ClearPoint Neuro, Inc. (CLPT) Business

ITEM 1. BUSINESS

Overview

We are a commercial-stage medical device company, incorporated in 1998 as a Delaware corporation, that develops and commercializes integrated systems used in minimally invasive neurosurgical procedures in the brain. 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. 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.

In 2025, through our acquisition of IRRAS Holdings, Inc. (“IRRAS”), we expanded our portfolio into neurocritical care. IRRAS is a commercial-stage medical technology company focused on treatments for intracerebral hemorrhage, intraventricular hemorrhage, and other conditions requiring intracranial fluid management.

The IRRAS products complement our existing neurosurgical technologies and broaden our reach into acute care settings, enabling us to offer an expanded set of solutions spanning functional neurosurgery, neurocritical care, and intracranial drug delivery.

Our business consists of two integrated 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.

Our primary medical device product, the ClearPoint system, is an integrated system comprised of hardware components, disposable components, and intuitive, menu-driven software. The primary applications for the ClearPoint system are to target and guide: (a) the insertion of deep brain stimulation electrodes, biopsy needles, and laser catheters; and (b) the infusion of pharmaceuticals into the brain. The ClearPoint system was originally designed for use in an MRI setting. In 2021, we launched the SmartFrame Array Neuro Navigation System and Software, which allows for operating room placement of the ClearPoint system and completion of the procedure in the MRI suite. 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 2025, we released the ClearPoint Navigation Software Version 3.0, which allows for the ClearPoint system navigation software to support end-to-end procedures 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. We have exclusive global rights to commercialize the system for neuro applications.

In 2025, through the acquisition of IRRAS, we added the IRRAflow Active Fluid Exchange System (the “IRRAflow system”) to our portfolio of medical devices. The IRRAflow system integrates continuous irrigation, drainage, and real-time intracranial pressure monitoring to provide controlled, automated intracranial fluid management within neurocritical care and operating room settings.

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. 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. Our consulting services include a core competency of in vivo biology services in large and small research models to assist our customers with establishing drug safety prior to and in support of their human clinical trials.

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. 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 pharmaceutical company customers, such customers' continuation of research and product development plans, such customers achieving success in completion of clinical trials and subsequent regulatory approvals of their drugs and biologics, and such customers’ realization of commercial success for their therapies, including overcoming barriers in reimbursement, physician adoption, and patient access to their therapies. In 2024, the U.S. Food and Drug Administration (the “FDA”) granted marketing authorization for our SmartFlow Neuro cannula to be used to deliver a gene therapy for the treatment of aromatic L-amino acid decarboxylase (“AADC”) deficiency directly to regions of interest within the brain.

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Our Products and Services

The ClearPoint System

Our ClearPoint system is an integrated system comprised of hardware components, disposable components and intuitive, menu-driven software.

ClearPoint Hardware. Our hardware components consist primarily of a head fixation frame, computer workstation and in-room monitor. The 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. 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 series of SmartFrame trajectory device, a hand controller and related accessories, and our SmartFlow Neuro cannula. Our SmartFrame devices are an adjustable trajectory guide that attaches to the patient’s skull and holds the targeting cannula. In the MRI, a 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 accessories include all other components necessary to facilitate the image-guided neurosurgical procedures, such as our SmartGrid patch, which is an MRI-visible marking grid that enables rapid localization of the entry position into the brain, and our customized surgical draping, which creates a sterile field within the MRI scanner. The SmartFrame OR Stereotactic System is a single use disposable that does not require MRI guidance. For drug delivery procedures, our SmartFlow Neuro cannula, which is an MRI-compatible injection and aspiration cannula, serves as the vehicle for the delivery of the compound.

ClearPoint Software. Our ClearPoint system software guides the physician in surgical planning, device alignment, navigation to the target and procedure monitoring. The software uses image segmentation algorithms to help locate and identify our SmartFrame device and its targeting cannula, as well as the anatomical structures of the brain. The software also performs geometric computations to provide the physician with information regarding the positioning of instruments inserted into the patient’s brain relative to the target anatomical structures. At the completion of the procedure, the software generates an automated report that includes the key metrics from the procedure. In 2022, we received FDA approval for the ClearPoint Maestro Brain Model, a software tool which we designed to automate the process of identifying, labelling, and quantifying the volume and shape of brain structures visible in MRI images.

ClearPoint Prism Neuro Laser Therapy System

Our ClearPoint Prism Neuro Laser Therapy System is indicated for use to necrotize or coagulate soft tissue through interstitial irradiation or thermal therapy for neuro applications under 1.5T and 3.0T MRI guidance. The laser system can be used in conjunction with the ClearPoint navigation platform or other third party cranial navigation platforms 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 IRRAflow System

Our IRRAflow system is an active fluid exchange platform designed for use in neurocritical care and neurosurgical operating room environments. The system integrates continuous irrigation, drainage, and real time intracranial pressure monitoring to actively manage intracranial fluid in patients with conditions such as intracranial hemorrhage and intraventricular hemorrhage. The use of IRRAflow Active Fluid Exchange System is indicated when intracranial pressure monitoring is required, and for externally draining intracranial fluid, as a means of reducing intracranial pressure in patients where an external drainage and monitoring system is needed.

