The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the ''Risk Factors'' section of this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a commercial stage medical technology company focused on designing,
developing and marketing products that improve the quality of life for patients
who suffer from neurohealth disorders. Our first commercial product, the
NeuroStar Advanced Therapy System, is a non-invasive and non-systemic
office-based treatment that uses transcranial magnetic stimulation, ("TMS"), to
create a pulsed, MRI-strength magnetic field that induces electrical currents
designed to stimulate specific areas of the brain associated with mood. The
system is cleared by the United States Food and Drug Administration , ("FDA"), to
treat adult patients with major depressive disorder, ("MDD"), that have failed
to achieve satisfactory improvement from prior antidepressant medication in the
current MDD episode. NeuroStar Advanced Therapy is safe, clinically effective,
reproducible and precise and we believe is supported by the largest clinical
data set of any competing TMS system. We believe we are the market leader in TMS
therapy based on the estimated 147,431 global patients treated with over 5.3
million of our treatment sessions through December 31, 2022 . We generated
revenues of $65.2 million and $55.3 million for the years ended December 31,
2022 and 2021, respectively.
We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic
alternative to treat patients who suffer from MDD and to address many of the key
limitations of existing treatment options. We generate revenues from initial
capital sales of our systems, sales of our recurring treatment sessions and from
service and repair and extended warranty contracts. We derive the majority of
our revenues from recurring treatment sessions. For the year ended December 31,
2022 , revenues from sales of our treatment sessions and NeuroStar Advanced
Therapy Systems represented 71% and 26% of our U.S. revenues, respectively. For
the year ended December 31, 2021 , revenues from sales of our treatment sessions
and NeuroStar Advanced Therapy Systems represented 78% and 18% of our U.S.
revenues, respectively.
We currently sell our NeuroStar Advanced Therapy System and recurring treatment
sessions in the United States through our sales and customer support team. Our
sales force targets an estimated 50,000 psychiatrists across 26,000 practices
that we estimate, based on a 2020 dataset from Symphony Health and our own
internal estimates, treat approximately 42% of the total MDD patients in the
United States who meet our labeled indication and are insured. We expect to
continue to expand our direct sales and customer support team to further
penetrate the market by demonstrating the benefits of our NeuroStar Advanced
Therapy to psychiatrists and their MDD patients. Some of our customers have and
may purchase more than one NeuroStar Advanced Therapy System. Based on our
commercial data, we believe psychiatrists can
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recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe psychiatrists can generate approximately$8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their practices. We have a diverse customer base of psychiatrists in group psychiatric practices inthe United States . One customer accounted for more than 10% of our revenues for the years endedDecember 31, 2022 and 2021. Patients are reimbursed by Medicare and the vast majority of commercial payors inthe United States for treatment sessions utilizing our NeuroStar Advanced Therapy System. We market our products in a few select markets outsidethe United States through independent distributors. International revenues represented 3% and 3% of our total revenues for the years endedDecember 31, 2022 and 2021, respectively. InOctober 2017 , we entered into an exclusive distribution agreement withTeijin Pharma Limited , ("Teijin"), for the distribution of our NeuroStar Advanced Therapy Systems and treatment sessions to customers who will treat patients with MDD inJapan . We received regulatory approval for our system inJapan inSeptember 2017 . We obtained reimbursement coverage for NeuroStar Advanced Therapy inJapan , which went into effect onJune 1, 2019 and covers patients who are treated in the largest inpatient and outpatient psychiatric facilities inJapan . We expect our international revenues to increase as a percentage of our total revenues as we grow our presence inJapan . Our research and development efforts are focused on the following: hardware and software product developments and enhancements of our NeuroStar Advanced Therapy System and clinical development relating to additional indications. We outsource the manufacture of components of our NeuroStar Advanced Therapy Systems that are produced to our specifications, and individual components are either shipped directly from our third-party contract manufacturers to our customers or consolidated into pallets at ourMalvern, Pennsylvania facility prior to shipment. Final installation of these systems occurs at the customer site. Our total revenues increased by$9.9 million , or 18%, from$55.3 million for the year endedDecember 31, 2021 to$65.2 million for the year endedDecember 31, 2022 . For the year endedDecember 31, 2022 , ourU.S. revenues were$63.4 million , compared to$53.4 million for the year endedDecember 31, 2021 , which represented an increase of 19% period over period. We expect to continue to incur losses for the next several years as we expand our commercial organization to support our planned sales growth and while continuing to invest in our pipeline indications. As ofDecember 31, 2022 , we had an accumulated
deficit of$345.9 million . Recent Developments COVID-19
