the foreseeable future until more detailed information about exercise behavior becomes available. Expected volatility is based on historical volatility of our common stock.
We intend to utilize the simplified method for the foreseeable future until more detailed information about exercise behavior becomes available. Expected volatility is based on historical volatility of our common stock. We utilize risk-free interest rates based on U.S. treasury instruments, the term of which is consistent with the expected term of the share-based award.
This valuation model requires the input of highly subjective assumptions, including the expected stock volatility, estimated award terms and risk-free interest rates for the expected terms. To estimate the expected terms, we utilize the simplified method for “plain vanilla” options discussed in the SEC’s Staff Accounting Bulletin 107, or SAB 107.
In the case of stock options, the fair value is estimated on the grant dates using the Black-Scholes valuation model. This valuation model requires the input of highly subjective assumptions, including the expected stock volatility, estimated award terms and risk-free interest rates for the expected terms.
The decrease is driven by lower service revenue of $0.6 million as a result of pausing a co-development program with one of our Brain Computer Interface partners for the year ended December 31, 2023, compared to the same period in 2022.
This was partially offset by a decrease in service and other revenue of $0.9 million primarily as a result of pausing a co-development program with one of our Brain Computer Interface partners.
We may also at times enter into long-term commitments or license and collaboration agreements which require commitments that are noncancellable.
We may also at times enter into long-term commitments or license and collaboration agreements which require commitments that are noncancellable. The total amount as of December 31, 2024 for unfulfilled purchase orders and long-term purchase commitments is $5.4 million, of which approximately 28% is expected to be paid in 2025.
This decrease consisted of a net decrease in operating assets and liabilities of $3.9 million, and a net increase in non-cash items of $4.2 million, partially offset by an increase in net loss of $5.7 million.
This decrease was due to a lower net loss of $3.2 million, and a net decrease in operating assets and liabilities of $1.8 million, partially offset by a net decrease in non-cash items of $0.2 million. The change in operating assets and liabilities is primarily due to higher accounts payable and accrued liabilities, partially offset by lower deferred revenue.
Factors Which May Influence Future Results of Operations The following is a description of factors which may influence our future results of operations, and that we believe are important to an understanding of our business and results of operations.
Factors Which May Influence Future Results of Operations The following is a description of factors which may influence our future results of operations, and that we believe are important to an understanding of our business and results of operations. 42 Table of Contents Macroeconomic Trends We continue to monitor the impacts of various macroeconomic trends, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, and global or local recession.
In addition, our use of cash from operations amounted to $13.7 million for the year ended December 31, 2023. Since inception, we have financed our operations principally from the sale of equity securities and the issuance of notes payable.
Liquidity and Capital Resources We have incurred net losses since our inception, which has resulted in a cumulative deficit at December 31, 2024 of $191.4 million. In addition, our use of cash from operations amounted to $9.0 million for the year ended December 31, 2024.
At current interest rates, we expect the interest expense for the next 12 months to be approximately $0.8 million. • We have lease arrangements related to our office and manufacturing facilities under non-cancellable operating leases.
Our short- and long-term liquidity requirements include the following obligations: • We have lease arrangements related to our office and manufacturing facilities under non-cancellable operating leases.
As discussed in Note 11 to the consolidated financial statements included elsewhere in this Annual Report, on March 4, 2024 we completed a public offering of 2,307,694 shares of our common stock. Net proceeds from the offering were approximately $14.0 million after deducting the underwriting discounts and commissions and other estimated offering expenses payable by us.
Since inception, we have financed our operations principally from the sale of equity securities and the issuance of notes payable. In March 2024, we completed a public offering of 2,653,848 shares of our common stock from which the net proceeds totaled approximately $16.2 million after deducting our payment of underwriting discounts and commissions and other offering expenses.
Net cash provided by financing activities in 2022 consisted of proceeds of $0.7 million from the exercise of common stock options and warrants and purchases made under the employee stock purchase plan, partially offset by payments of $0.3 million for taxes related to shares withheld in connection with vesting of restricted stock awards.
This is partially offset by the repayment of the remaining $10 million outstanding under the secured convertible notes issued in 2020 and payments of $0.4 million for taxes related to shares withheld in connection with vesting of restricted stock awards.
This increase was due primarily to an increase in the allowance for credit losses of $1.4 million and increased share-based compensation of $0.8 million. 50 Table of Contents Interest Expense. Net interest income for the year ended December 31, 2023 was $0.4 million, compared with $0.1 million in net interest expense for the same period in 2022.