The IRRAflow system consists of a control unit, proprietary dual-lumen catheters, and procedure-specific disposables. The control unit enables automated modulation of irrigation and drainage parameters, while the dual-lumen catheter design allows for infusion and drainage. The system’s disposables include tubing sets and sterile collection components required for each procedure.

ClearPoint Services

We provide consulting services to our pharmaceutical and other medical technology partners for improving outcome predictability and optimizing preclinical and clinical workflows. Our expertise is concentrated in benchtop testing, preclinical studies, clinical trial support, regulatory consultation, and over-arching translation from the preclinical to the clinical setting to enhance accuracy and precision of drug delivery. In 2021, we expanded our expertise to include nonclinical contract research services in large and small research models to assist our customers with establishing drug safety prior to and in support of human clinical trials. In 2025, we expanded our preclinical services business through the lease of a facility to enable increased operational capabilities and service capacity.

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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. 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, and Brazil, our approval carries a similar indication for use.

In the United States, our SmartFlow Neuro Cannula has received 510(k) clearance for injection of Cytarabine or for removal of cerebrospinal fluid (“CSF”) from the ventricles and De Novo marketing authorization for intraputaminal administration of eladocagene exuparvovec-tneq for the treatment of adult and pediatric patients with AADC deficiency. It has also received CE mark for the injection of approved fluids into the brain. Delivery of other therapeutic agents using our SmartFlow Neuro Cannula is investigational. The SmartFlow Neuro Cannula is also registered in Brazil, Canada, Turkey, and Taiwan. The device is a disposable intended for single patient use only and is not intended for implant.

Our development partner CLS received 510(k) clearance for its laser system to necrotize or coagulate soft tissue through interstitial irradiation or thermal therapy in neuro applications under 1.5T and 3.0T MRI guidance. In the U.S., the laser system is commercialized by us as the ClearPoint Prism Neuro Laser Therapy System.

Our SmartFrame OR Stereotactic System received 510(k) clearance in 2024. 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 imaging. 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.

Our ClearPoint Navigation Software Version 3.0 received 510(k) clearance in 2025. When used in conjunction with the SmartFrame disposable stereotactic frame, it is intended to provide precise stereotactic guidance when placing instruments or devices during neurosurgical procedures. These procedures include biopsies, catheter and electrode insertion including deep brain stimulation (asleep or awake) lead placement.

Our IRRAflow system has received 510(k) clearance from the FDA and is indicated for use when intracranial pressure monitoring is required and for externally draining intracranial fluid, as a means of reducing intracranial pressure in patients where an external drainage and monitoring system is needed. The system facilitates active fluid management, including controlled irrigation and drainage, within the intracranial space. The IRRAflow system has also obtained CE mark certification in the European Union for similar indications related to controlled fluid exchange and intracranial drainage. We may in the future seek new or expanded indications for use of the IRRAflow system, including indications related to subdural hematomas, extended-duration infusions, oncology, or intracranial drug delivery.

Market Discussion

Medical Devices for Neurosurgical Application

ClearPoint Navigational Platform and Therapy Applications

We believe there are a significant number of potential neurosurgical procedures in the U.S. in which our ClearPoint products could be used as a navigational platform for functional stereotactic neurosurgery in FDA-cleared indications or as a therapy device for performance of laser interstitial thermal therapy (“LITT”):

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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. When DBS or RNS is performed in the MRI suite, our ClearPoint system can provide intra-procedural navigation and visualization of the electrode placement and the patient may be placed under general anesthesia for the procedure. Multiple manufacturers have received FDA clearances for DBS systems, including Medtronic, Boston Scientific and Abbott Laboratories. These systems are indicated for Parkinson’s disease and essential tremor. DBS is used to treat the symptoms of Parkinson’s Disease, a degenerative condition that affects a substantial population in the U.S. and worldwide. DBS works by stimulating a targeted region of the brain through implanted leads that are powered by a device called an implantable pulse generator. We believe a meaningful number of Parkinson’s disease and essential tremor patients each year may be potential candidates for the implantation of deep brain stimulation electrodes utilizing our ClearPoint system. In addition, patients suffering from drug resistant epilepsy, refractory essential tremor, dystonia, severe obsessive compulsion disorder, severe major depressive disorder, paralysis, Huntington’s disease, auditory nerve implantation, Alzheimer’s disease and stroke rehabilitation may create additional potential procedure opportunities in

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the future. The only commercially available RNS system on the market is manufactured by NeuroPace. Their brain-responsive neuromodulation system is currently approved for use in patients with drug resistant focal epilepsy.

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LITT – LITT is a minimally-invasive MRI-guided technique to treat primary and metastatic brain tumors, as well as patients with drug-resistant epilepsy. The treatment uses heat to treat and ablate the tumor or networks that propagate seizure activity. A substantial number of patients with brain tumors or drug-resistant epilepsy may be candidates for LITT. Historically, manufacturers with FDA cleared laser therapy systems in North America have included Medtronic’s Visualase system and Monteris Medical’s NeuroBlate system. 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.