We have monitored the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has and will continue to impact the Company's customers, supply chain, employees and other business partners. We experienced significant disruptions, in the first quarter of 2022 and in the years ended 2021 and 2020 from the COVID-19 pandemic. Although business conditions during the rest of 2022 were largely not impacted by the COVID-19 pandemic, we are unable to predict whether the COVID-19 pandemic may have a material impact on our financial condition, results of operations and cash flows in the future due to numerous uncertainties. These uncertainties include the potential resurgence of COVID-19 due to new variants or otherwise, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic, vaccination rates and containment measures, among others. The outbreak of COVID-19 in many countries, includingthe United States , has significantly adversely impacted global economic activity. The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response in collaboration with business partners and assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business. For further information, refer to "Risk Factors" in "Item 1A" of this Annual Report on Form 10-K. 66
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Components of Our Results of Operations
Revenues
To date, we have generated revenues primarily from the capital portion of our business and related sales and rentals of the NeuroStar Advanced Therapy System and the recurring revenues from our sale of treatment sessions inthe United States . NeuroStar Advanced Therapy System Revenues. NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including upgrades to the equipment attributable to the initial sale of the system. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers. Treatment Session Revenues. Treatment session revenues primarily include sales of NeuroStar Treatment Sessions and SenStar treatment links. The NeuroStar Treatment Sessions are access codes that are delivered electronically inthe United States . The SenStar treatment links are disposable units containing single-use access codes that are sold and used outsidethe United States . Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions.
Other Revenues. Other revenues are derived primarily from service and repair
extended warranty contracts with our existing customers.
We refer you to the section titled “Critical Accounting Policies and Use of
Estimates-Revenue Recognition” appearing elsewhere in this Annual Report on
Form 10-K for additional information regarding how we account for revenues.
Sales inthe United States represented 97% of our total revenues for the years endingDecember 31, 2022 and 2021, respectively, and have been generated by our direct sales force. Outsidethe United States , our sales are made through local third-party distributors. International revenues were 3% for the years endedDecember 31, 2022 and 2021, respectively. We expect that both ourUnited States and international revenues will increase in the near term as we continue to expand active customer sites utilizing our NeuroStar Advanced Therapy Systems and increase the related patient utilization inthe United States , as well as grow our presence inJapan . We expect our revenues to be positively impacted to the extent our direct sales force is successful in increasing the rate of adoption and utilization of treatment with TMS Therapy as an alternative to other MDD treatments.
Cost of Revenues and Gross Margin
Cost of revenues primarily consists of the costs of components and products
purchased from our third-party contract manufacturers of our NeuroStar Advanced
Therapy Systems as well as the cost of treatment packs for individual treatment
sessions. We use third-party contract manufacturing partners to produce the
components for and assemble the completed NeuroStar Advanced Therapy Systems.
Cost of revenues also includes costs related to personnel, royalties, warranty,
shipping, and our operations and field service departments. We expect our cost
of revenues to increase to the extent our revenues grow.
Our gross profit is calculated by subtracting our cost of revenues from our
revenues. We calculate our gross margin as our gross profit divided by our
revenues. Our gross margin has been and will continue to be affected by a
variety of factors, primarily product sales mix, pricing and third-party
contract manufacturing costs. Our gross margins on revenues from sales of
NeuroStar Advanced Therapy Systems are lower than our gross margins on revenues
from sales of treatment sessions and, as a result, the sales mix between
NeuroStar Advanced Therapy Systems and treatment sessions can affect the gross
margin in any reporting period.
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Sales and Marketing Expenses
Sales and marketing expenses consist of market research and commercial
activities related to the sale of our NeuroStar Advanced Therapy Systems and
treatment sessions and salaries and related benefits, sales commissions and
share-based compensation for employees focused on these efforts. Other
significant sales and marketing costs include conferences and trade shows,
promotional and marketing activities, including direct and online marketing,
practice support programs, television and radio media campaigns, travel and
training expenses.
We anticipate that our sales and marketing expenses will decrease in 2023
compared to 2022 expenses due in-part to the termination of the one-time 2022
sales equity match incentive.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses, including salaries and related benefits, share-based compensation and travel expenses, for employees in executive, finance, information technology, legal and human resource functions. General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors' fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.
We anticipate that our general and administrative expenses will remain
materially consistent during 2023 compared to our 2022 expenses.