This increase was due primarily to higher personnel costs, including share-based compensation of $1.2 million, an increase in rent and occupancy costs as a result of the new Carlsbad site of $0.5 million, partially offset by a decrease in the allowance for credit losses of $1.5 million mainly as a result of subsequent recoveries. 46 Table of Contents Interest Income (Expense).
The fair value of each award is estimated as of the grant date and amortized as compensation expense over the requisite vesting period. The fair values of our share-based awards are estimated on the grant dates using the Black-Scholes valuation model.
We account for compensation for all arrangements under which employees and others receive shares of stock or other equity instruments (such as restricted stock and options) based on fair value. The fair value of each award is estimated as of the grant date and amortized as compensation expense over the requisite vesting period.
In 2021, we completed a public offering of 2,127,660 shares of our common stock from which the net proceeds totaled approximately $46.8 million. In 2020, we issued secured convertible notes to two investors which raised gross proceeds of $25 million, of which $15 million has been converted to common stock and $10 million remains outstanding.
As of December 31, 2024, we did not issue any shares of common stock under the ATM Agreement. In August 2024, we repaid in full the remaining $10 million outstanding under the secured convertible notes issued in 2020 to two investors raising gross proceeds of $25 million, of which $15 million had been previously converted to common stock.
The increase in interest income was due to higher interest rates and our investment in U.S. Government debt securities, offset partially by the higher amount of interest paid on the 2020 Secured Convertible Note, for the year ended December 31, 2023, compared to the same period in 2022.
Net interest income for the year ended December 31, 2024 was $0.9 million, compared with $0.4 million for the same period in 2023, as a result of increased investment in U.S. Government debt securities stemming from the capital raise in March 2024 as well as lower interest expense due to the early repayment of the First Closing Note.
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This part of our business potentially represents the largest opportunity for growth; however, our ability to grow in this market is dependent on our ability to maintain and establish new relationships with customers, such customers' continuation of research and development plans, and such customers achieving success in completion of clinical trials and subsequent regulatory approvals of their drugs and biologics. 2023 Developments • We entered into multiple multi-year agreements with pharmaceutical partners to partner on drug delivery platforms for gene therapy, earning success-based milestones based on the successful progression of a drug candidate through the clinical and regulatory process. • We further expanded our worldwide license and research agreement with Philips to add subnuclei segmentation applied to MRI, and potentially CT scans, for use in the operating room. • We signed an exclusive multi-year licensing agreement with UCSF to develop and commercialize a radially branching cellular delivery device for use in both the operating room under fluroscopy/CT guidance and under MRI guidance. • We received FDA clearance for ClearPoint Array Software 1.2 and ClearPoint Neuro Navigation Software 2.2. • As a result of increased investment in the biologics and drug delivery business to add new clinical, development, regulatory, and preclinical contract research organization services, we successfully completed multiple preclinical studies. • We exited our manufacturing site in Irvine, California, and are fully operational out of our new Carlsbad, California facility.
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This part of our business potentially represents the largest opportunity for growth; however, our ability to grow in this market is dependent on our ability to maintain and establish new relationships with customers, such customers' continuation of research and development plans, and such customers achieving success in completion of clinical trials and subsequent regulatory approvals of their drugs and biologics. 2024 Developments • Activated 25 new global centers for the year, reflecting an increase in demand driven by new product offerings, including the PRISM Laser Therapy System and SmartFrame OR. • Completed a follow-on public offering of common stock, resulting in net proceeds of approximately $16.2 million, and entered into an At-the-Market (“ATM”) Equity Offering Sales Agreement (the "ATM Agreement") pursuant to which we may offer and sell, from time to time, shares of our common stock, having aggregate sales proceeds of up to $50 million. • Repaid prior to maturity all remaining principal and interest on secured convertible notes issued in 2020, resulting in no outstanding debt at December 31, 2024. • Reduced cash used in operating activities to $9.0 million in 2024, a 35% year-over-year decrease. • Several of our partners advanced through preclinical and clinical review, with seven pharmaceutical partners receiving expedited US FDA review designations. • Received the following regulatory approvals: o US FDA 510(k) clearance for SmartFrame OR Stereotactic System to support expansion into the operating room; o Taiwan Food and Drug Administration approval of SmartFlow cannula for commercial use in Taiwan; and o US FDA De Novo marketing authorization of the SmartFlow Neuro Cannula for intraputaminal administration of eladocagene exuparvovec-tneq for the treatment of adult and pediatric patients with AADC deficiency, representing the first-ever FDA marketing authorization of a device used to deliver gene therapy directly to regions of interest in the brain.