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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. For small, deep-seated tumors, navigating a device to the exact target is challenging and necessary to avoid the inadvertent destruction of healthy brain tissue. We believe brain tumor applications represent a meaningful potential procedural opportunity for our platform.

IRRAflow Neurocritical Care and Intracranial Fluid Management Applications

With the addition of the IRRAflow system to our product portfolio, we participate in the neurocritical care market focused on the active management of intracranial fluid and intracranial pressure. This market includes patients who require external drainage and monitoring systems in intensive care units or neurosurgical operating rooms.

Conditions commonly requiring external ventricular drainage or other forms of intracranial fluid management include intraventricular hemorrhage, intracerebral hemorrhage, subarachnoid hemorrhage, and other acute neurologic conditions associated with elevated intracranial pressure. We believe there are a substantial number of procedures in the United States each year involving external ventricular drainage or intracranial pressure monitoring in which a system such as IRRAflow may be used; however, actual utilization may vary based on physician preference, institutional protocols, and patient-specific factors. The IRRAflow system is designed to provide controlled irrigation, drainage, and continuous monitoring, offering what we believe to be an active alternative to traditional passive drainage methods. Subdural hematomas, extended-duration infusions, oncology, and intracranial drug delivery represent additional conditions that may benefit from active intracranial fluid management; however, the IRRAflow system is not currently cleared or approved for use in the treatment of those conditions, and we may in the future seek regulatory clearance or approval for such conditions from the FDA and applicable foreign regulatory authorities. See the risk factor titled, To the extent we seek a new indication for use of, or new claims for, our products, the FDA may not grant 510(k) clearance or PMA approval of such new use or claims, which may affect our ability to grow our business, below.

Biologics and Drug Delivery

The blood-brain barrier prevents large-molecule, and nearly all small-molecule, neurotherapeutics from reaching the brain. Several pharmaceutical and biotech companies are developing methods to deliver a wide variety of molecules, genes or proteins to targeted brain tissue or structures that would need to bypass the blood-brain barrier. This may enable the development of treatments for rare single-gene pediatric disorders, such as AADC Deficiency, Friedreich’s Ataxia and Angelman Syndrome, as well as adult disorders including Parkinson’s disease, drug resistant epilepsy, Huntington’s disease, Alzheimer’s disease and certain types of cancers, such as Glioblastoma. If our ClearPoint system and SmartFlow Neuro 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, in the United States, these treatments are subject to FDA-mandated clinical trial requirements, which are expensive and time consuming for our partners to conduct. 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 Neuro cannula, preclinical, development and consulting services, and other partnership arrangements. In 2024, the SmartFlow Neuro 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.

Sales and Marketing

Medical Devices for Neurosurgical Application

Commercializing our ClearPoint products and services for neurosurgery applications, primarily involves marketing and selling directly to:

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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

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hospitals involved in the treatment of neurological disorders, including the opinion leaders at these hospitals.

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Our business model for the ClearPoint products includes producing high margin revenue from sales of the disposable components. Given that focus on disposable product sales, we sell our reusable components at lower margins in order to secure installations within hospitals. In addition, we may install the ClearPoint reusable components at a hospital, but retain title, either for an agreed-upon period of time while the hospital evaluates and processes the purchase opportunity, for a rental fee, or for an agreed-upon period of time for a placement fee bundled into the price of a disposable products stocking order. Our disposable and reusable ClearPoint products are tightly integrated, which allows us to leverage each new installation of a system to generate recurring sales of our disposable products.

With the acquisition of IRRAS, we have expanded our commercial reach into the neurocritical care and acute intracranial fluid management market. Commercializing the IRRAflow system involves marketing directly to neurosurgeons, neuro-intensivists, critical care physicians, and hospital based neurocritical care teams responsible for the management of intracranial pressure and intracranial fluid drainage. Similar to our ClearPoint model, the IRRAflow system generates recurring revenue primarily through disposable catheters and procedure-specific consumables, while the control unit serves as the durable capital equipment placed within hospitals. We believe that the integration of the IRRAS commercial team with our team will increase our commercial reach and scale, support the growth of the combined installed base, and strengthen our ability to serve both neurosurgical and neurocritical care customers.

Biologics and Drug Delivery

Commercializing our ClearPoint products and services for biologics and drug delivery primarily involves marketing and selling directly to pharmaceutical companies focused on research and development of therapies for neurological indications.

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. The ClearPoint services allow us to generate early technology integration of our products into our customers’ delivery workflow and participate in diversified partnership arrangements with our customers.

Manufacturing and Assembly

Our ClearPoint system and SmartFlow Neuro 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. We purchase most custom-made components of our ClearPoint system from single-source suppliers due to quality considerations, lower costs and constraints resulting from regulatory requirements; however, we have identified alternative sources for certain components, and believe additional alternative sources are available, if needed, for other components. Generally, we purchase our components through purchase orders and do not have material long-term contracts with our suppliers for our ClearPoint system or SmartFlow Neuro Cannula.

Our ClearPoint Prism Neuro Laser Therapy System is manufactured exclusively by CLS.