Research and Development Expenses
Research and development expenses consist primarily of personnel expenses, including salaries and related benefits and share-based compensation for employees in clinical development, product development, regulatory and quality assurance functions, as well as expenses associated with outsourced professional scientific development services and costs of investigative sites and consultants that conduct our preclinical and clinical development programs. We typically use our employee, consultant and infrastructure resources across our research and development programs. We plan to incur research and development expenses for the near future as we expect to continue our development of TMS Therapy for the treatment of additional patient populations and new indications related to neurohealth disorders, as well as for various hardware and software development projects. As a result, we expect our research and development expenses to increase during 2023 compared to our 2022 expenses.
Interest Expense
Interest expense consists of cash interest payable under our credit facility and
non-cash interest attributable to the accrual of final payment fees and the
amortization of deferred financing costs related to our indebtedness.
Other Income, Net
Other income, net consists primarily of interest income earned on our money
market account balances and note receivables.
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Results of Operations
Comparison of the Years ended
Years ended December 31, Increase / (Decrease)
2022 2021 Dollars Percentage
(in thousands, except percentages)
Revenues $ 65,206 $ 55,312 $ 9,894 18 %
Cost of revenues 15,483 11,653 3,830 33 %
Gross Profit 49,723 43,659 6,064 14 %
Gross Margin 76.3 % 78.9 %
Operating expenses:
Sales and marketing 49,982 37,746 12,236 32 %
General and administrative 25,516 25,554 (38) (0) % Research and development 9,336 7,923 1,413 18 % Total operating expenses 84,834 71,223 13,611 19 % Loss from Operations (35,111) (27,564) (7,547) (27) % Other (income) expense: Interest expense 4,251 4,019 232 6 % Other income, net (2,203) (390) (1,813) (465) % Net Loss$ (37,159) $ (31,193) $ (5,966) (19) % Revenues by Geography Years ended December 31, 2022 2021 % of % of Amount Revenues Amount Revenues (in thousands, except percentages) United States$ 63,406 97 %$ 53,447 97 % International 1,800 3 % 1,865 3 % Total revenues$ 65,206 100 %$ 55,312 100 % U.S. Revenues by Product Category Years ended December 31, 2022 2021 % of % of Amount Revenues Amount Revenues (in thousands, except percentages)
NeuroStar Advanced Therapy System$ 16,575 26 %$ 9,760
18 % Treatment sessions 45,077 71 % 41,933 78 % Other 1,754 3 % 1,754 4 % Total U.S. revenues$ 63,406 100 %$ 53,447 100 % 69 Table of Contents United States NeuroStar Advanced Therapy System Revenues by Type Years ended December 31, 2022 2021 % of % of Amount Revenues Amount Revenues (in thousands, except percentages) NeuroStar Capital$ 15,792 95 %$ 8,820 90 % Operating lease 222 2 % 279 3 % Other 561 3 % 661 7 % Total United States NeuroStar Advanced Therapy System revenues 16,575 100
%$ 9,760 100 % Revenues Total revenues increased by$9.9 million , or 18%, from$55.3 million for the year endedDecember 31, 2021 to$65.2 million for the year endedDecember 31, 2022 . For the period endedDecember 31, 2022 ,U.S. revenue increased by 19% and international revenue marginally decreased by 3% over the comparative prior year period. TheU.S. revenue growth was primarily due to an increase in NeuroStar Advanced Therapy System revenues. Revenues inthe United States increased by$10.0 million , or 19%, from$53.4 million for the year endedDecember 31, 2021 to$63.4 million for the year endedDecember 31, 2022 . NeuroStar Advanced Therapy System revenue inthe United States increased by$6.8 million , or 70%, for the year endedDecember 31, 2022 compared to the year endedDecember 31, 2021 . The increase was primarily driven by a 79% increase in NeuroStar Advanced Therapy System capital revenue, which includes capital sales and sales-type leases. The increase in NeuroStar capital revenue was primarily driven by an increase of 84 units in NeuroStar Advanced Therapy Systems sold from 129 units for the year endedDecember 31, 2021 to 213 units for the year endedDecember 31, 2022 . The Company expects to recognize future recurring treatment session revenue related to the sale of 213 NeuroStar Advanced Therapy systems, for the year endedDecember 31, 2022 compared to 147 units including 18 units recognized as operating leases for theDecember 31, 2021 period. Treatment sessions revenues represented 71% and 78% of total revenues inthe United States for the years endedDecember 31, 2022 and 2021, respectively, and increased by 7% from$41.9 million for the year endedDecember 31, 2021 to$45.1 million for the year endedDecember 31, 2022 . The increase inU.S. treatment session revenue was primarily the result of an increase in 50,608 treatment sessions sold from 521,979 units for the year endedDecember 31, 2021 to 572,587 for the year endedDecember 31, 2022 . We believe the increase in overall volume of treatment session revenue between these two periods was primarily due to the growth in active customer sites of 142 from 959 as ofDecember 31, 2021 to 1,101 as ofDecember 31, 2022 . Due to the time it takes for the customer sites to become fully operational, treatment session revenue will lag in the growth of our active customer sites.