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Macroeconomic Trends We continue to monitor the impacts of various macroeconomic trends, such as global economic and supply chain disruptions, geopolitical instability (including instability resulting from military conflicts), labor shortages, instability of financial institutions and inflationary conditions.
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The world’s financial markets remain susceptible to significant stresses, resulting in reductions in available credit and government spending, economic downturn or stagnation, foreign currency fluctuations and volatility in the valuations of securities generally. As a result, our ability to access capital markets and other funding sources in the future may not be available on commercially reasonable terms, if at all.
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Changes in domestic and global economic conditions, supply chain disruptions, labor shortages, as well as other stimulus and spending programs, have led to higher inflation, which is likely to lead to increased costs and may cause further changes in fiscal and monetary policy.
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The rapid development and fluidity of these situations precludes any prediction as to the ultimate impact they will have on our business, financial condition, results of operation and cash flows, which will depend largely on future developments.
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Impacts from inflationary pressures, such as increasing costs for research and development of our products, administrative and other costs of doing business, the potential for instability of the financial institutions where we maintain our deposits or other assets, and our access to capital markets and other sources of funding in the future could adversely affect our business, financial condition and results of operations.
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To estimate the expected terms, we utilize the simplified method for “plain vanilla” options discussed in the SEC’s Staff Accounting Bulletin 107, or SAB 107. We believe that all factors listed within SAB 107 as prerequisites for utilizing the simplified method apply to us and to our share-based compensation arrangements.
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We utilize risk-free interest rates based on U.S. treasury instruments, the term of which is consistent with the expected term of the share-based award. We have not paid, and do not anticipate paying, cash dividends on shares of our common stock; therefore, the expected dividend yield is assumed to be zero.
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Total revenue was approximately $31.4 million and $24.0 million for the years ended December 31, 2024 and 2023, respectively.
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This decrease in gross margin was primarily due to an increase in biologics and drug delivery preclinical services, which, to date, have had a lower margin than in prior years, as we launch new services and increase our presence in this space.
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Product revenue increased $2.7 million, or 36%, resulting from newly activated accounts, increased case count, and new product offerings, including SmartFrame OR and Prism Laser Therapy, compared to the same period in 2023.
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Additional information with respect to the 2020 Secured Convertible Note is in Note 7 to the consolidated financial statements included elsewhere in this Annual Report. Liquidity and Capital Resources We have incurred net losses since our inception, which has resulted in a cumulative deficit at December 31, 2023 of approximately $172 million.
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The increase in gross margin was primarily due to lower costs for the year ended December 31, 2024 due to the transition to the new manufacturing facility, occurring in 2023, and higher volumes for the year ended December 31, 2024. Research and Development Costs.
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Our short- and long-term liquidity requirements include the following obligations: • We have a $10 million secured convertible note payable due in January 2025. Future interest payments associated with the note are variable based on the greater of (i) three (3)-month Secured Overnight Financing Rate (“SOFR”) or (ii) 2%, plus a margin of 2%.
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In November 2024, we entered into an ATM Agreement pursuant to which we may offer and sell, from time to time, shares of our common stock, having aggregate sales proceeds of up to $50 million, subject to the terms and conditions of the ATM Agreement.
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The change in operating assets and liabilities is primarily due to lower inventory purchases in 2023, following a ramping up of inventory stock in previous years in response to supply chain disruptions, which were partially offset by increased use of cash in 2023 to pay down accounts payables and accrued expenses.
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Net Cash Flows from Financing Activities . Net cash provided by financing activities in 2024 consisted of proceeds, net of offering costs, of $16.2 million received from the public offering of our common stock and $0.4 million in proceeds from the issuance of common stock under the employee stock purchase plan.
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Net cash flows used in investing activities in 2022 were $10.7 million and consisted primarily of the purchase and maturities of short-term investments and acquisition of equipment licensing rights. Net Cash Flows from Financing Activities .
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Our cash balances are primarily held in a variety of demand accounts with a view to liquidity and capital preservation.

Other CLPT 10-K year-over-year comparisons