Our IRRAflow system includes a reusable control unit and related hardware accessories, which are manufactured at our San Diego, California facility. We rely on third-party manufacturers for the catheter and other procedure-specific disposables used with the IRRAflow system. We currently source these disposables from single-source suppliers due to their specialized expertise, quality considerations, cost efficiencies, and regulatory requirements. However, we have identified alternative supply sources for these disposables if needed. Our primary contract manufacturers for IRRAflow disposables operate under master service agreements that govern the terms of our supply relationships.

Our facilities are structured to complete component processing, final assembly, packaging and distribution activities for our products which are manufactured in-house. 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. 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”). We have instituted a quality management system, under which we have established policies and procedures that control and direct our operations with respect to design, procurement, manufacture, inspection, testing, installation, data analysis, training and marketing. We review and internally audit our compliance with these policies and procedures, which provides a means for continued evaluation and improvement. As required by our quality management system, we undertake an assessment and qualification process for each third-party manufacturer or supplier that we use. Typically, our third-party manufacturers and suppliers are certified to ISO 9001 and/or 13485. We also periodically perform audits on our key third-party manufacturers and suppliers to monitor their activities for compliance with our quality management system. 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.

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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 System products and IRRAflow system products. Our five largest hospital customers accounted for approximately 21% of our neurosurgery navigation disposable product revenues in 2025. The addition of the IRRAflow business is expected to continue to reflect a similar concentration of revenue among a limited number of hospital sites.

Biologics and Drug Delivery

As of March 6, 2026, we had commercial relationships with over 60 pharma/biotech, academic, and contract research organization partners who have either evaluated or used our SmartFlow Neuro cannula or our consulting services.

One of these companies, PTC Therapeutics, Inc. and its affiliates (“PTC”), accounted for approximately 15% of our biologics and drug delivery revenues in 2025. One of our directors is PTC's Chief Executive Officer and President. 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. Certain products supplied under the PTC Supply Agreement are subject to limited favored pricing terms for such products intended for human use in clinical or commercial settings.

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. In January 2023, the addendum to the PTC Supply Agreement was further amended and restated to allow us 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”). Under the Second Source Manufacturing Agreement, PTC may, at its expense, request that we appoint a backup contract manufacturer to supply products in the event of a supply interruption or a bankruptcy event. The exercise by PTC of its second source manufacturing rights may be subject, in certain cases, to payment by PTC to us of a per-product royalty payment. The Second Source Manufacturing Agreement will continue for the term of the PTC Supply Agreement, subject to certain early termination rights.

Intellectual Property

To maintain a competitive advantage in the marketplace, we seek to develop, maintain and protect the proprietary aspects of our technologies. We rely on a combination of patent, trademark, trade secret, copyright and other intellectual property rights and measures to protect our intellectual property.

Our patent portfolio includes patents and patent applications that we own or that we license from others. We seek patent protection in the U.S. and internationally for our products and technologies where and when we believe it is appropriate. U.S. patents are granted generally for a term of 20 years from the earliest effective priority date of the patent application. The actual protection afforded by a foreign patent, which can vary from country to country, depends on the type of patent, the scope of its claims and the availability of legal remedies in the country.

We also rely on other forms of intellectual property rights and measures, including trade secrets and nondisclosure agreements, to maintain and protect proprietary aspects of our products and technologies. We require our employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships with us. 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. The acquisition of IRRAS added ten additional patent families with patents in the field of fluid exchange systems, neuromonitoring, and processes. As of March 6, 2026, we own or license over 130 issued patents.

Some of our patents and patent applications are subject to licensing and cross-licensing arrangements in place with third parties.

Trademarks

We have registered trademarks in the United States, the European Union, the United Kingdom, Japan, and China.

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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. We believe that Maestro will have use across all our product lines through automatic pathway and trajectory planning and confirmation of device placement, while identifying eloquent structures of the brain so as to avoid crucial anatomy. 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. 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 early 2023, we further expanded our collaboration with Philips to include additional technology regarding subnuclei segmentation to the Maestro MRI and CT functionality. 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. 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.

CLS

In October 2018, we entered into a license and collaboration agreement and a distribution agreement with CLS, which as amended in August 2020, 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. Pursuant to these agreements, we began commercialization of the ClearPoint Prism Neuro Laser Therapy System in the U.S. in 2022.

UCSF

In 2013, we entered into a license agreement with UCSF that provides for our use of design features developed by UCSF, which we incorporated into our SmartFlow Neuro cannula, and for which we are committed to pay royalties based on our sales of the SmartFlow Neuro cannula.

NE Scientific

In 2022, we entered into a development and license agreement with NE Scientific to incorporate NE Scientific’s GPU-accelerated software solution for modeling of therapies administered to the brain into our products. In consideration of the foregoing, we paid fees for development of the software solution and committed to pay royalties based on (a) per hospital activations of the software solution, and (b) offline applications in which the licensed technology is used.

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.

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. Many of our competitors have substantially greater financial, manufacturing, marketing, and technical resources than we have.