Cost of Revenues and Gross Margin
Future Issuance
Cost of revenues increased by$3.8 million , or 33%, from$11.7 million for the year endedDecember 31, 2021 to$15.5 million for the year endedDecember 31, 2022 . Gross margin was 76.3% for the year endedDecember 31, 2022 compared to 78.9% for the year endedDecember 31, 2021 . The decrease in gross margin was the result of a change in the product mix of revenue versus the
prior year.
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Sales and Marketing Expenses
Sales and marketing expenses increased by$12.2 million , or 32%, from$37.7 million for the year endedDecember 31, 2021 to$50.0 million for the year endedDecember 31, 2022 . The change was primarily due to an increase of$9.4 million in personnel costs related to salary, share-based compensation, bonus, commissions (this includes a one-time commission retention benefit of$3.7 million ), and payroll taxes.$0.7 million in marketing related to a new campaign launch and focus on in person customer sales summits, and$0.9 million related to the opening ofCharlotte facility forNeuroStar University and other sales training programs. Travel expense increased by$0.9 million driven by inflation and additional head count.
General and Administrative Expenses
General and administrative expenses remained relatively consistent at
million
year ended
Research and Development Expenses
Research and development expenses increased by$1.4 million , or 18%, from$7.9 million for the year endedDecember 31, 2021 to$9.3 million for the year endedDecember 31, 2022 . The change was primarily due to an increase of$0.9 million in personnel costs related to salary and share-based compensation expense due to an increase in headcount,$0.3 million increase in professional fees related to consulting expense as the Company continued to incur research and development costs to pursue additional indications and NeuroStar Advanced Therapy System upgrades. Interest Expense
Interest expense increased by
the year ended
2022
Other Income, Net Other income, net increased by$1.8 million from$0.4 million for the year endedDecember 31, 2021 to$2.2 million for the year endedDecember 31, 2022 , primarily as a result of increased interest income earned on the Company's money market accounts and note receivables.
Comparison of the Years ended
The information required within this section is incorporated by reference to the information set forth in the section titled "Comparison of the Years endedDecember 31, 2021 and 2020" in "Management's Discussion and Analysis of our Financial Condition and Results of Operations" in our 2021 Annual Report on Form 10-K filed onMarch 8, 2022 .
Liquidity and Capital Resources
Overview
As ofDecember 31, 2022 , we had cash and cash equivalents of$70.3 million and an accumulated deficit of$345.9 million , compared to cash and cash equivalents of$94.1 million and an accumulated deficit of$308.7 million as ofDecember 31, 2021 . We incurred negative cash flows from operating activities of$30.7 million and$28.0 million for the years endedDecember 31, 2022 and 2021, respectively. We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to expand our sales and marketing initiatives to support our growth in existing and new markets, invest funds in additional research and development activities and utilize cash for other corporate purposes. 71
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Our primary sources of capital to date have been from our IPO, private placements of our convertible preferred securities, borrowings under our credit facility, sales of our products and a secondary public offering of our common stock. As ofDecember 31, 2022 , we had$35.0 million of borrowings outstanding under our credit facility, which has a final maturity inFebruary 2025 . Management believes that the Company's cash and cash equivalents as ofDecember 31, 2022 and anticipated revenues from sales of its products are sufficient to fund the Company's operations for at least 12 months from the issuance of these financial statements. If our cash and cash equivalents and anticipated revenues from sales or our products are insufficient to satisfy our liquidity requirements, we may seek to sell additional common or preferred equity or debt securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.