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Currently, we are aware of two companies, Monteris Medical, Inc. and Medtronic, which offer devices for laser ablation under direct MRI guidance. In addition, companies such as Brainlab, Medtronic, Elekta, FHC Inc., Integra LifeSciences Holdings Corporation and Neurologica Corporation, a subsidiary of Samsung Electronics Co., offer devices and systems for use in conventional stereotactic neurosurgical procedures, such as surgical navigation workstations, frame-based and frameless stereotactic systems, portable computer tomography scanners and computer-controlled guidance systems. These devices and systems are competitive with our ClearPoint system. Also, Zimmer Biomet Holdings, Inc.’s ROSA® robot is an operating room alternative to the ClearPoint system. Additionally, we could also face competition from other medical device, biotechnology and pharmaceutical companies that have the technology, experience and capital resources to develop alternative navigation and therapy methods.

Following our acquisition of IRRAS, we also participate in the neurocritical care market for intracranial fluid management and intracranial pressure monitoring. In this market, we compete with manufacturers of traditional external ventricular drainage (“EVD”) systems and related monitoring platforms. Key competitors in the EVD market include Medtronic plc, Spiegelberg GmbH & Co. KG, Sophysa, B. Braun, and Integra LifeSciences. While the IRRAflow system is differentiated by its active fluid exchange capabilities, irrigation and drainage features, and continuous monitoring functionalities, these competitors established EVD solutions present a competitive landscape that requires us to drive adoption and differentiate on clinical outcomes, workflow efficiency, and value propositions.

Biologics and Drug Delivery

Drug delivery can be divided into two categories, those that use image-guidance and those that do not. Our main area of focus and expertise is on image-guided drug delivery, in particular as it relates to the use of MRI technology. 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 our products. These companies have substantially greater marketing, manufacturing, technical, and financial resources than we have. Our preclinical development services business encounters a broad range of competitors of different sizes and capabilities, such as clinical research organizations or government funded not-for profit entities and industry experts.

Regulatory Requirements of the United States Food and Drug Administration

Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in the U.S. and other countries. Most notably, all 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. The FDA regulates the following activities that we perform or that are performed on our behalf, to ensure that the medical devices we manufacture, promote and distribute domestically or export internationally are safe and effective for their intended uses:

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product design, preclinical and clinical development and manufacture;

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product premarket clearance and approval;

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product safety, testing, labeling and storage;

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record-keeping procedures;

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product marketing, sales and distribution; and

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post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device malfunctions and repair or recall of products.

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. 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”). 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”). Manufacturers of most Class II and some Class I devices are required to submit to the FDA and obtain clearance for a premarket notification under Section 510(k) of the FDCA prior to commercially distributing the device. This process is generally known as 510(k) clearance. 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.

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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. The manufacturer must show that the proposed device has the same intended use as the predicate device, and it either has the same technological characteristics, or it is shown to be equally safe and effective and does not raise different questions of safety and effectiveness as compared to the predicate device.

The FDA has a user fee goal to apply no more than 90 calendar review days to 510(k) submissions. During the process, the FDA may issue an Additional Information request, which stops the clock. The applicant has 180 days to respond. Therefore, the total review time could be up to 270 days or more.

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. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission in the first instance, but the FDA may review any manufacturer’s decision. If the FDA were to disagree with any of our determinations that changes to a device did not require a new 510(k) submission, it could require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance, de novo authorization, or PMA approval is obtained. If the FDA requires us to seek 510(k) clearance, de novo authorization, or PMA approval for any modifications to a device, we may be required to cease marketing and/or recall the modified device, if already in distribution, until 510(k) clearance, de novo authorization, or PMA approval is obtained and we could be subject to significant regulatory fines or penalties.

De Novo Classification

Devices of a new type that the FDA has not previously classified based on risk are automatically classified into Class III regardless of the level of risk they pose. To avoid requiring PMA review of novel low- to moderate-risk devices classified in Class III by operation of law, Congress enacted a provision that allows the FDA to classify a novel low- to moderate-risk device into Class I or II in the absence of a predicate device that would support 510(k) clearance. The FDA evaluates the safety and effectiveness of devices submitted for review under the de novo pathway and devices determined to be Class II through this pathway can serve as predicate devices for future 510(k) applicants. The de novo pathway can require clinical data.

The FDA has a user fee goal to review a de novo request in 150 calendar review days. During the process, the FDA may issue an Additional Information request, which stops the clock. The applicant has 180 days to respond. Therefore, the total review time could be as long as 330 days or more.

PMA Approval Pathway

A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process or classified through the de novo process or is not otherwise exempt from the FDA’s premarket clearance and approval requirements. A PMA must generally be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. During the review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of our own 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 FDA has a user fee goal to review a PMA in 180 calendar review days, if the submission does not require advisory committee input, or 320 review days if the submission does require advisory committee input. During the process, the FDA may issue a major deficiency letter, which stops the review clock. The applicant has up to 180 days to respond. 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.

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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 PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can result in material adverse enforcement action, including the loss or withdrawal of the approval and/or placement of restrictions on the sale of the device until the conditions are satisfied.

New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types of modifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. 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. Such trials generally require an application for an investigational device exemption, or IDE, which is approved in advance by the FDA for a specified number of patients and study sites, unless the product is exempt from the IDE requirements or deemed a non-significant risk device eligible for more abbreviated IDE requirements. A significant risk device is one that presents a potential for serious risk to the health, safety, or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating, or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE application must also include a description of product manufacturing and controls, and a proposed clinical trial protocol. During the study, the sponsor must comply with the FDA’s IDE requirements for investigator selection, trial monitoring, reporting, and record keeping. The investigators must obtain patient informed consent, follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with reporting and record keeping requirements. Prior to granting PMA approval, the FDA typically inspects the records relating to the conduct of the study and the clinical data supporting the PMA application for compliance with IDE requirements.

Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice, or GCP, an international standard intended to protect the rights and health of patients and to define the roles of clinical trial sponsors, investigators, and monitors; and (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Clinical trials are typically conducted at geographically diverse clinical trial sites and are designed to permit the FDA to evaluate the overall benefit-risk relationship of the device and to provide adequate information for the labeling of the device when considering whether a device satisfies the statutory standard for commercialization.

Clinical trials must be conducted under the oversight of an institutional review board, or IRB, for the relevant clinical trial sites. We, the FDA, or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and effectiveness of the device or may otherwise not be sufficient to obtain FDA clearance, authorization or approval to market the product in the U.S. 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. The sponsor also must manufacture the investigational device in conformity with the quality controls described in the IDE application and any conditions of IDE approval that the FDA may impose with respect to manufacturing.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. In addition to the requirements below, the Medical Device Reporting regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Additional regulatory requirements include:

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product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

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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;

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labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;

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clearance, authorization, or approval of product modifications;

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post-approval restrictions or conditions, including post-approval study commitments;

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post-market surveillance regulations, which apply, when necessary, to protect the public health or to provide additional safety and effectiveness data for the device;

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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;

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regulations pertaining to voluntary recalls; and

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notices of corrections or removals.

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. 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. Promotional activities for FDA-regulated products of other companies have been the subject of enforcement actions brought under healthcare reimbursement laws and consumer protection statutes. Furthermore, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countries outside the U.S., which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.

Failure by us or by our third-party manufacturers and suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions including, but not limited to:

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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

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customer notifications or repair, replacement, refunds, recall, detention or seizure of our marketed products;

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operating restrictions, partial suspension or total shutdown of production;

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refusing or delaying requests for 510(k) clearance, de novo authorization or PMA approvals of new products or modified products;

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rescinding 510(k) clearances or PMA approvals that have already been granted;

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refusal to grant export approval for our marketed products; or

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criminal prosecution.

International Marketing Approvals

International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.

The EU has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling, and adverse event reporting for medical devices. Each EU member state has implemented legislation applying these directives and standards at a national level. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the EU with respect to medical devices. Devices that comply with the requirements of the laws of the relevant member state applying the applicable EU directive are entitled to bear a CE mark and, accordingly, can be distributed throughout the member states of the EU as well as in other countries, such as Switzerland and Israel, that have mutual recognition agreements with the EU or have adopted the EU’s regulatory standards.

The method of assessing conformity with applicable regulatory requirements varies depending on the classification of the medical device, which may be Class I, Class IIa, Class IIb or Class III. Normally, the method involves a combination of self-assessment by the manufacturer of the safety and performance of the device, and a third-party assessment by a Notified Body, usually of the design of the device and of the manufacturer’s quality system. A Notified Body is a private commercial entity that is designated by the national government of a member state as being competent to make independent judgments about whether a device complies with applicable regulatory requirements. An assessment by a Notified Body in one country with the EU is required in order for a manufacturer to commercially distribute the device 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 or general safety

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and performance requirements for CE marking. Certification to the ISO 13485 standard demonstrates the presence of a quality management system that can be used by a manufacturer for design and development, production, installation and servicing of medical devices and the design, development and provision of related services.

In 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the previous EU medical devices directive. Unlike directives, which must be implemented into the national laws of the EU member states, the regulations would be directly applicable, without the need for adoption of EU member state laws implementing them, in all EU member states and are intended to eliminate current differences in the regulation of medical devices among EU member states. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensure a high level of safety and health while supporting innovation.

The Medical Devices Regulation went into effect in May 2021, which:

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Strengthen the rules on placing devices on the market and reinforce surveillance once they are available;

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Establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

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Improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

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Set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and

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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.

Healthcare Laws and Regulations

Third-Party Reimbursement

In the U.S. and elsewhere, healthcare providers that perform surgical procedures using medical devices such as ours generally rely on third-party payors, including governmental payors such as Medicare and Medicaid and private payors, to cover and reimburse all or part of the cost of the products. Consequently, sales of medical devices are dependent in part on the availability of reimbursement to the customer from third-party payors. The manner in which reimbursement is sought and obtained varies based upon the type of payor involved and the setting in which the product is furnished and utilized. In general, third-party payors will provide coverage and reimbursement for medically reasonable and necessary procedures and tests that utilize medical devices. Third-party payors may provide separate payments for implanted or disposable devices themselves, although no such separate payments are currently provided for our ClearPoint disposable products. Most third-party payors will not pay separately for capital equipment. Instead, payment for the cost of using the capital equipment is considered to be covered as part of payments received for performing the procedure. In determining payment rates, third-party payors are increasingly scrutinizing the prices charged for medical products and services in comparison to other therapies.