Our current and future funding requirements will depend on many factors,
including:
? the impact of COVID-19 and related governmental responses;
? our ability to achieve revenue growth and improve operating margins;
? compliance with the terms and conditions, including covenants, set forth in our
credit facility;
? the cost of expanding our operations and offerings, including our sales and
marketing efforts;
? our ability to improve or maintain coverage and reimbursement arrangements with
domestic third-party and government payors, particularly in
? our rate of progress in establishing coverage and reimbursement arrangements
from international commercial third-party and government payors;
our rate of progress in, and cost of the sales and marketing activities
? associated with, establishing adoption of our products and maintaining or
improving our sales to our current customers;
? the cost of research and development activities, including research and
development relating to additional indications of neurohealth disorders;
? the effect of competing technological and market developments;
? costs related to international expansion; and
? the potential cost of and delays in product development as a result of any
regulatory oversight applicable to our products.
The Company’s material cash requirements include the following contractual and
other obligations.
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Debt
As of December 31, 2022 , the Company had $35.0 million of borrowings outstanding
under the Solar credit facility, which has a final maturity in February 2025
("maturity"). The interest rate on borrowings under the credit facility is
variable and resets monthly. Prior to the Company commencing principal payments
on the facility in March 2023 with total borrowings of $35.0 million coming due
in monthly installments, the Company and Solar agreed to delay the first
principal payment while negotiating a refinanced credit facility. Under the
current facility, the Company will be required to make a final payment fee of
$1.9 million at maturity. Future interest payments related to the current
facility total $5.4 million , including $3.7 million due within the next twelve
months as of December 31, 2022 .
Leases
The Company has lease arrangements for equipment and certain facilities, including corporate headquarters and our warehouse inMalvern, Pennsylvania and a training facility inCharlotte, North Carolina . As ofDecember 31, 2022 , the Company had fixed lease payment obligations of$4.5 million , including$0.9 million due within the next twelve months.
Cash Flows
The following table sets forth a summary of our cash flows for the years ended
December 31,
2022 2021 2020
Net Cash Used in Operating Activities $ (30,739) $ (27,983) $ (28,390)
Net Cash Provided by (Used in) Investing Activities 6,731 (9,839) (730)
Net Cash Provided by Financing Activities 207
83,006 2,369
Net (Decrease) Increase in Cash and Cash Equivalents
Net cash used in operating activities for 2022 was$30.7 million , consisting primarily of a net loss of$37.2 million and an increase in net operating assets of$4.8 million , partially offset by non-cash charges of$11.2 million . The increase in net operating assets was primarily due to increases in accounts receivable, inventory and prepaid commission expense, which were offset by increases in accrued expenses as a result of timing and accrued 2022 compensation and commissions as ofDecember 31, 2022 . Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers. Net cash used in operating activities for 2021 was$28.0 million , consisting primarily of a net loss of$31.2 million and an increase in net operating assets of$6.6 million , partially offset by non-cash charges of$9.8 million . The increase in net operating assets was primarily due to increases in accounts receivable, inventory and prepaid commission expense, which were offset by increases in accounts payable and accrued expenses as a result of timing and accrued 2021 compensation and commissions as ofDecember 31, 2021 . Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers. Net cash used in operating activities for 2020 was$28.4 million , consisting primarily of a net loss of$27.5 million and an increase in net operating assets of$8.3 million , partially offset by non-cash charges of$7.3 million . The increase in net operating assets was primarily due to an increase in net investment in sales-type leases and prepaid commission expense, which were offset by a decrease in accrued expense due to timing and the 2020 payments of 2019 incentive compensation and commission accrued as ofDecember 31, 2019 . 73
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Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers, and the loss on debt extinguishment.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by (used in) investing activities for the year endedDecember 31, 2022 , 2021 and 2020 was$6.7 million ,$(9.8) million and$(0.7) million , respectively. Net cash provided by investing activities for the year endedDecember 31, 2022 was due to the repayment of our promissory note offset partially by purchases of property and equipment and capitalized software costs. Net cash used in investing activities for the year endedDecember 31, 2021 was attributable to issuance of our promissory note and purchases of property and equipment and capitalized software costs. Net cash used in investing activities for the year endedDecember 31, 2020 was attributable to purchases of property and equipment and capitalized software costs.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended
was
exercises.
Net cash provided by financing activities for the year endedDecember 31, 2021 was$83.0 million and primarily consisted of additional proceeds from our secondary public offering and sale of our common stock onFebruary 2, 2021 and cash proceeds related to stock option exercises. Net cash provided by financing activities for the year endedDecember 31, 2020 was$2.4 million and attributable primarily to proceeds from the exercise of stock options. 74 Table of Contents Indebtedness Refer to "Note 12. Debt" in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K for information regarding our current Solar credit facility and extinguished Oxford credit facility.
Solar Credit Facility
The following table sets forth by year our required future principal payments
under the term loan portion of the Solar Facility (as discussed in "Note 12.
Debt") (in thousands):
Principal
Year: Payments
2023 $ 13,125
2024 17,500
2025 4,375
2026 -
2027 -
Total principal payments $ 35,000
Common Stock Offering
On February 2, 2021 , we closed a secondary public offering of our common stock
in which we issued and sold 5,566,000 shares of our common stock, which included
shares pursuant to an option granted to underwriters to purchase additional
shares, at a public offering price of $15.50 per share. We received net proceeds
of approximately $80.6 million after deducting underwriting discounts,
commissions and estimated offering expenses. The Company intends to use the net
proceeds of the offering for general corporate purposes, including working
capital, research and development, marketing and evaluating new clinical
indications.
Critical Accounting Policies and Use of Estimates
The preparation of our financial statements in accordance with accounting principles generally accepted inthe United States , or GAAP, and the rules and regulations of theSEC requires us to make estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and assumptions on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although we believe our estimates and assumptions are reasonable when made, they are based upon information available to us at the time they are made. We evaluate our estimates and assumptions on an ongoing basis and, if necessary, make adjustments. Due to the risks and uncertainties involved in our business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. We define our critical accounting policies as those accounting policies that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments. While our significant accounting policies are more fully described in "Note 3. Summary of Significant Accounting Policies" in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies. 75 Table of Contents Revenue Recognition
We account for revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. Under ASC 606, we recognize revenue when control of the promised good or service is transferred to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those good or services. Accordingly, we determine revenue recognition by applying the following steps:
? identification of the contract, or contracts, with a customer;
? identification of the performance obligations in the contract;
? determination of the transaction price;
? allocation of the transaction price to the performance obligations in the
contract; and
? recognition of revenue when, or as, we satisfy a performance obligation.
We primarily earn revenues from the sale of NeuroStar Advanced Therapy Systems, consumable use treatment sessions, and accessory products. A contract's transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied, which generally is the point in time when the product is shipped or control is transferred. We sell to end users inthe United States and to third-party distributors outsidethe United States and do not provide return rights. Sales to distributors outsidethe United States are made inU.S. dollars. Revenue attributable to the NeuroStar Advanced Therapy Systems purchased on a rent-to-own basis are accounted for either (1) as operating leases and revenue is recognized on a straight-line basis over the term of the lease; or (2) as a sales-type lease and revenue is recognized upon installation. Our NeuroStar Advanced Therapy System sales inthe United States typically have a post-sale training obligation. This obligation is fulfilled after product shipment, and we defer recognizing revenue until training occurs. We defer the fair value attributable to the post shipment training and recognize such revenue when the obligation is fulfilled. We base the fair value of the training using stand-alone service rates. Our sales to our third-party distributors outsidethe United States do not have these post-sale obligations. In addition, we provide a one year warranty for systems sold inthe United States . Terms of product warranty differ amongst our third-party distributors outsidethe United States , but are generally one year. We provide for the estimated cost to repair or replace products under any warranty at the time of sale. We also offer our customers inthe United States annual service contracts. Revenue from the sale of annual service contracts is recognized on a straight-line basis over the period of the applicable contract. We also earn revenue from customers from services outside of their warranty term or annual service contracts. Such service revenue is recognized as the services are provided.
JOBS Act Accounting Election
We are an "emerging growth company," as defined in the JOBS Act, and are
eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging
growth companies. Section 107 of the JOBS Act provides that an emerging growth
company can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act of 1933, (the "Securities Act"), for
complying with new or revised accounting standards issued subsequent to the
enactment of the JOBS Act until such time as those standards apply to private
companies. Section 107 of the JOBS Act provides that we can elect to opt out of
the extended transition period at any time, which election is irrevocable. We
have elected to avail ourselves of this exemption from complying with new or
revised
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accounting standards and, therefore, will not be subject to the same new or
revised accounting standards as other public companies that are not emerging
growth companies.
Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements under the JOBS Act, including without limitation (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by thePublic Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of$1.07 billion or more; (b) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO; (c) the date on which we have issued more than$1.0 billion in nonconvertible debt during the previous six years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of theSEC .
Recent Accounting Pronouncements
We refer you to “Note 4. Recent Accounting Pronouncements” in our audited
financial statements and related notes thereto included elsewhere in this Annual
Report on Form 10-K.
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