In many foreign markets, including the countries in the EU, pricing of medical devices is subject to government reimbursement. In the U.S., there have been, and we expect that there will continue to be, a number of federal and state proposals to limit payments by governmental payors for medical devices, and the procedures in which medical devices are used.

Medicare and Medicaid

The Medicare program is a federal health benefit program administered by the Centers for Medicare and Medicaid Services, or CMS, that covers and pays for certain medical care items and services for eligible elderly and certain disabled individuals, and individuals with end stage renal disease. 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.

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. 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. Payments also are adjusted to reflect other factors, such as regional variations in labor costs and indirect medical education expenses. Medicare pays a fixed amount to the hospital based on the MS-DRG into which the patient’s stay is classified, regardless of the actual cost to the hospital of furnishing the procedures, items and services that the patient’s condition requires. 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

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within the MS-DRG-based payments made to hospitals for the services furnished to Medicare-eligible inpatients in which the devices are utilized. For cases involving unusually high costs, a hospital may receive additional “outlier” payments above the pre-determined amount. In addition, there is a mechanism by which new technology services can apply to Medicare for additional payments above the pre-determined amount, although such requests have not been granted frequently.

Because PPS payments are based on predetermined rates and may be less than a hospital’s actual costs in furnishing care, and due to payment reforms enacted relatively recently, acute care hospitals have incentives to lower their inpatient operating costs by utilizing products, devices and supplies that will reduce the length of inpatient stays, decrease labor or otherwise lower their costs. For each MS-DRG, a relative weight is calculated representing the average resources required to care for cases grouped in that particular MS-DRG relative to the average resources used to treat cases in all MS-DRGs. MS-DRG relative weights are recalculated every year to reflect changes in technology and medical practice in a budget neutral manner. Under the MS-DRG payment system, there can be significant delays in obtaining adequate reimbursement amounts for hospitals for new technologies such that reimbursement may be insufficient to permit broad acceptance by hospitals.

In addition to payments to hospitals for procedures using our technology, Medicare makes separate payments to physicians for their professional services. The American Medical Association, or AMA, has developed a coding system known as the Current Procedural Terminology, or CPT, codes, which has been adopted by the Medicare program to describe and develop payment amounts for certain physician services.

The Medicare physician fee schedule uses CPT codes (and other codes) as part of the determination of allowable payment amounts to physicians. In determining appropriate payment amounts for surgeons, CMS receives guidance from the AMA regarding the relative technical skill level, level of resources used, and complexity of a new surgical procedure. Generally, the designation of a new procedure code for a new procedure using a new product does not occur until after FDA clearance or approval of the product used in the procedure. Codes are assigned by either the AMA (for CPT codes) or CMS (for Medicare-specific codes), and new codes usually become effective on January 1st of each year.

One result of the current Medicare payment system, which is also utilized by most non-governmental third-party payors, is that a patient’s treating physician orders a particular service and the hospital (or other facility in which the procedure is performed) bears the cost of delivery of the service. Hospitals have limited ability to align their financial interests with that of the treating physician because Medicare law generally prohibits hospitals from paying physicians to assist in controlling the costs of hospital services, including paying physicians to limit or reduce services to Medicare beneficiaries even if such services are medically unnecessary. As a result, hospitals have traditionally stocked supplies and products requested by physicians and have had limited ability to restrict physicians’ choice of products and services.

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. The full effects of the Affordable Care Act may be unknown until all outstanding legal issues are resolved, the statutory provisions are fully implemented, and CMS, the FDA, and other federal and state agencies issue final applicable regulations or guidance. These developments could result in increased coordination between hospitals and physicians and alignment of financial incentives between hospitals and physicians to control hospital costs. 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. The Affordable Care Act remains subject to potential legal and constitutional challenges in the United States Supreme Court.

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 program may be reduced. As noted above, failure by hospitals and physicians to receive an amount that they consider to be adequate reimbursement for procedures in which our products are used may deter them from purchasing or using our products and will limit our sales growth.

Commercial Insurers

In addition to the Medicare program, many private payors look to CMS policies as a guideline in setting their coverage policies and payment amounts. The current coverage policies of these private payors may differ from the Medicare program, and the payment rates they make may be higher, lower, or the same as the Medicare program. 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.

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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.

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. The U.S. federal healthcare programs’ Anti-Kickback Statute makes it unlawful for individuals or entities to knowingly and willfully solicit, offer, receive or pay any kickback, bribe or other remuneration, directly or indirectly, in exchange for or to induce the purchase, lease or order, or arranging for or recommending purchasing, leasing, or ordering, any good, facility, service, or item for which payment may be made in whole or in part under a federal healthcare program such as Medicare or Medicaid. The Anti-Kickback Statute covers “any remuneration,” which has been broadly interpreted to include anything of value, including for example gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the arrangement can be found to violate the statute. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. In addition, several courts have permitted kickback cases brought under the federal False Claims Act to proceed, as discussed in more detail below.

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. Although an arrangement that fits into one or more of these exceptions or safe harbors is immune from prosecution, arrangements that do not fit squarely within an exception or safe harbor do not necessarily violate the statute. The failure of a transaction or arrangement to fit precisely within one or more of the exceptions or safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that arguably implicate the Anti-Kickback Statute but do not fully satisfy all the elements of an exception or safe harbor may be subject to increased scrutiny by government enforcement authorities such as the OIG. 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. Some of these state prohibitions apply regardless of whether federal healthcare program business is involved, such as for self-pay or private pay patients.

Government officials have focused their enforcement efforts on marketing of healthcare services and products, among other activities, and recently have brought cases against companies, and certain sales, marketing and executive personnel, for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

Federal Civil False Claims Act and State False Claims Laws

The federal civil False Claims Act imposes liability on any person or entity that, among other things, knowingly and willfully presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program, including Medicare and Medicaid. The “qui tam” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically. Medical device companies, like us, can be held liable under false claims laws, even if they do not submit claims to the government where they are deemed to have caused submission of false claims by, among other things, providing incorrect coding or billing advice about their products to customers that file claims, or by engaging in kickback arrangements with customers that file claims.

The False Claims Act also has been used to assert liability on the basis of misrepresentations with respect to the services rendered and in connection with alleged off-label promotion of products. 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.

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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.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. There are many potential bases for liability under the False Claims Act. A number of states have enacted false claim laws analogous to the federal civil False Claims Act and many of these state laws apply where a claim is submitted to any state or private third-party payor.

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. The HIPAA healthcare fraud statute prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program, or to obtain by means of false of fraudulent pretenses, any money under the control of any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment and/or exclusion from government-sponsored programs. The Affordable Care Act also provides for civil monetary penalties for knowingly participating in certain federal healthcare offenses and enhances sentences under the Federal Sentencing Guidelines for such offenses. The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines and/or imprisonment. Entities that are found to have aided or abetted in a violation of the HIPAA federal healthcare offenses are deemed by statute to have committed the offense and are punishable as a principal.

We are also subject to the United States Foreign Corrupt Practices Act and similar anti-bribery laws applicable in non-U.S. jurisdictions that generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. 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.

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. Although we do not believe we are a covered entity and therefore are not currently subject to these standards directly, we expect that our customers generally will be covered entities and may ask us to contractually comply with certain aspects of these standards by entering into confidentiality agreement or, when appropriate, business associate agreements. While the government intended this legislation to reduce administrative expenses and burdens for the healthcare industry, our compliance with certain provisions of these standards could entail significant costs for us.

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. HITECH also fundamentally changed a business associate’s obligations by imposing a number of Privacy Rule requirements and a majority of Security Rule provisions directly on business associates that were previously only directly applicable to covered entities. HITECH includes, but is not limited to, prohibitions on exchanging patient identifiable health information for remuneration (directly or indirectly), restrictions on marketing to individuals and obligations to agree to provide individuals an accounting of virtually all disclosures of their health information. 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. Business associates are similarly required to notify covered entities of a breach.

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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. HITECH requires HHS to conduct periodic audits to confirm compliance and to investigate any violation that involves willful neglect. Additionally, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations of HIPAA Privacy and Security Rules that threaten the privacy of state residents.

In addition to federal regulations issued under HIPAA, some states have enacted privacy and security statutes or regulations that, in some cases, are more stringent than those issued under HIPAA. Further, the majority of states have enacted state data breach laws, which also require notification of certain alleged breaches of the privacy or security of personal information.

Federal and state consumer protection laws are being applied increasingly by the FTC and state attorneys general to regulate the collection, use, storage and disclosure of personal or patient information, through websites or otherwise, and to regulate the presentation of web site content. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Numerous other countries have or are developing laws governing the collection, use, disclosure and transmission of personal or patient information.

HIPAA, as well as other federal and state laws, will apply to our receipt of patient identifiable health information in connection with any clinical trials we conduct. In addition, we collaborate with other individuals and entities in conducting research and all involved parties must comply with applicable laws. 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. 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. Fish and Wildlife Service (“USFWS”), and similar applicable international agencies also apply to the care, handling and oversight of regulated species.

The import and export of animals and operations in foreign countries are subject to applicable international agreements and conventions, as well as a variety of national, regional and local laws and regulations, which establish the standards for the humane treatment, care, handling and transport of animals by dealers and research facilities.

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. 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 6, 2026, we had 172 full-time employees, including the 37 employees who joined us in connection with the IRRAS acquisition. None of our employees are covered by a collective bargaining agreement. As a small, innovative company focused on the development and commercialization of technology, we believe that cultural fit and energy are important considerations in recruiting employees. We assess the likelihood that a particular candidate will contribute to our overall goals, and beyond their specifically assigned tasks. We aim to provide market-based compensation to retain our employees. New employees are provided industry-relevant compliance training and are introduced to our Code of Business Conduct and Ethics, which is posted on our website at www.clearpointneuro.com. The inclusion of our website address in this Annual Report does not include or incorporate by reference the information on our website into this Annual Report.